Friday, February 14, 2014

GlaxoSmithKline: Bribery Scandal & Medication Inflation (2013)

GSK corporate building & logo
Scandals seem to be a reoccurring theme in our capitalistic business system as of late. Revealing the unethical actions of these big corporations proves to be very telling when looking at the integrity of businesses. Analyzing these cases are crucial in order to gain perspective of what not to do, as well as offering insight into what really went wrong, and how a change in business ethics could benefit a company. The company under the microscope in 2013 was that of GlaxoSmithKline (or GSK). A United Kingdom based company, GSK is known for being “one of the world’s largest vaccine markers” and specials in pharmaceuticals (Inocencio). An employer of over 97,000 people, GSK’s work force is fairly strong and occupied in over 100 countries (Inocencio). Like many other companies, they were found guilty of bribery that “totaled nearly half a billion dollars” (Inocencio). The accusation proved true the moment “GSK executive Abbas Hussain admitted that some of the company's senior executives in China appeared to have violated the law” (Inocencio). The accused were 39 hospital workers, taking $450,000 kickbacks over the last three years; other executives of GSK were affected in part (Inocencio). In terms of latent effects of the scandal “Glaxo's weak China sales contrast[ed] poorly with those of its European rivals, Roche and Novartis” (CNBC). Not only are GSK and its stockholders affected by this sales decline (Figure 1), but patients themselves were subjected to “substantially inflated” medication costs (Inocencio). In response to the investigation, GSK offered that they “will cooperate fully with the Chinese authorities in the investigation of these new allegations” but claimed they had no knowledge of the briberies in China’s hospitals (GSK). Although handled fairly appropriately, it’s clear that an analysis of the ethics (or lack thereof) within the company is valuable. 
Graph detailing GSK shares durring the scandal
As a primary theory that relates to my argument, defining Individualism (or The Economic Theory) can help observers of this scandal better identify the issue at hand. The theory states that, "everyone has the right to pursue his[/her] own interests and should do so, but no one has a right to make other people’s choices about their pursuits for them" (Salazar Week 2). Seemingly fair enough, Individualism essentially deploys the 'Golden Rule' we all know and love. GlaxoSmithKline beyond a doubt did not confirm to the premise of Individualism. Gaining revenue of around 500 billion dollars at the cost of inflated prices for the customers is certainly infringing on the medication rights that patients deserve. It's hard enough for some to pay for their medications on a baseline price, and it becomes even more difficult when a inner company bribery scandal causes horrible inflation for patients. Offering a ethical and law abiding solution, I conclude that in order to gain customers respect while gaining business they should compensate those affected by the inflation, seeing as they bare no control over the corruption within the company itself.
Moving to another important theory, one finds themselves face to face with John Mill and the ideology of Utilitarianism which states that, "we ought to bring about happiness and pleasure in all beings capable of feeling it (and do so impartially)" (Salazar Week 3). Applying this to business theory means maximizing the happiness within the company as well as in the customers and subsidiaries on the outside of the business. Bribery is an extremely one sided affair, and in this case, it was the company that was the sole beneficiary. Happiness, coming from the money [$450,00 per person] the 39 hospital workers received, did not transcend to the happiness of the patients or stock holders. Moving forward, it would seem most logical that GSK would be concerned less about the revenue of it's main manufacturers and employees, and focus equally on the customer satisfaction and compliance to lawful revenue management.

Andrew Witty, CEO of GSK

A third and defining theory that applies to the GSK bribery scandal is that of Kantianism (or Kant's Theory). The main principles of this theory include acting rationally, allowing others to react rationally, "respecting individual needs and differences", and being "motivated by Good Will" (Salazar Week 3). From even brief observation of the case it is clear that GlaxoSmithKline violated every principle of Kant Theory. Bribery in business by definition is illegal, and therefore irrational. Respect for the customer seemed to be of little importance to GSK seeing as their actions caused inflated medication prices. Good Will you ask? I see nothing honorable in bribery or inflation, "seeking to do what is right" was not of concern to GSK or more specifically the 39 accused. A section of Kant Theory that is very popular as of current is The Formula of Humanity which states that we should "'act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means' (Kant, MM 429)" (Salazar Week 3). GSK focused to critically on the means: the value being cold hard cash, and not enough on the ends: the satisfaction of the customer and the instantiation of a steady economy. Principally, GSK did not conform to Kant Theory, and will need to regain the trust of the public in order to be a respectful business once again.

Virtue Theory A final theory I propose connects to the GSK bribery scandal is that of Virtue Theory. Virtues by definition are "the characteristics that allow things to function properly" and depend greatly on function and circumstance (Salazar Week 4). Specific to business, there are four main virtues, courage: "risk-taking and willingness to take a stand for the right ideas and actions", honesty: truthful interaction " in agreements, hiring and treatment of employees, customers and other companies", temperance: reasonable desires, and justice: "hard work, quality products, good ideas, fair practices" (Salazar Week 4). Yes, GSK took risks, but not ethical ones, gaining based on bribery is not a courageous virtue. Honesty is out the window the second money is unaccounted for, if GSK had been honest, bribery wouldn't have occurred and we would not have a scandal to analyze. Temperance is debatable, they most likely had reasonable desires individually, but such widespread corruption affected the validity of these desires. Although, quality products are of safe mind within GSK, they did not participate in fair practices of business. Beyond an unspeakable doubt, GSK fails to meet the ethical and moral standards that a business of it's caliber should possess.


"GSK's China Sales Topple on Bribery Scandal." N.p., n.d. Web. 14 Feb. 2014.

"GSK Response to China Investigation | 2013 | Press Releases | Media | GlaxoSmithKline."GSK Response to China Investigation | 2013 | Press Releases | Media | GlaxoSmithKline. N.p., n.d. Web. 14 Feb. 2014.

Inocencio, Ramy. "GlaxoSmithKline's China Network Caught in Massive Bribery Scandal."CNN. Cable News Network, 25 July 2013. Web. 14 Feb. 2014.

Salazar, Heather. PowerPoint Presentations Unit One - Four. 2013-14

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