My subject is Management theory & practice and the assignment topic is Ethical leadership & decision making. The word limit is 3000

Running Head: ETHICAL LEADERSHIP & DECISION MAKING - VALEANT 1
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ETHICAL LEADERSHIP & DECISION MAKING - VALEANT 2
Introduction
Valeant Pharmaceuticals International Inc. is a large pharmaceutical company of Canada.
The pharmaceutical industry is the rule based industry as various rules and regulations highly
govern them. Valeant Pharmaceutical preferred to make unethical decisions by paying least
attention to the ethical values (Bosanac, 2016). Pharmaceutical industry plays a major role in the
human life, and they provide life-saving medicines to the people. Charging skyrocketing price
like a premium brand accessories will refrain more people to get better healthcare services and
treatment. There was exploitation of customers by Valeant Pharmaceuticals by charging higher
prices for their drugs. The unethical behavior was present as an organization culture, and it is
evident from their inappropriate disclosure of variable interest entity and poor consolidation
process. This paper makes a detailed discussion about the ethical dilemma of Valeant
Pharmaceutical and provides alternatives to avoid them in future.
Ethical Dilemma of Valeant Pharmaceutical
Valeant Pharmaceuticals International Inc. is a large pharmaceutical company of Canada.
The pharmaceutical industry is the rule based industry as various rules and regulations highly
govern them. The pharmaceutical industry is a capital intense industry, and it is a challenge for
the companies in this industry to show a higher level of profits (Bosanac, 2016). There is an
increasing expectation from the customers, shareholders and other stakeholders of the company
resulting in companies to make unethical decisions to satisfy the demands of all the stakeholders
of the company.
Ethical dilemma occurs when the decision maker has to choose either ethics or involve in
unethical behavior. Except for these two options the decision maker of the company will not
have any other alternatives that will be mediocre at the desired result and ethical values. Ethical
ETHICAL LEADERSHIP & DECISION MAKING - VALEANT 3
values are compromised in most of the cases by most of the organization when the ethical
dilemma arises for the company. The main reason for such activities is that company will not
face any financial problems or nonfinancial problems until otherwise they are identified at some
or other point.
In this case, the fraudulent accounting practice of Valeant was not determined until the
issue was raised by R&O pharmaceutical against Valeant Pharmaceutical for issuing a notice to
pay $69,861,343.08 to the company (Lu, 2017). R&O Pharmaceutical denied the claims made by
Valeant Pharmaceutical as R&O pharmaceutical claimed that they did not have any direct
transaction with Valeant Pharmaceutical. It resulted in R&O pharmaceutical to take the issue to
court for solving their problem. It was the time when the unethical accounting at Valeant was
noticed by all the stakeholders of the company.
Valeant Pharmaceutical justified that the notice sent to R&O pharmaceutical was valid as
there was an affiliation of Valeant Pharmaceutical with R&O pharmaceutical using Philidor Rx.
Valeant Pharmaceutical is the stakeholder of Philidor Rx and Philidor Rx has purchased an
option to purchase Isolani, the main stakeholder of R&O pharmaceutical. It will provide an
option for Philidor Rx to purchase all the stake of R&O pharmaceutical. The analysis of the issue
indicated that Philidor Rx provided a back end serviced to R&O pharmaceutical and that was
categorized as an amount not recoverable. It was the reason for Valeant Pharmaceutical to issue
the notice to R&O pharmaceutical.
The issue mentioned above indicates that Valeant Pharmaceutical does not have
transparency in disclosing their financial statement to the shareholders. There was no
information related to the variable interest equity by Valeant Pharmaceutical in their financial
statements. As per the Financial Accounting Standards Board, Valeant Pharmaceutical should
ETHICAL LEADERSHIP & DECISION MAKING - VALEANT 4
disclose all their variable interest equity in their balance sheet. The financial statement presented
by Valeant Pharmaceutical is that such it is not easy for the users of financial statement to have
an understanding of the relationship between Valeant Pharmaceutical, Philidor Rx and R&O
pharmaceutical as the consolidation was inappropriate by the company (Kumar, n.d.).
Valeant Pharmaceutical was consolidating the profit generated by Philidor Rx in their
financial statement and did not disclose the costs associated with the transaction of Philidor Rx.
The justification of Valeant Pharmaceutical was that the cost of exercising the option associated
with the purchase of Philidor Rx was much lesser than the threshold limits provided by the
Accepted Accounting Principles (Kumar, n.d.). Valeant pharmaceutical’s another major ethical
dilemma was that they made use of Philidor Rx to sell all the costly drugs through their stores
and to obtain more claims from the insurance company.
There was no indication or disclosure of the relationship between Valeant Pharmaceutical
and Philidor Rx. The insurance companies indicated that Philidor Rx was acting to be neutral,
but they were favoring Valeant pharmaceutical drug sales. Valeant Pharmaceutical like other
pharmaceutical companies was accused of increasing their cost of drugs sold by them. Philidor
Rx was acquired by Valeant Pharmaceutical to exclusively sell their costly drugs in their stores
and claim the amount from the insurance company. The behavior of Valeant Pharmaceutical
indicates about the unethical business practices of the company. They have intentionally
deceived all the stakeholders of the company and made the disclosures in the consolidated
financial statement more complex so that users cannot identify how the company is generating
profits.
ETHICAL LEADERSHIP & DECISION MAKING - VALEANT 5
Valeant Pharmaceutical Decision Analysis
Valeant Pharmaceutical understood the availability of various opportunities in the
business environment that will provide a sophisticated option to involve in unethical behavior.
The main reason for such unethical decision of Valeant Pharmaceutical is the increasing
expectation from the customers. There is more increase in the demands of the customers from the
pharmaceutical companies. Customers expect the pharmaceutical companies to sell drugs that are
more effective and that will have less to no side effects and after involving in intensified
research.
On the other hand, customers are not ready to bear premium charges for their expectation.
There is an increase in the industrial challenges as the government is expecting more from the
pharmaceutical companies so that government can provide better healthcare services to the
people. The pharmaceutical industry is highly regulated industry, and even a small mistake can
result in huge...