What issues do you suppose Monsanto’s key decision-makers now examine in greatest detail? How much weight do you suppose they attach to (i) shareholder priorities (ii) environmental priorities? On the basis of the above case study and additional information, do you think they got the balance about right?

Question

What will be an ideal response?

Answer 1

In general terms the same issues are likely to remain on the agenda of Monsanto’s key decision-makers.
The set-backs (such as the cautious, even hostile reaction of the European Union) no doubt occupy their
thinking to some degree. But they are probably concentrating much more on exploiting opportunities in
those parts of the world where environmentalism is less established and where increasing food
production is more of a priority. As a for-profit enterprise they attach considerable weight to shareholder
priorities. Contrary to much popular opinion, one suspects, they do not ignore environmental priorities;
rather, they are likely to believe that the threats are much less significant that opponents argue, based on
scientific evidence and perhaps an unwarranted degree of arrogance arising from that knowledge.
Have they got the balance between commercial and ethical priorities about right? The answer probably
depends on the assessor’s personal priorities, whether one is an investor, a hungry farmer or a well-fed
green activist, for example. There is a presumption in the West of freedom to act unless harm is clearly
and undeniably going to result; operation of the precautionary principle limits that freedom, unacceptably
in the minds of libertarians, prudently as seen by others. By proceeding, Monsanto has accepted a degree
of risk that some shareholders no doubt found unacceptable and sold their shares. The challenge for
Monsanto is to demonstrate rates of return that justify the risk premium that current shareholders have
accepted.
Factual update on subsequent developments
The 2010 SEC annual filing (10k report) indicates limited sales growth in seeds and slight decline in net
profits, but a dramatic decline in sales and profits of Roundup and associated chemicals, accompanied by
plant closures and employee layoffs. Global recession has evidently been a major factor, but shareholders
must surely now wonder of Monsanto’s strategy is flawed, perhaps fundamentally.