I’ve read a lot of great articles and analysis about what’s happening with GlaxoSmithKline (GSK) and other pharmaceutical companies in China. The Chinese authorities allege that GSK executives colluded with a travel agency to inflate expenses associated with conferences, then use the extra cash as a slush fund to bribe doctors and hospitals to purchase GSK products. It doesn’t look good for GSK.
All of the analysis I’ve read has focused on what companies with China operations should be doing, especially in light of the fact that GSK undertook its own investigation and said it found nothing of concern. We’ll probably see a lot more about that from the Securities Exchange Commission and/or the Department of Justice in the future. Companies were somewhat relieved when the Morgan Stanley decision came out, but the FCPA Professor pointed out some of the reasons Morgan Stanley isn’t a good exemplar, the primary reason being that the wrongdoer admitted that he deceived the company. GSK appears to have all the elements of an effective compliance program in place, and the program appears to have failed (as did Enron’s). It will be interesting to see what the SEC and DOJ have to say about that and if it leads to any reprioritization in the C-suite and on Boards.
I wonder, though, about all the GSK employees that had to be involved for a scheme like this to work and all the GSK employees who weren’t involved but suspected something. Is the entire China operation tainted? Did GSK’s compliance and ethics (C&E) department make it to China and train the employees there? Was there not a single employee who was involved or who had suspicions and thought the alleged bribery scheme was wrong? It appears that the country manager was involved, so maybe any employees who were uncomfortable or wanted to report didn’t think they had any option but to go along to get along.
The human aspect of this fascinates and saddens me. It’s fascinating because it shows in stark detail how people sometimes feel forced into doing the wrong thing. It’s sad because it shows in stark detail how a lack of management commitment to business integrity can corrode a company’s culture. Effective C&E depends on a multitude of oars all pulling in the same direction at the same time. Many of those oars are individuals making decisions in the moment under a tremendous amount of pressure. And when enough of those oars stop going the right way, the entire boat can capsize.