CASE 1

Monsanto Attempts to Balance Stakeholder Interests

Monsanto is one of the world’s largest industrial agriculture businesses. For much of its history,
Monsanto has dealt in controversial products from artificial sweeteners to Agent Orange, to pesticides
and herbicides. One of the more recent additions to Monsanto’s product portfolio has been genetically
modified seeds. GM products have stirred up controversy everywhere they are distributed, and
Monsanto, being a huge multinational corporation and a major producer, is at the center of the debate.
This case deals with the ethical implications involved in producing and selling a product with unknown
health and environmental side effects. Monsanto claims that its products are safe, even beneficial for
society. However, critics are not convinced. A major issue in this case pertains to the debate over
whether genetically modified plants (GMO) and substances (milk) are safe both for the environment
and for human consumption. Other issues Monsanto faces have to do with intellectual property and
patent protection, and the question of whether seeds can be proprietary goods. Traditionally, farmers
save seeds from one year to plant in the next year, but Monsanto wanted to introduce a “kill gene” to
force farmers to purchase new seeds from the company every year. The case also covers Monsanto’s
long history of ethical misconduct, including instances of hiding illegal pollution, and taking bribes.
Finally, the case goes on to cover Monsanto’s corporate responsibility initiatives, charitable giving, and
how its GM seeds may actually help farmers in less developed countries (LDCs). The case concludes
by asserting that Monsanto claims to have realized the errors of its ways and is on the path to greater
corporate responsibility. The question to students remains: Do they believe Monsanto, or is it just lip
service to avoid further criticism?

To summarize the Monsanto Case:

1. Monsanto is a powerful company, with a history of making what many would find questionable
or unethical business decisions in the quest for profits.
2. The company holds a virtual monopoly on GM seeds for soybeans, cotton, corn, and canola.
Many of these seeds require the use of Roundup herbicide, also produced by Monsanto.
3. Critics accuse Monsanto of seeking to profit at the expense of consumers’ health, the
environment, biodiversity, and of being anticompetitive. While GM seeds have not been
conclusively proven to be harmful, these critics’ claims are not without merit, as Monsanto has
a long history of cutting corners and covering up illegal and/or unethical activity.
4. However, GM seeds have not been proven harmful to humans or to the environment, and plants
that are hardier, more drought resistant, and resistant to pests present a huge opportunity for
farmers in less-developed countries, particularly in Africa, Asia, and Latin America.

This is a very complex and contentious case, and students should be encouraged to conduct further
research at Monsanto’s website (http://www.monsanto.com/). Students should find the exercise of
perusing the website interesting, as much for what is left out, as for what is included. The instructor
should point out that such websites, which are theoretically designed for all stakeholders, often only
contain the positive information on the company and do not address any negative press. Given what
they know about Monsanto’s past ethical misconduct, students may find its Public Policy and Corporate
Responsibility webpage interesting
(http://www.monsanto.com/responsibility/corp_gov/committees/public_policy.asp). Instructors may
want to ask students how they think Monsanto is measuring up to its own objectives.

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 Case 1: Monsanto Attempts to Balance Stakeholder Interests 55

The Public Policy and Corporate Responsibility Committee shall:

1. Review and monitor the performance of the Company as it affects communities, customers,
other key stakeholders and the environment. Hold periodic meetings with stakeholders to
understand external perspectives.
2. Review issues affecting the acceptance of Company products in the marketplace, including
issues of agricultural biotechnology.
3. Identify and investigate significant emerging issues.
4. Receive periodic reports on the state and effectiveness of the Business Conduct Program from
the Company's Director of Business Conduct.
5. Receive periodic reports regarding the Company's political contributions.
6. Receive periodic reports regarding the Company's charitable contributions.
7. Perform such other duties and responsibilities as may be assigned to the Public Policy and
Corporate Responsibility Committee by the Board of Directors and/or the Chairman of the
Board.
8. Make delegations of authority and responsibilities of the Public Policy and Corporate
Responsibility Committee as the Public Policy and Corporate Responsibility Committee deems
appropriate, and to periodically review such delegations.

Charitable Donations
In 2007 Monsanto made charitable donations of $24,514,660, which represented less than .66% of its
$3.74 billion in annual profits. The average individual in the United States donates 2.2% of his or her
disposable income. (http://www.america.gov/st/washfile-
english/2007/June/200706261522251CJsamohT0.8012354.html). Small businesses contribute an
average of 6% of their profits to charitable causes Small businesses that earned between $250,000 and
$1-million contribute, on average, 6% of their profits to charity.
(http://philanthropy.com/news/prospecting/6349/most-small-companies-make-charitable-donations-
survey-finds) Discussing these numbers and Monsanto’s true level of interest in charitable donations
should result in a lively debate.

Environmental Issues
Monsanto has long been plagued with accusations of environmental law violations. In 2003 the
corporation’s bad reputation for illegal pollution came to a head when courts in Anniston, Alabama
awarded $700 million to 20,000 residents for decades of ground water contamination. Because of the
notoriety of this ruling, Monsanto’s stock lost 50% of its value. The company replaced its CEO and
proceeded to create SBUs for its more controversial products under the names Pharmacia, Seminis, and
Solutia. One could argue that this move was calculated to put less familiar and less controversial names
on these products.

Intellectual Property
The issue of sterile seed technology as well as the firm’s “seed police” can lead students into a
discussion of whether patents on food products, particularly seeds, are ethical. Within the U.S., patent
infringement lawsuits are increasing, especially within pharmaceuticals and gene therapy for specific
diseases. At the heart of this issue is whether seeds, no matter how scientifically manipulated, should be
considered technology, considering how essential they are to the basic acts of agriculture and eating.
Does Monsanto have any sort of moral obligation to farmers and consumers to make its seeds available
at prices affordable to even the poorest of farmers? Students should also debate the question of piracy
and lack of intellectual property protection in LDCs. How, do they think, large MNCs with widespread
distribution should handle this problem?

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56 Case 1: Monsanto Attempts to Balance Stakeholder Interests

Sustainability
While Monsanto is the first to assert that it has increased food production wherever its seeds are
planted, many ask “at what cost?” Sustainability is an increasingly popular word in the business
community, as is organic. While Monsanto claims that it has helped farmers grow more food in less
space using less water, no one can make the argument that what Monsanto sells is a natural product.
Students should discuss the products introduced in this case, and whether or not they think they offer
advantages and hope to farmers. Do they believe that it is a problem that farmers grow dependent on
Monsanto for their seeds, pesticides, and herbicides? Or do they think there are better solutions out
there? The case touches on the growing importance of organic farming, which purports to be a more
thoughtful, sustainable solution to food problems, and that takes care of the land instead of maximizing
output. Students can discuss the pros and cons of Monsanto’s products, and what they think the long-
term costs to people, animals, and society will be.

DISCUSSION
1. Does Monsanto maintain an ethical culture that can effectively respond to various
stakeholders?

Students will provide a variety of answers to this question. However, most will probably agree that,
while the company may have made strides in terms of its corporate responsibility, Monsanto does not
maintain the most ethical culture possible. Monsanto is in a difficult position, as it produces products
that many people do not understand or trust. The corporation also does a great deal of business in very
poor LDCs, where it is very easy for critics to accuse Monsanto of taking advantage of people who do
not know better. Monsanto’s low levels of charitable giving and history of ethical lapses do not help the
corporation’s case—that it is seeking to improve the lives of the people of the world. However,
Monsanto has poured considerable energy into publicizing its efforts to product seeds that generate
higher yields, use less water, and are hardier—thereby serving and improving the lives of stakeholders
around the world.

2. Compare the benefits of growing GM seeds for crops with the potential negative consequences
of using them.

The second discussion question does not have a definitive answer, but students will likely passionately
debate their beliefs on the issue. Research on GM plants’ effects on the environment, biodiversity, and
human health has provided inconclusive results. The United States, China, and Brazil—all major
economies—remain quite permissive of GM products until science proves that they are harmful.
However, the European Union has taken the opposite approach and is extremely cautious about GM
products. Some argue that the EU has taken the issue too far and its stringent labeling requirements
represent an informal trade barrier. Environmental and health issues aside, Monsanto’s GM seeds
provide an opportunity for farmers to increase profits by allowing them to grow crops on land where
they previously could not.

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 Case 1: Monsanto Attempts to Balance Stakeholder Interests 57

3. How should Monsanto manage the potential harm to plant and animal life when using products
such as Roundup?

As with any product designed to kill a pest, excessive use of Roundup will almost definitely result in
worse pest problems in the future. While the product kills weeds now, Roundup resistant weed strains
will almost certainly develop in the future as farmers continue to use the product. The largest problem
for Monsanto is that many farmers may not know the proper usage of the product, creating larger
problems for themselves and their fellow farmers in the future. Students should offer ideas on how
Monsanto might handle educating farmers. If this discussion strays away from the topic at hand,
instructors should bring the class back to the business issue of cost/benefit and corporate responsibility.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.