It is a generally accepted precept that corporations are obligated to maximize shareholder returns. Resources thus should be directed only to efforts that have the highest expected return. Diseases of poverty, like TB and malaria, by definition afflict those least able to pay, and thus are least likely to generate satisfactory returns on investment for pharmas. Their obligation to maximize shareholder return regrettably precludes investment in these otherwise commendable efforts.
Bullshit I say.
There is no legal requirement that corporations must maximize shareholder returns to the exclusion of other values. Nor is it an inescapable law of nature or economics. Instead, this notion is merely the modern equivalent of Social Darwinism, a high-minded justification for self-dealing. It is nothing more than propaganda, a Big Lie that we have all heard so many times for so long that its truth goes unquestioned.
Corporations are government-created entities. Emerging in Northwest Europe in the 17th century, they were granted certain rights and privileges and obligated in return to engage in specific enterprises – quite often of a quasi-governmental nature, and with a public purpose in mind. Most of the colonies that became American states were founded as corporations. If you drive through New England or the old Northwest Territory, you will see signs like this, relicts of the corporation-as-public-entity era:
What we think of today as a corporation is the limited-liability/joint-stock corporation. They emerged in the mid-19th century and were a key enabling development of the new innovation economy. Owners of limited-liability corporations are freed from fear of financial ruin if their investments go bad. If you are a shareholder of a company that goes bankrupt (as most eventually do), you do not have to worry that the corporation’s creditors will take your house and clean out your bank account. Your liability is limited strictly to the money you invested.
This is a very valuable benefit – both to society at large and to investors. Freed from the threat of unlimited financial ruin, investors can fund even the riskiest ideas and technologies. It’s no exaggeration to say that this financial innovation enabled the technological explosion that brought us the trappings of the modern world – instant communication, speedy travel, cheap manufactured goods.
Given the public-purpose history of corporations, and the valuable grant of limited liability, a social norm existed that expected some degree of corporate responsibility to stakeholders other than shareholders. But this was a norm, not a law. Milton Friedman, probably more than anyone, promoted the contrary doctrine that the only responsibility that corporations have is to maximize shareholder value (within the bounds of law).
But this is a doctrine, not a law. As the Supreme Court held in the recent Hobby Lobby case , “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”
Or, as Mitt Romney put it, “Corporations are people”. Backing him up, the US courts have now endowed corporations with rights of political speech and religious conscience.
It stands to reason that entities endowed with these rights (which you share), in addition to the valuable grant of limited liability (which you do not), have social responsibilities, just like we all do.
If you believe that people have an obligation to use their skills and resources to lessen the suffering of other people, then you must believe that corporations have this responsibility also.
So yes. Pharma companies do indeed have an obligation to develop treatments for diseases that afflict mostly poor people.