Article originally published in the Philadelphia Business Journal on January 31, 2022.
Some CEOs become famous for building great companies. Others become infamous for acting in an egregious manner and are viewed with contempt and derision. The latter is the case of Martin Shkreli, the former CEO of Turing Pharmaceuticals. Turing is the producer of Daraprim, a drug used to treat toxoplasmosis, a disease that weakens the immune system of people who have cancer or are HIV positive.
In 2015, shortly after acquiring the rights to Daraprim, Turing raised its price from $13.50 to $750 per pill, with callous disregard that the price hike pushed this drug out of the financial reach of many patients.
On Jan.14, a federal judge ordered Shkreli to pay back $64.6 million in excess profits as a result of Daraprim price hikes. Shkreli was also banned for life from the pharmaceutical industry. He is currently serving a seven-year prison sentence for securities fraud in an unrelated case.
At a Forbes Healthcare Summit in December 2015, Shkreli was asked if he would have raised the price of Daraprim so steeply, had he known about the resulting negative reaction. Shkreli responded, “I think health care prices are inelastic. I could have raised it higher and made more profits for our shareholders. Which is my primary duty. Again, no one wants to say it. No one’s proud of it. But this is a capitalist society, capitalist system and capitalist rules. My investors expect me to maximize profits. Not to minimize them or go half or go 70% but to go to 100% of the profit curve that we’re all taught in MBA class.”
No, Mr. Shkreli, this is not what is taught in M.B.A. class. A growing number of business schools have their graduates recite the MBA Oath, an excerpt of which follows:
As a business leader, I recognize my role in society. My decisions affect the well-being of individuals inside and outside my enterprise, today and tomorrow. Therefore, I promise that:
- I will manage my enterprise with loyalty and care, and will not advance my personal interests at the expense of my enterprise or society.
- I will understand and uphold, in letter and spirit, the laws and contracts governing my conduct and that of my enterprise.
- I will refrain from corruption, unfair competition, or business practices harmful to society.
- I will protect the human rights and dignity of all people affected by my enterprise, and I will oppose discrimination and exploitation.
- I will protect the right of future generations to advance their standard of living and enjoy a healthy planet.
- I will report the performance and risks of my enterprise accurately and honestly.
In exercising my professional duties according to these principles, I recognize that my behavior must set an example of integrity, eliciting trust and esteem from those I serve.
The values outlined in the above Oath are embraced by the Business Roundtable in their August 2019 statement redefining the purpose of the corporation. These are the values that will sustain long-term company success. These are the values that every CEO should embrace.
Not everyone agrees with the new Business Roundtable statement. The Council of Institutional Investors said, “The statement undercuts notions of managerial accountability to shareholders.” The Wall Street Journal stated, “It’s … notable that the CEOs for America’s biggest companies feel the need to distance themselves from their owners.” Both the CII and WSJ should have said being a good corporate citizen is a necessary condition for maximizing shareholder return.
Business schools that teach to maximize shareholder value but don’t emphasize the importance of ethics, integrity and the need to be a good corporate citizen are shortchanging their students and the companies they will work for. This is a lesson that Shkreli will never learn.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.