Who Sees the Halo? - Pharmaceutical Executive

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Who Sees the Halo?
Insiders say pharma reputations shine. Consumers don't see the glow.


Pharmaceutical Executive



Distribution of Rankings Across Ethics Components, 2005
To find out more about stakeholder perceptions, RRC used its Ethics Reputation Model to assess which factors are most closely aligned with strong or weak ethics reputation (see Figure 3).

The 12 components on which ethics rankings are determined remain the same over time, but their relative importance, as cited by survey respondents, often varies dramatically from year to year. On average, RRC found the strongest increases this year in the component "led by talented management," followed by "positive relationships with vendors and suppliers," and "positive relations with regulators."

Further supporting its strong overall ethics reputation, the industry scored well across the 12 components. Figure 3 presents the industry's average performance on each component, ranked by quintile, with the first quintile representing the highest quality.

The industry performed well on the following components: having talented management, strong CEO leadership, and being open and honest. Most companies earned scores of E2 on the majority of components; very few came in at E4 or below. One notable exception was Schering-Plough, which scored poorly on almost half of the component questions, suggesting significant ethical weakness and a risk of ethical default.

A Troubling Disconnect Now the not-so-good news. In an effort to find out more about the opinion of the pharmaceutical industry's other key stakeholders, RRC worked with its affiliate, Opinion Research Corporation, to learn how the American public perceives the pharmaceutical industry in today's challenging environment. The results point to a troubling disconnect between the views of industry insiders and consumers.

In a nationwide poll conducted in early February, only 44 percent of 1,000 Americans surveyed said they agreed (or strongly agreed) that the senior leadership of major drug companies "engage in ethical business practices." By comparison, 65 percent of executives interviewed in RRC's latest survey expressed confidence that senior leadership of the major drug companies "adhere to ethical business practices."

In the same survey, consumers ranked the ethics of drug company managers well below average in corporate America. Half of the respondents said they are "very" or "somewhat" confident in the ethical behavior of senior leaders of American companies generally. To take an example from another industry, about 57 percent of the same respondents said they are confident in the ethical behavior of electric power companies.

Understand, Then Act What difference does this make? Companies burdened with an unrealistically low public image may underperform others with stronger reputations, ultimately affecting their bottom lines.

Commenting on these findings, Professor Stephen A. Greyser of the Harvard Business School cautions that with such a difference in opinion, one of these groups—either executives or the general public—must be wrong.

"If it is the executives [who are wrong]," says Dr. Greyser, "then the industry must think more deeply about the perceptions of its ethical behavior to get a more precise understanding of the sources of the public distrust, and then act on that assessment."

"On the other hand," he adds, "if it is the public that is mistaken, then industry leaders must do a much better job of communicating the true basis of their ethical grounding to the general public."

Doretta Gasorek is principal for Rating Research. She can be reached at
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