3M: Their Unethical Pandemic Failure (2020)
3M Company is one of the world leaders in producing N95 masks, the masks that are in very high demand due to the pandemic. The Corona Virus forced 3M to double their global production of N95 masks in response to fight this airborne disease. Before the pandemic, an N95 mask costed $1.25 on pharmacy shelves, then increased to as high as $8 at the height of the pandemic, which led to many questions regarding price gauging. 3M was failing to hold their resellers accountable for jacking up prices during an emergency, these actions benefitted stakeholders such as the investors and the resellers while it hurt customers in need of these masks. Individualism is the business ethics theory that says business actions should maximize profits for the owners of a business, but do so within the law, an individualist would say 3M was acting ethically by maximizing profits for busines owners. Utilitarianism requires that business actions should aim to maximize the happiness of all beings, from this point of view 3M acted unethically by failing to maximize happiness of customers allowing high prices. Kantianism values rational decision making, the autonomy of individuals, and honesty. From a Kantian perspective, 3M was unethical by using the customers as a means to an end. Virtue theorists care more about the character of an individual or company more than anything else and follow the four cardinal virtues of prudence, justice, courage, and temperance, under this theory 3M did not act ethical. In my opinion, 3M did not act ethical and failed to act for many individuals in a time of need. Many will say it is the resellers fault, but taking actions such as distributing the masks themselves or holding resellers accountable could have helped the situation. 3M should first focus on being honest with the public and then handle the distribution to diffuse the situation.
Ethics Case Controversy
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| 3M N95 Mask |
Their major contribution to the virus is the manufacturing of N95 masks, which are referred to by health experts as the most effective mask for fighting the virus. These masks prior to the pandemic were mainly used by health workers in hospitals and other offices around the world. Certainly, there are other companies that manufacture these N95 masks, but 3M is the world leader in manufacturing and distributing these masks throughout the United States as well as to other parts of the world including Canada and Latin America. The company is heavily relied upon by many big corporations and of course hospitals to have their equipment ready and easily accessible for use.
Companies that deal with scientific and medical equipment typically stay out of the public eye and avoid any type of pressure from the media, that is until there is a worldwide pandemic and people’s lives are at stake. 3M company does not have a squeaky-clean record as they were sued by the state of Minnesota in 2018 for acting negligently and polluting groundwater with damaging compounds after their own study in 1970 showed that they would harm the environment (The Intercept). 3M eventually settled the suit for $850 million and admitted to covering up their findings and acting negligently, as you will see in the upcoming case, it is evident that 3M has not learned their lesson from just two years ago.
On March 11, 2020 the World Health Organization (WHO) declared the novel coronavirus outbreak a global pandemic. On March 13, 2020 President Donald Trump declared a national emergency and left the nation questioning what was going to come next. Around this time most of the world was introduced to Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, and he, along with the Centers for Disease Control (CDC) started telling the public to wear a mask to fight this airborne disease. While all of this was going on, 3M was starting to ramp up their N95 mask production in anticipation of a major uptick in sales. 3M doubled its global production of N95 masks to about 100 million a month and projected to produce 2 billion within 12 months (CNBC).
While many people were starting to look for these N95 masks due to their high demand, they started to notice a very big jump in price and people started accusing 3M of price gauging. Before the pandemic, a N95 mask could be bought at pharmacies for $1.25 and at the height of the pandemic were going for $8 a mask. Local laws may have their own rules and regulations on price gauging but for example California law “prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared” (State of California Department of Justice). The masks being sold on the shelves saw over a 600% increase on prices and way over most price gauging laws. It seems like it would be a no brainer to accuse 3M of price gauging in this scenario but the truth is they aren’t directly on the hook for it. 3M sells their masks through a network of resellers who then are just trying to maximize their profits and have no obligation to sell to hospitals or people in health care.
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| Mark Cuban, Billionaire Dallas Mavericks Owner |
A statement was released by a 3M representative when they started to face backlash and said that they have not changed their prices and can’t control the price the other retailers set for them. Many, including Cuban, responded with questions as to why they don’t distribute the masks themselves or approach the resellers and say “If you don’t sell the inventory to hospitals, we will never let you buy more of our product?” It was becoming evident that the profits coming in are more important to 3M than the major problem they could solve in our world. At the end of March, the 3M CEO Mike Roman said he was “disappointed” to see these N95 masks at retail stores rather than hospitals where they are necessary. (CNBC)
Stakeholders
The stakeholders in the 3M case include the investors, the executive team, the resellers, and most importantly the customers. At the beginning of 2020, before the pandemic, 3M’s stock price was at $177 and in March when the Corona virus came to the US, 3M’s stock price fell to $117 (Bloomberg). Since then, the stock price started climbing back and investors must have been happy to see a resurgence, but it is safe to say that these investors are affected by the business. The executive team with CEO Mike Roman along with many other corporate officers have a lot at stake and need the company to succeed for their own business careers. The resellers of the masks are also certainly at stake here because if 3M decided they did not like what they were listing the masks for they would lose a lot of business. And most importantly the customers because these are the ones who need these masks during very difficult times especially hospital workers. If the prices keep raising and these workers cannot receive these masks, they are at an even higher risk of contracting the virus.
Individualism
Individualism is the business ethics theory that says business actions should maximize profits for the owners of a business, but do so within the law (Salazar 17). The Father of Economics Adam Smith first developed this theory and then it was Milton Freidman who said that it is the aim and responsibility of business to maximize their profits. Many people believe this theory to be a selfish one and in response to that Milton Freidman says “Managers are ethically obliged to maximize profits” (Desjardins 54). The other ethical theories can be more generally compared to life context but this theory is specifically related to business and Freidman says if you are not trying to maximize profits you are acting unethically.
In the 3M case, an individualist would say that they were acting ethically and did nothing wrong. 3M focused on their profits more than anything else and put their self-interest above all, they did all of this within the law so it fits in with this business ethics theory. By ramping up their production of masks during the pandemic and giving them to resellers, they were maximizing profits for the stockholders. Even though the resellers were price gauging the masks and 3M had the opportunity to stop them and avoid the situation they chose the profits. This theory values the business, the owner’s choices, and the business profits, there is no better case to describe this theory than the 3M case.
Utilitarianism
Utilitarianisms ethical rule is that “business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action” (Salazar 19). Utilitarianism can look at life decisions and effects which differs from individualisms strict business context. “Utilitarianism tells us that we can determine the ethical significance of any action by looking to the consequences of that act” (Desjardins 29). By simply evaluating a decision and seeing if the decision maximized happiness for everyone involved you can figure out utilitarian business ethics. Utilitarianism aims to maximize happiness for everyone not just business owners like individualism, so there are more stakeholders that need to be looked at when examining utilitarian business ethics. Utilitarianism takes on a stakeholder approach while the individualist model takes on a stockholder approach.
In the 3M case, from a utilitarian’s point of view, the company fails to maximize happiness in all beings. The business owners, as mentioned in the individualism section, all profited from the resellers price gauging and 3M’s failure to stop them. Their happiness was maximized by making profits and having no repercussions for their failure to act. The stockholders were certainly happy as well after they saw a bounce back in the company’s stock price once all these masks started to get distributed. The only ones who were left unhappy were the customers who were not able to obtain these N95 masks because of ridiculously high pricing. The hospitals and millions of health care workers around the world were left unhappy due to the decision made by 3M to not act on their reseller’s decisions. Due to the customers being unhappy, a utilitarian would say that 3M acted unethical.
Kantianism
Kantianism values rational decision making, the autonomy of individuals, and honesty. Immanuel Kant believes that it is wrong to manipulate, exploit, or use people, and he believes this is wrong all the time. These values are portrayed through the formula of humanity which states that you don’t use people as means but rather as ends in themselves, to me this means do not take advantage of anyone or see them/use them as simply an object. Utilitarian’s say the end justifies the means to get there, Kantian says the means are the most important no matter the outcome. Kant says that no matter what you should not lie, cheat, or harm others just to get your way, instead, you should be honest with all parties and get rational consent. (Salazar 20)
3M put their customers in a very tough spot when they allowed resellers to raise prices so high that it is hard to get a mask. In the middle of a pandemic where masks are mandated in several parts of the country, the company saw an opportunity and used the people as a mean. If 3M wanted to treat the customers and everyone else involved and treat them as an end rather than a mean they would have ensured prices would stay a fair amount. A quote from Heather Salazar’s The Case Manual sums it up perfectly when she says “They will not attempt to manipulate or exploit employees or consumers, but rather they will attempt to work together with others to create products and services that anyone can agree make good choices available in the marketplace.” If you support Kantian business ethics, you would say that what 3M did is unethical based off of the standards of Kantianism. The customers were exploited and nobody deserves to be treated like they were.
Virtue Theory
A virtue theorist cares more about the character of an individual than anything else. A person who believes in this ethical theory values traits that promote the wellness of individuals within a society (Salazar 22). To follow the ethical theory, you must follow through with good character traits and avoid those traits that are considered bad. This theory differs from the previous three ethical theories because virtue theory does not specifically look at the action of an individual or company, rather they analyze a person’s character. To see if a person or company was acting ethically by the virtue theory, we must examine if they were following the four cardinal virtues which are prudence, justice, courage, and temperance.
Prudence is thinking about things from your future self’s perspective and being cautious in your character, when 3M decided to not stop resellers from price gauging their masks they were not looking ahead and thinking about the impact it could have on them in the future. Justice is about practicing empathy and truthfulness; 3M was truthful throughout the process and never lied but could have done a better job showing empathy for the millions of people in need of the masks. Courage is the ability to say yes to the right things and no to the wrong things no matter what and the company failed to do so by their lack of action. Lastly, temperance is self-restraint and the ability to control yourself, something the company directly couldn’t do with their mask distribution tactics. A virtue theorist would say that 3M did not act ethically because it failed to meet the cardinal virtues, you can’t have one of the cardinal virtues without the others and the company had none of them.
Justified Ethics Evaluation
In my opinion, 3M acted unethically and could have done something to avoid this whole situation. Obviously, price gauging is a serious situation and there are opportunities to increase profits but in the midst of a global pandemic and serious emergency is not the time to turn a blind eye to it. The obvious objection to my opinion will be that 3M was not the company who was changing the prices and that they could not control it. Although a portion of the statement is true and they were not the ones price gauging, they could have been stepped in as the supplier and put a halt to it. The only way 3M acted ethically was by maximizing profits for business owners and doing so within the law, besides that there were many actions taken by the company that had a negative impact on others.
It is hard to say whether other companies would have acted the same way in this situation, but it is very possible that it could happen again because the draw for money is so strong. Price gauging is not the most uncommon business action this scenario was just so unique with the pandemic and resellers involved. Hopefully we do not have a similar story like this along with a global pandemic anytime soon, but it is something to keep an eye out for with other companies as the virus is not completely gone yet.
Action Plan
In this case, the problem at hand is that 3M did not decide to stop the price gauging of their resellers when they had the opportunity to. The company knows who they are selling to and what the resellers are marking up their prices at, but they failed to address it and only publicly made a statement when they faced backlash. To fix the issue that they have created for themselves, they can act upon a few steps to make everything better. First, the company needs to acknowledge that they knew the resellers were price gauging the masks and that they didn’t have a problem with it because they were making money, that would be 3M telling the truth. Instead, they argued that they cannot stop resellers from raising prices and that it is out of their hands, which leads to the next step. Second, the company should handle their own distribution directly to most importantly hospitals and then other outlets such as pharmacies and health buildings. The CEO of 3M claimed to have been disappointed at the lack of their N95 masks in hospitals, but didn’t act to take matters into his own hands and have the company distribute themselves. And lastly, the company needs to force resellers to lower their prices and create an ultimatum of “If you don’t lower the prices, we will never do business with you again”, that would be the ethical thing to do in a time of crisis.
3M’s current mission statement is “3M is committed to actively contributing to sustainable development through environmental protection, social responsibility, and economic progress.” A new mission statement that could guide 3M better would be “3M is dedicated in providing customers with the best possible product or service no matter the circumstances”. This new mission statement would embody what the company needs to stand for especially in a time of need. This mission statement focuses more on the company’s character and promotes core values such as integrity, honestly, loyalty, and reliability. These core values ensure customers that they can trust 3M no matter the situation or circumstance they may find themselves in.
In the future, I believe that if a situation were to arise similar to this one, the CEO should be held accountable by other employees to do the right thing. There does not have to be extra training or new hires involved to fix this situation, just a better understanding of what is at stake and how important it is to help others when you have the ability and power to. The bad publicity was the only reason 3M made a statement and, in the future, they should practice good ethics by having their public relations make a statement before anyone else and be honest about the problem and their handling of it. This plan aims to better business relations with future customers and partners, along with maximizing profits within the law and not cutting any corners.
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| 3M Controversy Timeline |
Graham Topor
References
Lerner, Sharon. “3M Knew About the Dangers of PFOA and PFOS Decades Ago, Internal Documents Show.” The Intercept, 31 July 2018, theintercept.com/2018/07/31/3m-pfas-minnesota-pfoa-pfos/.
“3M Company (MMM) Company Profile & Facts.” Yahoo! Finance, Yahoo!, 20 Nov. 2020, finance.yahoo.com/quote/MMM/profile?ltr=1.
Deb, et al. “N95 Mask: 14 Things You Need To Know Before Buying.” Terry Cralle, 31 Oct. 2020, www.terrycralle.com/n95-mask/.
“3M CEO: 'Disappointing' to See N95 Respirator Masks at Retail Stores Instead of Hospitals.” CNBC, CNBC, 23 Mar. 2020, www.cnbc.com/2020/03/23/coronavirus-3m-ceo-says-its-disappointing-to-see-n95s-at-stores.html.
Chappell, Bill. “Slammed By Trump, 3M Says N95 Mask Exports From U.S. Should Continue.” NPR, NPR, 3 Apr. 2020, www.npr.org/sections/coronavirus-live-updates/2020/04/03/826629472/slammed-by-trump-3m-says-n95-mask-exports-from-u-s-should-continue.
“Mark Cuban Aiding in Pandemic.” Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2020-03-28/mark-cuban-aiding-mask-effort-says-3m-fails-to-stop-profiteers.
“FAQs on Price Gouging.” State of California - Department of Justice - Office of the Attorney General, 8 Apr. 2020, oag.ca.gov/consumers/pricegougingduringdisasters.
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