Companies Behaving Badly

Corporate malfeasance has been in the news lately. First, Volkswagen was caught cheating on its

Gordon Gekko won.

emissions test for its diesel cars. This is an upsetting story for two reasons: (1) a huge amount of extra pollution was emitted by people who thought they were buying a "green" car, and (2) it highlights the fact that we need to bring our regulatory processes up to date for an age in which the cheating can be done by software. Zeynep Tufekci has a really good op-ed in the NY Times about the second issue.

And then the Martin Shkreli and Turing Pharma hit the news with the decision to jack up prices on an old anti-infective used to treat malaria and toxoplasmosis. Derek Lowe at In the Pipeline has an excellent explanation of why other companies can't just come in and compete the price down like they usually do for generic drugs (its a loophole in the FDA regulations) and a rundown of other similar cases we've seen recently. Basically, some people more interested in finance than drug discovery and development have discovered they can make a lot of money on a certain class of old drug, and are doing so, with sometimes tragic consequences (read this comment on one of Derek Lowe's other posts on the topic and tell me you don't want to punch someone).

Derek Lowe also has a good, eloquent post about how Martin Shkreli and his ilk do not represent the attitude of the drug discovery industry, but how we need to do more to explain why what they are doing is not the same thing as what the rest of the pharma industry does. I'll go a step further and say that the rest of the pharma industry should think long and hard about whether the slimeball behavior of Shkreli and the other profiteers is just the logical and horrible extension of their business practices.

Yes, drug companies are companies and have to be run with an eye on making money. But from where I sit, a lot of the industry has gotten a little too focused on short term financial goals. You need to watch the money to make sure you stay in business, but there is a difference between staying in business and dancing a dance that will kill you in the long run to keep Wall Street happy in the short run. I am not an expert on finances by any stretch, but a lot of us on the science side of the business have felt like the finance guys have a little too much power right now, and we worry that they're driving our industry over a cliff.

Whenever people point out the issues of focusing so much on short term profits, we hear about the fiduciary duty of the company's executives and directors. But what does that actually mean? Despite what we often hear, there is no special duty to run a business to maximize shareholder value.

I see the value of our financial system, but I think we've let its values have an outsize influence on the values of our society. How, really, is a value system that says the most important concern is to maximize shareholder value all that different from the value system that Shkreli apparently operates under, in which it is absolutely OK to exploit a loophole to make as much money as possible on a drug you took absolutely no risk in developing- the impact on patients be damned? He's just maximizing value for the people who invested in his company, after all. How is it all that different from the value system that was apparently in place in Volkswagen, that said it was OK to cheat on emissions tests so you could sell more cars?

We act shocked when we see these egregious examples, but to me, they're just the logical, if extreme, extensions of the values we've allowed to become our guiding principles as a society: money matters more than anything, and it is OK- desirable even!- to do everything that is legally allowed to make more money. No other ethics need be considered. We already shrug off overworking salaried employees and abusive scheduling practices applied to hourly employees, after all- it makes the company more profitable, so how could we expect anything different?

Well, I expect different. I don't know how we change these values, but I think we have to try. Otherwise, we will surely see more and more scandals- or worse, we'll just get more and more inured to the crappy things companies do in the name of maximizing profits and we'll stop thinking of these things as scandals at all.

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In completely unrelated news, I'm running another session of my class that introduces the fundamentals of project management so that you can make your projects run better, and get more done with less stress. Here's the post I wrote introducing this session. If you're interested, check it out and sign up!