Of an Organization that has Experienced an Ethical Dilemma - Case Study Example

Nestlé Corporation, a multinational food processing firm based out of Switzerland, has for decades been a paradigm case for of business ethics. Throughout most of the past quarter century, Nestlé faced strong criticisms of its activities in marketing products to developing nations. Its marketing strategies have been condemned for their misleading nature and harmful effects on those who placed trust in their products. Denunciations of Nestlé’s business practices culminated in 1977 with the commencement of a widespread boycott of its products. And despite the corporation’s attempts to clean up its image in the global marketplace, mostly by launching Fair-trade products in various developed countries, recently Nestlé’s reputation was damaged even more by the same morally reprehensible tactics it employed decades ago (Merrett, 2007). Our case study, however, will focus expressly on the controversy which Nestlé Corporation brought upon itself decades ago in the 1970s by utilizing questionable marketing practices in selling its products to vulnerable mothers in developing nations. These practices grant an ideal opportunity to apply normative ethical theories in an evaluative context. The normative theories of interest here will be those of deontology’s duty-centric approach and utilitarianism’s focus upon happiness satisfaction as the highest degree of moral action. This approach will hopefully reveal the rotten core of Nestlé Corporation’s past treatment of rational beings; whether or not it is the case that the company has truly changed these methods through time remains for another discussion. The present discussion, by focusing upon deontology and utilitarianism specifically, will examine the Kantian concepts of ends, utilitarian notions of value, and the evident lack of moral content backing Nestlé’s actions. Nestlé Corporation dates back to the mid-19th century when American businessmen joined with Henri Nestlé, a food developer, to create what would become the centerpiece of the company. Throughout the remainder of the 19th century, the company would continue to develop ground-breaking food products. Throughout the 20th century, the firm continued to innovate—growing ever larger through acquisitions and mergers. In recent times, Nestlé’s line of products has revolved around a wide range of goods, including coffee, water, ice cream, infant foods, seasonings, frozen foods, refrigerated foods, pet foods, and nutritional products (Nestlé Corporation). The organization’s stated objective is to “…grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The… priority is to bring the best and most relevant products to people, wherever they are…” (Nestlé Corporation). Nestlé today employs roughly a quarter of a million people worldwide, with factories in almost every country in the world. From 2007, the company made almost 88 million American dollars in sales, with a net profit of almost 9.9%, at 8.7 million. Nestlé states further, “we demonstrate… a deep understanding of the local nature of nutrition, health and wellness. We know that there is no one single product for everyone—our products are tailored to suit tastes and habits wherever you are” (Nestlé Corporation). With their enormous size, Nestlé Corporation accordingly has an enormous responsibility not to commit actions which can be considered unethical by any reasonable standard. However, Nestlé put itself in an ethical dilemma some time ago in 1977 when the firm was challenged for utilizing unethical marketing techniques which endangered consumer health by promoting its infant formula in developing nations. In response, agencies urged the boycott of Nestlé’s product lines. The boycott continues even today, but effectively ceased in the 1980s when Nestlé agreed to conditions to adopt infant formula marketing codes created by UNICEF and the World Health Organization (WHO). Indeed, the case of Nestlé offers an invigorating mixture of issues to consider: namely, marketing practices, injustice, poverty, and public health. The ethical dilemma can be traced back even as far as over a hundred years ago. So, although the case came into widespread public attention only a quarter century ago, one must consider the history to stretch back much further, as far back as 1867. In that year, Henri Nestlé developed his trademark infant formula which would satisfy all conditions requested for by physicians (Megone & Robinson, 2002). Progressing into the 20th century, alternative breast milks became ever more popular. In the 1950s, in the United States, such formulas peaked in sales. However, the next decade saw a decline in American birthrates, leading to a significant decline in sales for the formulas. As a Swiss company, Nestlé was not in a good place to compete for American business. But it held a sizeable share of the global market. So, while the formula companies with strong commitments to the American market suffered through the decline and tried to move into other parts of the world, Nestlé held a strong position—moving its resources into those developing nations with soaring birthrates. This left them the prospect of using advertising to corner the market (Megone & Robinson, 2002). There were, of course, numerous differences between the marketplace of the developed and the developing world. Namely, food companies in the developing world tend to market directly to the consumer. In doing so, such corporations would cross the divide between pharmaceutical and commercial industries that existed in the developed world, with the former advertising instead to health professionals. By marketing to consumers instead of other corporations, food companies—and especially Nestlé—had to employ some specialized (and unethical) strategies to sell their products. The first of these strategies was, of course, advertising, which bombarded mothers with messages about breast milk alternatives, and emphasized the importance of such alternatives without even bringing up breastfeeding. Nestlé would also set up milk banks to sell formula at reduced prices to poor mothers, and even offer potential users free samples both directly to consumers and to hospitals. Nestlé also supplied people with baby-food booklets, which gave the impression of informed advice while advertising their products, without actually mentioning breastfeeding. Lastly, Nestlé employed milk nurses to advise mothers to use the product and compensated medical professionals to do the same (Megone & Robinson, 2002). These questionable methods can be criticized by any recognized standard of business ethics. However, the most potent criticisms arise from using well-known, established normative theories to condemn such strategies. The first would be to question these strategies in the context of a duty-based ethical theory like Kantianism, or deontology. A central component of a Kantian ethical system is that of a good will—the only thing which is good without qualification. Kant conceives of a will which is determined by the dictates of the moral law and nothing else. The good will is supposed to be the notion of a person who only decides on what he holds to be morally good—regarding morality itself to be a decisive justification (Johnson, 2004). Such marketing techniques in the Third World clearly ignored some critical factors such as hygiene, illiteracy, and poverty. Troubles would arise when illiterate mothers mixed the formula incorrectly, often with unsterilized water, which led to the infant developing diarrhea and being unable to absorb the nutrients of the formula. In addition, when the milk ran out, mothers could not afford to get more. Applying Kant’s good will to this situation, one cannot honestly regard Nestlé as possessing good intention. The claim that Nestlé’s aims were good insofar as the corporation wished to help mothers in these circumstances feed their infants is invalid. Kant’s moral philosophy requires a respect for rational beings as ends-in-themselves—beings worthy of benefiting from moral action. Thus, in Kant’s system Nestlé’s administrators would have been ready to market the product, even if they were uninformed customers themselves. To do otherwise entails using rational beings as mere means to a more intrinsic value. The decision to market to uninformed customers and to direct them to this product demonstrates disrespect for rational beings as ends-in-themselves. What this reveals is a corrupt maxim—a subjective volitional principle—which the decision makers of the corporation decided to act upon. They concluded that rational beings, who are uninformed and ill-equipped to safely or even effectively handle the goods being supplied to them, are not ends but mere means to accomplishing their goals of a high marketshare and large profits. Unethical marketing of infant formula in the Third World constitute example of wrong-doing knowingly, and of benefiting from lax legal restraints—to the detriment of the consumer. If business follow Kant’s rule, it will provide a quality and safe product to the entire market. Nestlé’s actions also violate several other formulae which Kant and deontology established. In addition to disobeying the formula of humanity as an end, the formula of autonomy and the kingdom of ends are also contravened. The first of these, the autonomy formula, is, as Kant states it, “the Idea of the will of every rational being as a will that legislates universal law” (Johnson, 2004). This means that one should act so that through his maxims he could be a legislator of universal laws. On the standard of universalizability, Nestlé’s actions fail miserably. If all multinational corporations decided to exploit individual consumers, suffering from dire living conditions, little could be possible in terms of expanding business for there would be no one left able to be exploited. Secondly, the formula of the kingdom of ends posits the necessity of a “systematic union of different rational beings under common laws”—that one must “act in accordance with the maxims of a member giving universal laws for a merely possible kingdom of ends” (Johnson, 2004). The disrespect of moral rational agents, the uninformed consumers of these developing countries, represents a clear contradiction with this formulation, for the notion such a formula is that one’s moral obligation is to act on principles which could only earn acceptance by a community of fully rational agents who each possess equal share in legislating such principles. Clearly, in this respect, some members of the community are not represented with Nestlé’s principles of morality (Johnson, 2004). Above all, these different formulas all represent one fundamental principle: the categorical imperative, which defines what is morally acceptable regardless of the circumstances and conditions of reality at any one time. In contrast to the categorical imperative, the hypothetical imperative denotes a rule of reason which applies conditionally; that is, for the accomplishment of some defined end, this means is required to do so (Johnson, 2004). But unlike certain intrinsic values specified by the categorical imperative, hypothetical imperatives direct one’s actions to the accomplishment of some extrinsic or instrumental values—values that are not good in themselves, but have goodness which is contingent on one’s own desires. Kant’s criticisms of another ethical theory—utilitarianism—equate that latter theory to a theory of hypothetical imperatives. He claimed that utilitarians hold that heinous crimes are immoral insofar as they do not maximize the good of the greatest number. But such is irrelevant to someone concerned merely with himself. Hypothetical systems of morality, thus, persuade no one to moral action because their imperative base is subjectivism (McCormick, 2006). But it is to utilitarianism qua a system of hypothetical imperatives that we now move. The most common characterization of utilitarianism is by the consideration of the individual act. So-called “act utilitarianism” denotes the application of the principle of utility, the notion that moral worth consists of the creation of happiness and elimination of suffering in as much as possible for as many as possible, to the single act. For utilitarianism, it is not the motive behind an act which makes it moral to some degree, but purely the consequences of said action. To apply utilitarianism to Nestlé’s situation then, one must consider the consequences. The consequences of Nestlé’s actions have already been well-described: many factors stood in the way of the consumers’ abilities to use the product to meet their needs and, as a result, perhaps made matters worse by diluting or infecting the formula. The marketing techniques they employed led to widespread ignorance of the first and better option: traditional breastfeeding. Ignoring breastfeeding as the best option, because of the predatory advertising, led to incalculable damage to newborns born under such conditions. By undermining autonomy and manipulating maternal desires, Nestlé committed not only unethical acts but committed themselves to unethical rules under the utilitarian system. So-called “rule utilitarianism” focuses upon the consequences of a type of action done repeatedly, and not just a single act. Some rules that one may identify from this case are the rules of selling to improperly informed consumers, using medical professionals to market products, and engaging in deceptive advertising. These rules, used with devastating consequences, violate clearly not only principles of certain acts, but certain well-defined rules of moral action. To remedy the consequences of such actions, we may introduce notions of rights—negative and positive rights. Negative rights, in this context, are rights not to be interfered with, or, are rights to be left alone. Positive rights, in contrast, are rights which denote an entitlement to something to be fulfilled by someone else. Using the normative theories applied earlier of deontology and utilitarianism, one may conclude how such rights are to be distributed. Negative rights, as rights not to be interfered with, are rights which secure utilitarian notions of happiness. Because consumers have the negative right not to be manipulated or sold products that cannot do what they are promised to do, consumers have a negative right not to have their happiness interfered with by Nestlé. By contrast, the consumer has the positive right from Nestlé that their autonomy be secured through contractual obligations; or, in other words, Nestlé’s obligations to its customers are that of autonomy-granting products and services insofar as the infant formulas they sell should work as promised. Obviously, these products were not marketed according to this standard. Evaluated in the context of utilitarian and deontological normative theories of ethical action, Nestlé’s marketing to Third World mothers via a variety of means constitute morally reprehensible acts and conform to equally corrupt rules and maxims. By the standard of Kantianism, these marketing practices undermined the autonomy condition of the categorical imperative, violated the formulation of humanity as an end-in-itself and signified a lack of good will on the part of the corporation’s decision makers. By the standard of utilitarianism, these marketing practices generated consequences which failed to maximize happiness, committed the company to rules that are entirely unethical, and mistook extrinsic for intrinsic value by placing profits above human life or happiness. Ethical dilemmas for businesses—choices between what is the moral action and one’s commitment to the shareholders—can be properly resolved only by evaluating relative interests in the context of philosophical sound principles. Thus, one cannot expect sainthood when it comes to organizations like Nestlé. However, what one ought to reasonably expect is a balance between obligations—a balance clearly absent in this case. Works Cited Johnson, R. (2004, February 23). Kants Moral Philosophy. Retrieved November 21, 2008, from Stanford Encyclopedia of Philosophy: http://plato.stanford.edu/entries/kant-moral/ McCormick, M. (2006, May 12). Immanuel Kant -- Metaphysics. Retrieved November 20, 2008, from Internet Encyclopedia of Philosophy: http://www.iep.utm.edu/k/kantmeta.htm Megone, C., & Robinson, S. (2002). Case Histories in Business Ethics. New York: Routledge. Accessed by: http://books.google.com/books?id=dL58ZB1pCVQC&dq=Case+histories+in+business+ethics&ei=ZLwpSceIOYz2MJjg8ZsK Merrett, N. (2007, December 5). Nestle, Vivartia fined in Greek milk price probe. Retrieved November 19, 2008, from Food&drinkeurope.com: http://www.foodanddrinkeurope.com/Financial/Nestle-Vivartia-fined-in-Greek-milk-price-probe Nestlé Corporation. (n.d.). Introduction. Retrieved November 18, 2008, from Nestlé: http://www.nestle.com/AllAbout/AtGlance/Introduction/Introduction.htm Read More