Topics: Foreign Corrupt Practices Act, GlaxoSmithKline, United States Pages: 9 (1931 words) Published: March 3, 2015

GlaxoSmithKline in China
Case Study 1
Khoa Nguyen
AMBA 660 9043

There has been a lot of increase in expanding companies throughout other countries. In order for a CEO of a company based in USA to move some of its operations to China, it’s best to understand the foreign and local policy that is in placed in China and the bribery scandal that involved four employees of GlaxoSmithKline. This case study will examined the GSK scandal by analyzing the case that involved the four employees, the Chinese government, assessing GSK’s response, lessons learned in order to provide the USA based company to operate at a lower risk and succeeding in China. Analysis

Question 1
GSK has featured its robust ethics and compliance program, even a “3rd Party Code of Conduct” for suppliers. What went wrong? What are the main external and internal factors that encouraged the GSK bribery scandal in China? Which, in your opinion, are more important? Explain your position. According to Quelch & Rodriguez (2013), GlaxoSmithKline (GSK) is a pharmaceutical company that started off as an import-export business in New Zealand and has expanded into a worldwide firm with offices in United Kingdom, India, South America, China, Malaysia, and Greece (Quelch & Rodriguez, 2013). DRS explains one of the challenging factors is changes in political situations and government policies (DRS, 2015, p 7). Because of that, GSK has a strict policy on regulations breaches, fraud, bribery and corruption. Upon arrival, every GSK employee goes through training on the “Code of Conduct” that teaches employees how to conduct business with “honesty and integrity and in compliance with all applicable legal and regulatory requirements” by: Always acting legally and fairly, within the spirit of all laws, regulations and policies Not offering illegal inducements

Looking for principles, not loopholes
(Quelch & Rodriguez, 2013). GSK has a “3rd Party Code of Conduct” that requires all 3rd parties to conduct business in an ethical manner and act with integrity (Fox, 2014). The employees were fully aware of what bribery is and what is expected of them as an employee of GSK. There were several factors that was taken into the scandal but the most important factor was money. Money was both an external and internal factor that influenced the doctors to prescribed GSK drugs and bringing in more sales for the employees, which resulted in higher pay and status. As doctors from China do not make a lot of money and China not allowing doctors to take second jobs (Quelch & Rodriguez, 2013), it’s easy for GSK to bribe additional money to them. Question 2

Assess GSK’s response so far. Are the initiatives that GSK has implemented to address the bribery problems sufficient or would you suggest further actions? If you were Mark Reilly what would you have done? Explain. GSK issued a response to the allegations of the scandal in China on July 15, 2013, a few weeks after the initial raid on June 27 2013 (Quelch & Rodriguez, 2013). They agreed, supported the Chinese government in their full investigation of the allegations and also took various steps for the fraudulent behavior. Immediately, they stopped the use of travel agencies and conducted a thorough investigation of the transactions that was related to the travel agency and other third parties (Quelch & Rodriguez, 2013). Because of their zero tolerance on corruption and bribery, the CEO – Andrew Witty – sent the President of International, Abbas Hussain to China to discuss the investigation and with the government regarding the future of GSK’s operations in China. At the same time, Mark Reilly, GSK’s general manager of China was being replaced by Herve Gisserot (Quelch & Rodriguez, 2013). All of the actions that GSK took was sufficient enough to show that they were sorry and was willing to comply to the government in order to continue operations. If GSK had a true zero tolerance policy then they...

References: Daniels, J. D., Radebaugh, L.H. & Sullivan, D.P. (2015). International business. (15th ed.). Upper Saddle River, NJ: Prentice Hall/Pearson Education.
Fox, T. (2014). GSK in China: A Game Changer in Compliance. Retrieved from http://www.uleduneering.com/fileadmin/user/Multi-Media/LF2014/GSK%20in%20China-A%20Game%20Changer%20in%20Compliance%20By%20Thomas%20Fox.pdf.
Quelch, J. Rodriquez, M. (2013). GlaxoSmithKline in China (A). Harvard Business School. Retrieved from https://cb.hbsp.harvard.edu/cbmp/content/34297188.
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