International Business Management in GlaxoSmithKline - Case Study Example

Northumbria (BA Hons) International Business Management Module Applied Business Ethics Module SM 0381 Seminar Dr. Nigel Petts Student Name: Habeel Kakakhel Student Number: 14043199 Word Count (excluding headings and sub-headings): 3316 Submission date: 20/05/2015 Table of Content 1.0 Ethical Dilemma Essay (Part A) 1 1.1 Ethical Dilemma Description 1 1.2 Why is it an Ethical Dilemma 2 1.3 Ethical Solutions 3 1.4 Conclusion 4 2.0 Portfolio of Evidence (Part B) 5 2.1 Appendix A 5 2.2 Appendix B 7 2.3 Appendix C 10 2.4 Appendix D 12 2.4.1 – Level 1 12 2.4.2 – Level 2 13 2.4.3 – Level 3 14 2.4.4 – Level 4 15 2.4.5 – Ending Video 16 2.4.6 – Completion Screen 16 3.0 Bibliography 17 1.0 Ethical Dilemma Essay (Part A) 1.1 Ethical Dilemma Description The ethical dilemma here is in regard to GlaxoSmithKline (GSK), which is a major British pharmaceuticals company that got involved in major ethical issues relating to bribery and immoral sales techniques in China. According to the reports of Jack and Waldmeir (2013), the Chinese division of the company faced several charges relating to the accusation of bribery to government officials. The vice president of GSK, Liang Hong, had admitted that he offered bribery through payments via a local travel agency (Reuters.com, 2013). The bribes were mostly given to doctors and government officials so that they prescribe medicines and costly treatments to the patients that otherwise may not be required for the treatment (Peston, 2013). It has been revealed that the company has offered around $500 million (RMB 3 billion) to doctors and officials in the form of travel packages (Kelton, 2014). Liang Hong also mentioned that he used more than 700 travel firms to lure their target. The company has been involved in offering cash payments and “sex bribery” to the employees and executives to convince them and gain their favour in the unethical venture (Peston, 2013). This ethical issue is not the first one for GSK. Based on the reports of McBride (2013), it has been evidenced that the company has been involved in the unethical research activities. The researchers in the business unit in China did not report the details of their research processes. The medicines and procedures which were supposed to be tested on animals before testing on animals were alleged to be directly tested on humans (Purtilo & Doherty, 2013). This is a clear violation of ethical code of conducts. From the above cases, it can be stated that both GSK and the government officials and doctors are involved in this ethical issue (Peston, 2013). It might be argued that the participants could have declined the offer proposed by the company and could have blown the whistle on the company. This can be an ethical dilemma for the employees of the company while deciding whether or not to participate in the unethical activities or to go against the higher authority which may put their employment in danger. 1.2 Why is it an Ethical Dilemma It can be stated that the situations that were discussed above can create ethical dilemmas for the employees. However, in order to justify these facts as to why they are an ethical dilemma, an in-depth review of the situations are required. In the first situation, GSK was involved in increasing the sales of their medicines through unethical bribing. These participants faced severe ethical dilemma resulting from a mental conflict between two thought processes. According to Subedi (2014) and Schmuke (2010), the concept of ethical dilemma can be described as a mental conflict between two contrasting mentalities – one of them focuses on the short-term objectives and safekeeping while the other focuses on the moral obligations and ethics. The activities which are morally right are often considered to be ethical in nature, as it looks after the long-term interest of the stakeholders. The unethical activities are mostly on the grounds of short-term financial gains and personal benefits. The employees were tempted by offering money and “sex bribery” so that they get involved in the unethical activities and support its progress. At this point, the employees are most likely to face a severe ethical dilemma (Ferrell & Fraedrich, 2014; Griseri & Seppala, 2010). At one hand they had to follow the orders given by the supervisors, and on the other hand they are supposed to ensure that the company is following ethical activities. Moreover, they also had to choose between easy money and moral obligations which did not have any apparent return. The employees also perceived that if they did not cooperate they might face threats of getting fired or demoted (Hanson, 2014). The employees also had another option to blow the whistle on the company by exposing their activities to the public. However, this might expose them to a certain degree of risk. These contrasting thoughts resulting from the unethical activities of the company justifies that there is a significant level of an ethical dilemma among the employees. In the second incident discussed that occurred in 2011, the company was involved in unethical drug trials on humans (Thomas, 2013). According to the code of practice for conducting research on drugs, a pharmaceutical company can only proceed to human trials if the animal trials are approved by the governing body (Purtilo & Doherty, 2013). However, GSK had moved on to human trials without properly reporting on the animal trials. In order to cover this up, the company paid a flat rate of payment to several hospitals. They could have either refused to collaborate with the company or expose their activities to the government (De George, 2011; Singer, 2013). However, since the company had a wide network of their accomplice, so it would put their career in danger. This mental conflict between earning extra money or securing their career and stopping unethical drug trials is clearly an ethical dilemma. 1.3 Ethical Solutions Since a dilemma is a mental conflict between two contrasting ideas leading to two contrasting outcomes, so in order to judge and provide a solution one must have an unbiased view over the incidents (Jennings, 2014). The solution towards an ethical issue is to find out a way so that it yields an ethical outcome without compromising on personal goals or objectives. However, taking the middle path is not always a viable option (Durkheim, 2013). In several cases where a large number of employees are involved in and favours unethical activities, then it becomes difficult for one person to stay away from it. In the case of the ethical issues faced by the employees of GSK, there can be several solutions that could have solved the ethical dilemma of the employees (Reamer, 2013). The employees were offered money and “sex bribery” to win their favour. Therefore, it can be assumed that it only offered money and favour to the employees. In cases like this, one must take the moral high ground and look for the long-term benefit of the company and himself. The unethical activities can lead to devastating results for the companies and its stakeholders, just like it happened with Enron (Time.com, 2015). Prescribing unnecessarily expensive treatments to the patients have allowed the company to earn higher revenue and the employees to earn higher incentives (TheConversation.com, 2013). Being an employee, one would always like to get paid higher than usual, which as a result compels them to get involved in unethical activities. Thus for one individual being indifferent or not participating under peer pressure may keep him away from ethical issues, but it will not stop the unethical practices of the company (Jennings, 2014). Thus the employees who are willing to go against the unethical activities of the firm can take necessary evidence to the media. This as a result will not only expose the company’s acts to the public but it will also compel the government and the law enforcement authority to take legal actions against the company (Durkheim, 2013). Moreover, it would also keep the whistle blower away from any spotlight and would keep him away from danger. It can also be argued that the government should also take certain actions against unethical medical and pharmaceutical practices. In China, the legal system against unethical practices is not so strongly enforced (Wu, 2014). As a result, this has encouraged the company and its employees to be involved in unethical activities. It has been evidenced that in regions where the law enforcement is not so strict, the level of unethical practices are also higher (Albareda, Lozano & Ysa, 2007). Thus the government should also make more strict laws and make sure that they are being properly enforced. From the stand point of the government body, it can be stated that the major well-established companies often create lobby with the government by making large donations. This as a result leads to ethical issues for the government (Ardichvili et al., 2012; Williams, 2012). 1.4 Conclusion From the above discussion, it can be mentioned that the unethical activities conducted by GSK had put several stakeholders in an ethical dilemma, particularly the employees and the medical institutes. The unethical bribery to the doctors and government officials also involved employees. The employees were lured in to get involved in unethical activities to increase the revenue generation of the company. This as a result led to severe ethical dilemma for the employees who faced a mental conflict between two contrasting ideas; one was based on moral grounds and the other was based on self-security. This ethical dilemma can be solved by carefully whistle blowing on the company to the media, so that the unethical activities are uncovered and the government is forced to take action against the company. Word Count: 1467 2.0 Portfolio of Evidence (Part B) 2.1 Appendix A A debate was held in our class relating to ethical issues in organizations. Each group was assigned a particular character for the debate which was discussed in detail in a given case study. Our group was assigned with the case study of Jan Edwards. The motion of the debate stated that business school students are more inclined to believe that in a shareholder-focused economy it is impossible to maintain ethical leadership. Jan Edwards is a person of high morality and has focussed her entire life to the welfare of the society in a selfless manner. Her company, Clean Solutions Inc., is an industrial building maintenance company. Being the CEO of the firm, Jan had encouraged every exiting employee to develop a socially responsible mentality. Jan herself has personal preference towards Corporate Social Responsibility (CSR) activities. She and her company had donated several working hours for the development of the underprivileged Guatemalan population. Thus it can be stated that Jan follows ethical leadership and also wants her employees to conduct their duties and meet their responsibilities in an ethical manner. It can be clearly stated that Jan has always been a supporter of ethics and social responsibilities. In this regard, the character of Mike Gustavsson also shares a lot of similarities. He shares the same values and principles, and believes that the ethical practices of an organization start from the higher management. Mike is against the fact that the fresh passed out graduates are only focussed on making money and earning incentives without having any concerns for the environment and society. The character of Mei-Hua Felung needs a deeper understanding as she displayed a hypocritical nature. She mentioned that despite helping her company evade millions of dollars in taxes, she is still following ethical approaches. She mentioned that the government have several loopholes in the legal system, which is just being leveraged by her company and therefore is not involved in any unethical activity. The character of Deshi Chen can be quite clearly evaluated since he does not bear any contrasting nature. He believes that in the current business environment there is no room for the ethical leadership. He firmly stated that in order to sustain in a competitive environment, firms need to focus more on making profit and ensure that the shareholders’ interests are being looked after. The debate regarding ethical issues always lingers between the morally right activities that take care of the society and all of the stakeholders and the business-oriented activities that only focus on the interest of the shareholders and the financial benefit of the company (Bonerjee, 2009). Our group went in favour of the debate motion and stated that the ethical leadership approach taken by Jan is no longer a viable option in the current business scenario. The business school students have learnt that the global business scenario is constantly evolving. Nowadays the success of a firm is largely dependent on the financing provided by its shareholders and investors. Thus in order to ensure the long-term sustainability of a company, it has to be ensured that the company can attract increasing number of stakeholders and investors (Gilbert, 2006). The shareholders who invest their money in a particular firm bear the primary motive of gaining the highest possible return on their investment. Thus the Return on Investment (ROI) is primarily the only objective of shareholders (Prince, 2006). In a shareholder-dominated business scenario, the companies that follow strong ethical leadership practices are most likely to attract fewer shareholders, thereby limiting their financial abilities. Jan and her company are solely focussed on their CSR activities and not on making higher revenue. The company only has 50 shareholders comprising of only small local investors. However, in order to make the business grow, Jan needs more shareholders who are willing to invest in her venture. The other groups highlighted the fact that following ethical practices ensures long-term sustainability of the firms. They mentioned that an organization being a part of the society has the obligation to look after the society and as well as the environment. The character of Deshi Chen and Mei-Hua Felung was highly criticized owing to their ignorance towards ethical practices. This as a result has changed the economy to be more focussed on the shareholders and meeting their interests by offering more returns. Thus it has created a conflict within the organization between the existing organizational culture and the new trend among business school students. Word Count: 739 2.2 Appendix B The case study focussed on Borries, and his work-related decisions have been discussed in this section. It will highlight the ethical dilemma faced by Borries where he had to choose between his organisational duties and personal responsibilities towards his family and loved ones. From the case study it has been revealed that Borries works in an advertising agency company and its employees work under severe work pressure to meet stringent deadlines. This as a result barely allows the employees to have personal holidays. In this case study Borries faced a severe ethical dilemma where he needed to choose between his personal choices and the welfare of the company. It has been mentioned that Borries had a clear option to take the holidays to meet his girlfriend and her family and take his relationship a step further. However, Borries could not jeopardize the project he was working on and could not abandon the company he was working in. The dilemma faced by Borries clearly highlights the mental conflicts that he experienced while choosing between his relationship and his job role. Another ethical dilemma faced by Borries was when he was confronted by his colleagues who claimed that since Borries agreed with the management and cancelled his leave, then no one else can say “no” to the management when they will be asked to give up their leaves. This incident also resulted in an ethical dilemma for Borries where he had to choose between the welfare of the company or a good relationship with his colleagues. It has been mentioned that the employees of this advertising firm mostly socialize among themselves and bear a strong bond between them. After this incident, Borries is most likely to be socially abandoned by his colleagues. However, he ignored all the consequences and decided to take the side of the management. This as a result created a mental conflict leading to an ethical dilemma where he had to choose between his colleagues and social life or his organizational responsibilities. In the following paragraph, the ethical dilemma faced by Borries while choosing between his organizational responsibilities or his personal life will be discussed based on the normative theoretical framework. Contractualism theory suggests that the people should make their decisions based on their unbiased nature (Goldman, 2012). However, in order to make an unbiased decision the individual must weigh the value of both the decisions and make the judgement. However, any personal judgement is based on some level of biasness particularly when the individual making the judgement is being affected by the choice itself. Thus this theory is improper to conclude to any solution to the ethical dilemma faced by Borries. In order to solve his problem, a more standardized approach is needed that can offer a benchmark that will help to identify the ethical or moral decision. This can be achieved by the Utilitarianism theory which suggests that the best way to solve an ethical dilemma is to choose the option that yields highest possible happiness for the maximum number of people (Hayry, 2013; Jones, 1991). This theory allows an individual to choose between different options which lead to different outcomes and come up with an option which is ethically “correct”. In the light of the situation dictated in the case study, it can be stated that Borries took the decision that will be beneficial to a large number of people. By conforming to the management and cancelling his leave, he opened new business opportunities for his company. This as a result led to the welfare and happiness of a lot of people in the management (Landau, 2013). Descriptive framework of the character analysis suggests that Borries is an individual who prioritizes his work and may get influenced by higher authorities. It has been clearly stated that Borries making the decision to take holidays was largely dependent on the manager’s orders. It can also be seen that he did not want to discuss the matter with his fellow colleagues and avoided any further discussion by making it clear that he has nothing to do with their personal opinion. This clearly suggests that Borries bears a discretionary and dependent personality, as can be referred to in Figure 1. Figure 1: Stakeholder Salience Model (Mitchell, Agle & Wood, 1997) Referring to Figure 2, the decision taken by Borries did not have drastic consequences on his life, as he prioritizes his work and organizational responsibilities more than his personal and social life. The social consensus on the other hand is quite high as his colleagues are quite upset by his decision to follow the order of the management. For the managers, the consequential magnitude is low as he got what he wanted and it proved to be beneficial for the company. However, the management also bears a high level of social consensus as the employees were also quite angry against the management to make Borries cancel his holidays. Characters Impact of Consequences Social Consensus Probability of Effect Temporal Immediacy Proximity Concentration of Effect Normative Ethical Theory Borries Medium High Medium Medium High High Non-Consequentialist - Virtue Ethics Manager Low High High Medium High Medium Consequentialist - Utilitarianism Clients Medium Medium Low Medium Medium Low Consequentialist - Egoism Swee-Lan and her Family High Low Medium Medium High High Non-Consequentialist - Deontology Colleagues Medium High Low Low High High Non-Consequentialist - Deontology Figure 2: Based on the Moral Intensity Framework Model (Goldman, 2012) Word Count: 808 2.3 Appendix C The module of Business Ethics and ethical dilemma proved to be quite interesting since it compelled all the team members to engage in brain storming activities. The group debate allowed us to leverage each others’ communicational skills and knowledge base. The seminars allowed us to communicate as a group and not as an individual. This as a result made us acknowledge the importance of team work. The case studies that we discussed in the seminars gave rise to several different opinions on a single matter, thus teaching us how to handle internal conflict and leverage each others’ strengths. The class debate allowed us to implement our team work where we demonstrated good communicational skills. I believe good communication skill is a necessity for improving leadership skills. This as a result allowed all the members to stick to one opinion and stand strong behind our point in the debate. We all took turns to speak and while one was putting up his point, rest of us were helping him with notes and reminding him of any point that he may have missed. The seminars also allowed us to engage in several group discussions regarding cases studies. The group discussion facilitates us to discuss each other’s point of view and help us to look at a particular scenario from different perspectives. In a group, we are able to learn from each other and point out each other’s mistakes, which as a result helped us to greatly improve our cognitive faculties. Working in a group has also helped me to learn on how to work collaboratively with other colleagues who may bear different mental perspectives. I have realized that the best way to work effectively in a group is to develop good listening skills so that I can analyse others’ ideas and frame my own. Word Count: 302 2.4 Appendix D 2.4.1 – Level 1 2.4.2 – Level 2 2.4.3 – Level 3 2.4.4 – Level 4 2.4.5 – Ending Video 2.4.6 – Completion Screen 3.0 Bibliography Albareda, L., Lozano, J. M., & Ysa, T. (2007). Public Policies on Corporate Social Responsibility: The Role of Governments in Europe. Journal of Business Ethics, 74(4), 391-407. Ardichvili, A., Jondle, D., Kowske, B., Cornachione, E., Li, J., & Thakadipuram, T. (2012). Ethical Cultures in Large Business Organizations in Brazil, Russia, India, and China. Journal of Business Ethics, 105(4), 415-428. Bonerjee, S. B. (2009). CSR: The Good, The Bad & The Ugly (5th ed.). London: Wiley. De George, R. T. (2011). Business Ethics (7th ed.). New Delhi: Pearson Education India. Durkheim, E. (2013). Professional Ethics and Civic Morals (2nd ed.). London: Routledge. Ferrell, O. C., & Fraedrich, J. (2014). Business Ethics: Ethical Decision Making & Cases (10th ed.). Connecticut: Cengage learning. Gilbert, D. (2006). Ethics through Corporate Strategy (2nd ed.). London: Oxford University Press Goldman, A. H. (2012). Contractualism and the Foundations of Morality, by Nicholas Southwood. Mind, 121(482), 539-543. Griseri, P. & Seppala, N. (2010). Business Ethics and CSR (4th ed.). New York: Wiley Hanson, K. O. (2014). Six Unavoidable Ethical Dilemmas Every Professional Faces. Business and Society Review, 119(4), 537-552. Hayry, M. (2013). Liberal Utilitarianism and Applied Ethics (1st ed.). London: Routledge. Jack, A., & Waldmeir, P. (2013). GSK China Probe Flags Up Wider Concerns. Retrieved May 9, 2015, from http://www.ft.com/cms/s/0/ba26aa2c-6648-11e3-aa10-00144feabdc0.html#axzz3a1D1E22U Jennings, M. (2014). Business: Its Legal, Ethical, and Global Environment (10th ed.). Mason: South-Western College Publishing. Jones, T. M. (1991). Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model. The Academy of Management Review, 16(2), 366-395. Kelton, E. (2014). GlaxoSmithKlines Spin Doctoring Doesnt Cure Corruption Problems. Retrieved from http://www.forbes.com/sites/erikakelton/2014/04/28/glaxosmithklines-spin-doctoring-doesnt-cure-corruption-problems/ Landau, R. S. (2013). Ethical Theory (2nd ed.). Hoboken: Wiley BlackWell. McBride, R. (2013). NYT: GlaxoSmithKline’s China R&D Audit Found Ethical Breaches. Retrieved May 9, 2015, from http://www.fiercebiotech.com/story/nyts-glaxosmithklines-china-rd-audit-found-ethical-breaches/2013-07-23 Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. Academy of Management Review, 22(4), 853-886. Peston, R. (2013). GSK’s Chinese Lesson. Retrieved May 9, 2015, from http://www.bbc.com/news/business-23331806 Prince, E. T. (2006). The Valuation Approach to ROI. Chief Learning Officer, 5(11), 44-47. Purtilo, R. B., & Doherty, R. F. (2013). Ethical Dimensions in the Health Professions (5th ed.). Melbourne: Elsevier Health Sciences. Reamer, F. G. (2013). Social Work Values and Ethics (4th ed.). New York: Columbia University Press. Reuters.com. (2013). Bribery by GSK China was Coordinated at Company Level: Xinhua. Retrieved May 8, 2015, from http://www.reuters.com/article/2013/09/03/us-gsk-china-idUSBRE98207S20130903 Schmuke, M. (2010). Managerial Ethics: The Psychology of Morality (5th ed.). London: Routledge Singer, P. (2013). A Companion to Ethics (Rev. ed.). New Jersey: John Wiley & Sons. Subedi, D. (2014) Ethics Lessons for Business Managers, Organizations and Researchers. Retrieved May 8, 2015, from http://www.emeraldinsight.com/doi/full/10.1108/CR.34724baa.001 TheConversation.com. (2013). China’s Pharma Scandal and the Ethics of the Global Drug Market. Retrieved May 10, 2015, from http://theconversation.com/chinas-pharma-scandal-and-the-ethics-of-the-global-drug-market-16424 Thomas, K. (2013). Drug Research in China Falls Under a Cloud. Retrieved May 8, 2015, from http://www.nytimes.com/2013/07/23/business/global/drug-research-in-china-falls-under-a-cloud.html?_r=0 Time.com. (2015). Behind the Enron Scandal. Retrieved May 10, 2015, from http://content.time.com/time/specials/packages/article/0,28804,2021097_2023262_2023247,00.html Williams, B. (2012). Morality: An Introduction to Ethics (2nd ed.). Cambridge: Cambridge University Press. Wu, N. (2014). Compliance with Environmental Regulations when the Rule of Law is Weak: Evidence from China. Retrieved May 10, 2015, from http://journalistsresource.org/studies/international/china/regulatory-compliance-evidence-from-china# Read More