Monsanto: A Growing Controversy.  Read the case and answer the following questions A brief overview of the company’s history, successes, and future plans/goals Does Monsanto maintain an ethical culture that effectively responds to various stakeholders? Compare the benefits of growing GM seeds for crops with the potential negative consequences of using them. How should Monsanto manage the potential harm to plant and animal life from using products such as Roundup? 5-1Introduction When you think of Monsanto, the phrase genetically modified likely comes to mind. The Monsanto Company is the world’s largest seed company, with sales of $13.5 billion. It specializes in biotechnology, or the genetic manipulation of organisms. Monsanto scientists have spent the last few decades modifying crops—often by inserting new genes or adapting existing genes within plant seeds—to meet certain aims, such as higher crop yields or insect resistance. Monsanto develops genetically engineered seeds of plants that can survive weeks of drought, ward off weeds, and kill invasive insects. Monsanto’s genetically modified (GM) seeds have increased the quantity and availability of crops, helping farmers worldwide increase food production and revenues. Today, 90 percent of the world’s GM seeds are sold by Monsanto or companies that use Monsanto genes. Yet Monsanto has met its share of criticism from sources as diverse as governments, farmers, activists, and advocacy groups. Monsanto supporters say the company creates solutions to world hunger by generating higher crop yields and hardier plants. Critics accuse the multinational giant of attempting to take over the world’s food supply and destroying biodiversity. The announcement that Bayer AG is acquiring Monsanto for $66 billion has intensified these concerns because the acquisition would create a company that would command over one-fourth of the world’s seeds and pesticides market. Since biotechnology is relatively new, critics also express concerns about the possibility of negative health and environmental effects from biotech food. These criticisms have not kept Monsanto from becoming one of the world’s most successful businesses. This analysis first looks at the history of Monsanto as it progressed from a chemical company to an organization focused on biotechnology. It then examines Monsanto’s current focus on developing GM seeds, including stakeholder concerns regarding the safety and environmental effects of these seeds. Next, we discuss key ethical concerns, including organizational misconduct and patent issues. We also look at Monsanto’s corporate responsibility initiatives. We conclude by examining the challenges and opportunities that Monsanto may face in the future. Main content 5-2History: From Chemicals to Food Monsanto was founded by John E. Queeny in 1901 in St. Louis, Missouri. He named the company after his wife, Olga Monsanto Queeny. The company’s first product was the artificial sweetener saccharine, which it sold to Coca-Cola. Monsanto also sold Coca-Cola caffeine extract and vanillin, an artificial vanilla flavoring. At the start of World War I, company leaders realized the growth opportunities in the industrial chemicals industry and renamed the company The Monsanto Chemical Company. The company began specializing in plastics, its own agricultural chemicals, and synthetic rubbers. Due to its expanding product lines, the company’s name was changed back to the Monsanto Company in 1964. By this time, Monsanto was producing such diverse products as petroleum, fibers, and packaging. A few years later, Monsanto created its first Roundup herbicide, a successful product that propelled the company even more into the spotlight. However, during the 1970s Monsanto encountered a major legal obstacle. The company had produced a chemical known as Agent Orange, which was used during the Vietnam War to quickly deforest the thick Vietnamese jungles. Agent Orange contained dioxin, a chemical that caused a legal nightmare for Monsanto. Dioxin was found to be extremely carcinogenic, and in 1979 a lawsuit was filed against Monsanto on behalf of hundreds of veterans who claimed they were harmed by the chemical. Monsanto and several other manufacturers agreed to settle for $180 million. In 1981 Monsanto leaders determined that biotechnology would be the company’s new strategic focus. In 1986 Monsanto successfully spliced bacterium DNA into a seed. The bacterium was lethal to certain types of insects that feed on corn, potatoes, and cotton. The quest for biotechnology was on, and in 1994 Monsanto introduced the first biotechnology product to win regulatory approval. Soon the company was selling soybean, cotton, and canola seeds engineered to be tolerant to Monsanto’s Roundup herbicide. Many other herbicides killed good plants as well as the bad ones. Roundup Ready seeds allowed farmers to use the herbicide to eliminate weeds while sparing the crop. In 1997 Monsanto spun off its chemical business as Solutia, and in 2000 the company entered into a merger and changed its name to the Pharmacia Corporation. Two years later, a new Monsanto, focused entirely on agriculture, broke off from Pharmacia, and the companies became two legally separate entities. The emergence of new Monsanto was tainted by disturbing news about the company’s conduct. For nearly 40 years the Monsanto Company had released toxic waste into a creek in the Alabama town of Anniston. The company had also disposed of polychlorinated biphenyls (PCBs), a highly toxic chemical, in open-pit landfills in the area. The results were catastrophic. Fish from the creek were deformed, and the population had highly elevated PCB levels. A paper trail showed that Monsanto leaders had known about the pollution since the 1960s but had not stopped the dumping. Once the cover-up was discovered, thousands of plaintiffs from the city filed a lawsuit against the company. In 2003 Monsanto and Solutia agreed to pay a settlement of $700 million to more than 20,000 Anniston residents. When CEO Hugh Grant took over in 2003, scandals and stakeholder uncertainty over Monsanto’s GM products had tarnished the company’s reputation. The price of Monsanto’s stock had fallen by almost 50 percent, down to $8 a share. Grant knew the company was fragile and decided to shift its strategic focus. Through a strong strategic focus on GM foods, the company has recovered and is now prospering. In spite of their controversial nature, GM foods have become popular in developed and developing countries. Monsanto became so successful with its GM seeds that it acquired Seminis Inc., a leader in the fruit and vegetable seed industry. The acquisition transformed Monsanto into a global leader in the seed industry. Today, Monsanto employs over 20,000 people worldwide. It is recognized as one of the 100 best corporate citizens by Corporate Responsibility Magazine and has made Fortune magazine’s World’s Most Admired Companies list. Main content 5-3Monsanto’s Emphasis on Biotechnology While the original Monsanto made a name for itself through the manufacturing of chemicals, the new Monsanto changed its emphasis from chemicals to food. Today’s Monsanto owes its $13.5 billion in sales to biotechnology, specifically to its sales of GM plant seeds. These seeds have revolutionized the agriculture industry. Not content with resting on its laurels, Monsanto continues to use its research budget to investigate new methods of farming at its 1.5-million-square-foot complex in Missouri. Throughout history, weeds, insects, and drought have been the bane of the farmer’s existence. In the twentieth century, synthetic chemical herbicides and pesticides were invented to ward off pests. Yet applying these chemicals to an entire crop was both costly and time consuming. Then Monsanto scientists, through their work in biotechnology, were able to implant seeds with genes that make the plants themselves kill bugs. They also created seeds containing the herbicide Roundup, an herbicide that kills weeds but spares the crops. Since then Monsanto has used technology to create many innovative products, such as drought-tolerant seeds for dry areas like Africa. The company utilizes its technological prowess to gain the support of stakeholders. For example, Monsanto has a laboratory in St. Louis that gives tours to farmers. One of the technologies the company shows farmers is a machine known as the corn chipper, which picks up seeds and removes genetic material from them. That material is analyzed to see how well the seed will grow if planted. The “best” seeds are the ones Monsanto sells for planting. Monsanto is extending its reach into the computing industry as well. The company offers software and hardware that use big data to yield important information to help farmers in the field. It even provides recommendations on when and where to plant. Monsanto also arranges tours for its critics to help them understand the process of GM crops and their implications. However, GM crops are not without critics. Opponents believe influencing the gene pools of the plants we eat could result in negative health consequences. Others worry about the health effects on beneficial insects and plants, fearing that pollinating GM plants could affect nearby insects and non-GM plants. CEO Hugh Grant decided to curtail the tide of criticism by focusing biotechnology on products not directly placed on the dinner plate but on seeds that produce goods like animal feed and corn syrup. In this way, Grant reduced some of the opposition. The company invests largely in four crops: corn, cotton, soybeans, and canola. Monsanto owes much of its revenue to its work on GM seeds, and today more than half of U.S. crops, including most soybeans and 90 percent of corn, are genetically modified. Farmers who purchase GM seeds can grow more crops on less land and with less left to chance. GM crops have saved farmers billions by preventing loss and increasing crop yields. For example, in 1970 the average corn harvest yielded approximately 70 bushels an acre. With the introduction of biotech crops, the average corn harvest increased to roughly 150 bushels an acre. Monsanto predicts even higher yields in the future. According to Monsanto CEO Hugh Grant, this increase in productivity will increase crop yields without taking up more land, helping to meet the world’s growing agricultural needs. Monsanto’s GM seeds have not been accepted everywhere. Attempts to introduce them into Europe met with consumer backlash. Consumers have gone so far as to destroy fields of GM crops and arrange sit-ins. Greenpeace has fought Monsanto for years, especially in the company’s efforts to promote GM crops in developing countries. Even China placed bans on certain GM corn imports, although it has since relaxed the ban and appears to be encouraging more acceptance of GM crops among its citizens. This animosity toward Monsanto’s products is generated by two main concerns: the safety of GM food and the environmental effects of genetic modification. Main content 5-4aPatent Issues As bioengineered creations of the Monsanto Company, Monsanto’s seeds are protected under patent law. Under the terms of the patent, farmers using Monsanto seeds are not allowed to harvest seeds from the plants for use in upcoming seasons. Instead, they must purchase new Monsanto seeds each season. By issuing new seeds each year, Monsanto ensures it secures a profit as well as maintains control over its property. This patent protection has become a controversial subject among farmers and has led to numerous litigation battles for Monsanto. Throughout agricultural history, farmers have collected and saved seeds from previous harvests to plant the following year’s crops. Critics argue that requiring farmers to suddenly purchase new seeds each year puts an undue financial burden on them and gives Monsanto too much power. However, the law protects Monsanto’s right to have exclusive control over its creations, and farmers must abide by these laws. When they are found guilty of using Monsanto seeds from previous seasons, either deliberately or out of ignorance, they are often fined. Since it is fairly easy for farmers to violate the patent, Monsanto has found it necessary to employ investigators from law firms to investigate suspected violations. The resulting investigations are a source of contention between Monsanto and farmers. According to Monsanto, investigators deal with farmers in a respectful manner. They approach the farmers suspected of patent infringement and ask them questions. The company claims that investigators practice transparency with the farmers and tell them why they are there and who they represent. If after the initial interview is completed and suspicions still exist, the investigators may pull the farmer’s records. They may bring in a sampling team, with the farmer’s permission, to test the farmer’s fields. If found guilty, the farmer often pays fines. However, some farmers tell a different story about Monsanto and its seed investigators. They claim that Monsanto investigators have used unethical practices to get them to cooperate. They call the investigators the “seed police” and say they behave like a “Gestapo” or “mafia.” In 2007 Monsanto sued Vernon Bowman, an Indiana farmer who Monsanto claims used second-generation Monsanto seeds to plant soybeans. Monsanto claimed its patent protection reaches past first-generation seeds and Mr. Bowman infringed upon its patent. In 2009 the court ruled in favor of Monsanto and ordered Bowman to pay $84,000 in damages. Mr. Bowman did not accept defeat, and in 2013 brought his case before the Supreme Court. The Supreme Court ruled in favor of Monsanto, representing a great victory for biotechnology companies. Monsanto does not limit its investigations to farmers. It filed a lawsuit against DuPont, the world’s second-largest seed maker, for combining DuPont technology with Roundup Ready. Monsanto won that lawsuit, but was countersued by DuPont for anticompetitive practices. These accusations of anticompetitive practices garnered the attention of federal antitrust lawyers. With increased pressure coming from different areas, Monsanto agreed to allow patents to expire on its seeds starting in 2014. This will allow other companies to create less expensive versions of Monsanto seeds. However, Monsanto announced it would continue to strictly enforce patents for new versions of its products, such as Roundup Ready 2 soybeans. Main content 5-5Corporate Responsibility at Monsanto Despite criticisms levied against Monsanto, a study has provided evidence that GM crops have greatly benefited farming. The study estimated that farmers who adopted GM crops have seen their profits increase to 69 percent higher than those who did not. Today, the public generally expects multinational corporations to advance the interests and well-being of the people in the countries where they do business. Monsanto has given millions of dollars in programs to improve communities in developing countries. Monsanto created a Code of Business Conduct to provide guidance on the firm’s ethical expectations and is concerned with maintaining integrity among its many different stakeholders. In 2003 the company adopted an additional Code of Conduct for its chief executives and financial officers and a Human Rights Policy in 2006 to ensure the rights of Monsanto employees and those in its supply chain. The company’s Business Conduct Office is responsible for investigating cases of alleged misconduct as well as maintaining the company’s anonymous hotline. As part of Monsanto’s culture, the company wrote a pledge informing stakeholders about what it sees as its ethical commitments. According to Monsanto, the pledge “helps us to convert our values into actions, and to make clear who we are and what we champion.” Table 1 provides the values Monsanto pledges to uphold, including integrity, dialogue, transparency, sharing, benefits, respect, acting as owners to achieve results, and creating a great place to work. Table 1 THE MONSANTO PLEDGE Integrity Integrity is the foundation for all that we do. Integrity includes honesty, decency, consistency, and courage. Building on those values, we are committed to: Dialogue We will listen carefully to diverse points of view and engage in thoughtful dialogue. We will broaden our understanding of issues in order to better address the needs and concerns of society and each other. Transparency We will ensure that information is available, accessible, and understandable. Sharing We will share knowledge and technology to advance scientific understanding, to improve agriculture and the environment, to improve crops, and to help farmers in developing countries. Benefits We will use sound and innovative science and thoughtful and effective stewardship to deliver high-quality products that are beneficial to our customers and to the environment. Respect We will respect the religious, cultural, and ethical concerns of people throughout the world. The safety of our employees, the communities where we operate, our customers, consumers, and the environment will be our highest priorities. Act as owners to achieve results We will create clarity of direction, roles, and accountability; build strong relationships with our customers and external partners; make wise decisions; steward our company resources; and take responsibility for achieving agreed-upon results. Create a great place to work We will ensure diversity of people and thought; foster innovation, creativity, and learning; practice inclusive teamwork; and reward and recognize our people. Source: Monsanto Corporation, Monsanto Code of Conduct, http://www.monsanto.com/SiteCollectionDocuments/Co... (accessed April 1, 2017). As an agricultural company, Monsanto must address the grim reality that the world’s population is increasing fast and the amount of land and water available for agriculture is decreasing. Some experts believe our planet must produce more food in the next 50 years to feed the world’s population than what has grown in the past 10,000 years, requiring us to double our food output. As a multinational corporation dedicated to agriculture, Monsanto is expected to address these problems. The company developed a three-tiered commitment policy: (1)produce more yield in crops, (2)conserve more resources, and (3)improve the lives of farmers. The company hopes to achieve these goals through initiatives in sustainable agriculture. 5-4bLegal Issues Many major companies face occasional conflicts with government and legal forces, and Monsanto is no exception. The government has begun to examine Monsanto’s practices more closely. In early 2013 Monsanto settled with local residents in Nitro, West Virginia, after claims of health problems became persistent in a now-closed Agent Orange plant. The company agreed to spend up to $93 million on medical testing and local cleanup of as many as 4,500 homes. It also agreed to establish a medical monitoring program and will make additional money available to continue the program’s operation for 30 years. In 1980 the Supreme Court allowed living organisms to be patented for the first time, giving Monsanto the ability to patent its seeds. Despite this victory, Monsanto came to the attention of the American Antitrust Institute for alleged anticompetitive activities. The institute suggested that Monsanto hinders competition, exerting too much power over the transgenic seed industry and limiting seed innovation. When Monsanto acquired DeKalb and Delta Land and Pine, it had to obtain the approval of antitrust authorities and gained that approval after agreeing to certain concessions. As a result of complaints, the Department of Justice (DOJ) began a civil investigation into Monsanto’s practices. Although the DOJ eventually dropped the antitrust probe, concerns over Monsanto’s acquisitions continue. The announcement that chemical, pharmaceutical, and life sciences firm Bayer AG would acquire Monsanto for $66 billion drew scrutiny from both U.S. and European authorities (Bayer is a German company). Such a merger would create a “one-stop shop” for seeds, pesticides and herbicides, and farmer services. Regulators are concerned that the merger might give the combined firm too much power over the seed and pesticide industry. During his presidential campaign, Vermont Senator Bernie Sanders claimed the deal threatened Americans because it would increase prices. Regulators in the European Union have asked for Bayer to provide them with more information before they make a decision on whether to approve—actions which might potentially delay the proposed merger. Bayer and Monsanto deny that their merger would reduce competition. In a meeting with President Trump, Bayer said it would spend $8 billion for research and development in the United States and keep Monsanto’s workforce intact. However, the companies will have to convince the U.S. Justice Department, the Federal Trade Commission, and European regulators that its merger will not restrict competition for it to receive approval. Main content 5-5bCharitable Giving In 1964 the Monsanto Company established the Monsanto Fund. This fund contributes to educational opportunities and the needs of communities across the world. One recipient of the Monsanto Fund is Nanmeng Village in China. The company is helping to train farmers in the area about ways to improve agricultural methods and infrastructure development. The Monsanto Fund also provides $1,500 scholarships to students who are interested in agriculture. Each applicant must be endorsed by three farmers in their communities to be eligible for the grant. Another program implemented by the company is the Matching Gifts Program. This program matches employee contributions to charitable and educational organizations, dollar-for-dollar, by the Monsanto Fund. The program matches a maximum of $5,000 per employee every year and includes organizations supporting the environment, arts and culture, and disaster relief, among many others. In the first decade of the twenty-first century, Monsanto supported youth programs and donated nearly $1.5 million in scholarships to students wanting to pursue agriculture-related degrees. The company supports 4-H programs and the program Farm Safety 4 Just Kids, a program that teaches rural children about safety while working on farms. Monsanto also partnered with the organization Agriculture Future of America (AFA), providing more than $100,000 in scholarships to youth in eight states who want to pursue agricultural careers. In St. Louis, where its headquarters are located, Monsanto offers grants to schools who develop innovative approaches to teaching students math and science. Main content 5-6Conclusion Monsanto faces challenges that it must address, including lingering concerns over the safety and the environmental impact of its products. The company needs to enforce its code of conduct effectively to avoid organizational misconduct. Monsanto also faces scrutiny from antitrust authorities who are concerned that the firm is too large, especially in light of Monsanto’s proposed merger with German firm Bayer AG. Yet despite the onslaught of criticism from Monsanto detractors, Monsanto has numerous opportunities to thrive in the future. The company is currently working on new innovations that could increase its competitive edge as well as benefit farmers worldwide. Monsanto has teamed up with a Danish biotechnology firm to develop microscopic organisms that could be used to aid plant growth and ward off pests. The company is also taking advantage of big data and its potential uses for farming. Monsanto’s inroads into the computing industry are likely to grow in the coming years. Although Monsanto has made ethical errors in the past, it is trying to portray itself as a socially responsible company dedicated to improving agriculture. As noted, the company still has problems. The predictions from Monsanto critics about biotech food have not yet come true, but that has not eradicated the fears among stakeholders. Non-GM food products are becoming more popular, despite their higher costs. Faced with the increasing popularity of organic food and staunch criticism from opponents, Monsanto needs to continue working with stakeholders to promote its technological innovations and eliminate fears concerning its industry.