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The Case of the Detrimental Drug: Implications for the Stakeholder Theory of Directorship

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  • JS Armstrong

    (The Wharton School - University of Pennsylvania)

Abstract

The Winter 1979 issues of Directors and Boards presented readers with a questionnaire based to a degree on a 1969 board incident at Upjohn Corporation [see Box 1 (on page 2) and Box 2 (on pages 3-4)]. In this questionnaire, a profitable drug named “Wondola” was being produced by the so-called International Drug Corporation (IDC). Readers were told that members of the American Medical Association's Council on Drugs had objected to the sale of most fixed -ratio (combination) drugs on the grounds that they grant no benefits superior to those of single- ingredient drugs, and are more likely to produce detrimental side effects, including death. Wondola, with an approximated fatality record of 14 to 22 deaths per year, was no exception. The Federal Drug Administration had asked IDC to withdraw the drug. Readers were asked how they would have voted at a board meeting called to resolve the withdrawal issue. Several months after the publication of the first questionnaire, follow-up questionnaires were sent to D&B readers and to select corporate constituents. These letters solicited comments on a “stakeholder” theory of board membership which I proposed in conjunction with the Wondola experiment. In the following pages, I present the background of the experiment. The stakeholder theory will then be proposed as a solution to the “responsiblity dilemma” the Wondola case raises. Finally, questionnaire respondents will speak for themselves on this complex issue.

Suggested Citation

  • JS Armstrong, 2004. "The Case of the Detrimental Drug: Implications for the Stakeholder Theory of Directorship," General Economics and Teaching 0412030, EconWPA.
  • Handle: RePEc:wpa:wuwpgt:0412030 Note: Type of Document - pdf; pages: 19
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    File URL: http://econwpa.repec.org/eps/get/papers/0412/0412030.pdf
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    References listed on IDEAS

    as
    1. JS Armstrong, 2004. "Social Irresponsibility in Management," General Economics and Teaching 0412031, EconWPA.
    2. Armstrong, J. Scott, 1977. "Social irresponsibility in management," Journal of Business Research, Elsevier, vol. 5(3), pages 185-213, September.
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    Keywords

    stakeholder theory; responsiblity dilemma; drug;

    JEL classification:

    • A - General Economics and Teaching

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