Ethics, Organisations, and Society - Ethical Issues in GlaxoSmithKline Plc - Case Study Example

Ethics, Organizations & Society Ethical issues in GlaxoSmithKline plc Having done an in-depth study of the governance framework of GlaxoSmithKline plc over the past few years, quite a few ethical issues came into the forefront. GlaxoSmithKline was accused of malpractices such as bribery, fraud and corruption, false marketing and advertising. The company allegedly breached certain regulatory standards by marketing and selling drugs which were not in compliance with the criteria specified by the board (IBE, 2012). The case study that was done on GlaxoSmithKline highlighted that the company deceitfully manipulated study designs in order to attain results which were in favour of the interests of the company. Alongside such malpractices, the company was also accused of concealing important information which was actually unfavourable and was also accused of failure to notify customers with the unbecoming results thereby developing and producing drugs which were detrimental to the health of the patients. GlaxoSmithKline did false advertising thereby encouraging the usage of off label drugs which led to a significant misuse of medicines. The company was accused of using grants as a means to promote drug products illegally. These facts highlight the ethical lapses that existed in the governance framework of GSK. The company also resorted to means of offering bribes to doctors in order to intimidate them to prescribe drugs that were manufactured by the company itself. The underlying reason behind the company resorting to unethical means was to accrue huge benefits (Kassirer, 2007). The insurmountable growth in business transactions and revenue streams has led to inception of a seemingly unstoppable force of unethical practices in large-scale business transactions (Scott, Gilliard and Scott, 2002). Sanyal and Guvenli (2009) explained that, the issue of corruption and bribery is spreading like plague all across different countries. Over the past few years there has been a significant increase in the amount of bribes that are being offered and accepted by organizations in order to fulfil their vested interests. This has led to the predominance of bribery throughout the world. Such has been the case of GSK who has been associated with such practices over the past two years in the USA and China. GSK admitted to have promoted antidepressants Paxil and Wellbutrin for unapproved uses, including treatment of children and adolescents. This illegal practice that the company adopted is termed as off label marketing. Moreover, the company was also charged with holding back data that provide unsupportive claims regarding the diabetes drug Avandia manufactured by the company (Herper, 2012). The company also was found guilty of providing incentives to doctors. The companys sales force have been found guilty of bribing physicians by using every imaginable form of high-priced entertainment in order to lure them into giving favourable reviews regarding the drugs manufactured by the company (BBC, 2012). The malpractices that GSK resorted to in China were also somewhat similar to what they had done previously. They offered bribes to doctors in order to influence them to prescribe their medicines (Shobert, 2013; Rankin, 2013). These facts highlights the unethical practices that GSK was engaged in which tarnished the reputation of the UK blue chip company and has affected its stakeholders significantly. Key stakeholders and their perspectives The key stakeholders who were affected by these incidents that happened with GSK are the Shareholders, Government, Customers, Suppliers, Debt holders, Employees, Community (Grin, 2008). From the perspective of the shareholders, resorting to this unethical means were in one way of generating higher profit which would mean heavy compensation for the shareholders. Such was also the case of the employees, as the ones who were in favour of such practices received lucrative packages. This was good for them in terms of improving their financial status. The debt holders had no direct involvement in this but since the company was engaged in diverse operations, which meant that they would need more finances and this is where the debt holders make their business. The government again had no direct involvement in this. They completely overlooked the health sector just because they were focused towards making economic modernization and they believed that with the companies of the stature of GSK operating in their country achieving this feat would be relatively easy. The customers were on the receiving end of these unethical practices. It is in one way difficult to explain the issue from their perspective. However, it goes without saying that they must have criticized the company’s governance framework considering the fact that their lives were at stake. The suppliers are happy as long as their targets are met. They would not be much bothered as long their supplies are being received accordingly. For them, the use of unethical means did not matter much. The community even if were against such practices, had nothing to do as they were doing their job and had to do the best with what they had. Figure 1: Stakeholder map (Source: Author’s creation) Impact of events on stakeholders Table 1: Key stakeholders STAKEHOLDERS Stakeholder Type IMPACT Supplier Internal Financial Customer External Social Employees Internal Financial and territorial Debt holders Internal Financial Government External Social and environmental Community External Social and environmental Shareholders Internal Financial As far as the suppliers are concerned, they have been significantly affected by this unethical means adopted by the company. With the bribery scandal coming at the forefront the sales of GSK plummeted hugely (Hirschler, 2013; BBC, 2013). This affected the profit of the company adversely and thus the company had to reduce the rate at which the supply was received in order to prevent the wastage of inventory as the company was not being able to generate additional sales. Thus the financial performance of the suppliers also deteriorated significantly. The customers were in one way at the receiving end of these unlawful practices conducted by the company. GSK lured doctors into prescribing drugs as well as give favourable reviews regarding the products manufactured by them which would in return influence customers to buy their products regardless of the safety of the products. The company concealed important information rather the negative attributes of some of the drugs in order to prevent the reduction in sales. These drugs were detrimental to the health of the patients and by doing so the company put the lives of its customers into jeopardy. The employees of the company were also not spared from the repercussions of the incidents that took place within the company. There were two groups of employees; one who worked hand in hand in favour of the unethical means conducted by the company and the others who opposed it. The employees who were in favour received lucrative packages initially but when the scandal unfolded, some of them were arrested and detained which eventually led to the termination of their contracts (Jordan, 2013; Jennings, 2013; Market Watch, 2013). The one’s who were against such practices were severely discriminated at the time these practices were being conducted. Considering the fact that the market is efficient, the shares price of GSK plummeted after the news of the company being involved in such unethical means came into the spotlight. With the share price going down, the financial value of the shares held by the shareholders depreciated significantly. This led to severe financial loss bared by the shareholders. The shareholders started selling the shares rapidly in order to prevent further losses. This led to further reduction of the share price of GSK. The Government although external to the company is also affected because of this incident. The Chinese government completely overlooked and underfunded the health sector in the light of achieving economic modernization. The bribing scandal deteriorated the financial performance of GSK which in turn depleted the health reforms within the country. The severe losses incurred by the company and its suppliers impacted the economy severely. This affected the further enhancements the government was intending to make in the health sector of the company. The research community was also affected because of this bribery scandal precisely because the scientists who worked within the company were also bribed in order to influence them to obtain favourable results regardless of what the actual results were. This deteriorated the quality of research that was being done and henceforth the quality of the product manufactured. The end results were drugs which were associated with potential safety and quality issue and were detrimental to the health of the patients. Ethical theories As far as ethical theories are concerned, there are two basic types: 1. Consequentialist 2. Non consequentialist The Consequentialist theory states that if the consequences come out to be favourable then the actions are right and if they are bad then the actions are wrong (Rossouw, 2009). The non consequentialist theory determines the moral righteousness and wrongness of an action on the basis of the characteristics of the actions (Tuan, 2011). This theory is based on the fact that good actions are a result of right intentions and are motivated by a sense of duty. The worth of actions should be based upon the attributes of the actions taken and not by the consequences or results. Having done an in-depth research about the ethical issues faced by GSK, it can be said that the leaders of the company adopted the Consequentialist approach with a view of pursuing only one consequence and that is to accrue significant financial benefits. In the process they compromised with the quality and integrity with which they and henceforth put human lives into jeopardy. The actions were measured in terms of the favourability of the results that they fetched and this highlights the gap present in the corporate governance framework of the organization (Peppas, 2003). Conclusion The study provided a comprehensive view regarding the ethical issues faced by the company as a result of cultural differences. The study focused on the act of corruption and bribery as well as illicit marketing conducted by GSK, a UK based Blue Chip Company. Having done an in-depth research, it can be concluded that, a rigid corporate governance framework, strict code of conduct and business ethics are crucial factors ensuring the stability of the organization (Svensson, Wood and Callaghan, 2006). From the point of view of GSK, the management will have to ensure that employees follow a strict code of conduct and that the operations being carried out are in complete compliance with the code of corporate ethics. A strong governance framework should be formulated who will be responsible for laying down strict rules and regulation directed towards penalizing anyone who breaches the code of conduct. Honest and motivated personnel will have to be recruited in key positions whose responsibility will be to uphold the integrity of service. Needs and concerns will have to be communicated effectively through an effective chain of communication. If followed properly, these actions would contribute hugely towards tackling ethical issues that companies face in the current scenario. Reference List BBC, 2012. GlaxoSmithKline to pay $3bn in US drug fraud scandal. [online] Available at: [Accessed 6 January 2014]. BBC, 2013. GlaxoSmithKline sales plunge in China after scandal. [online] Available at: [Accessed 7 January 2014]. Grin, 2008. Business Deconstructed Assignment "Glaxo Smith Kline". [online] Available at: [Accessed 7 January 2014]. Herper, M., 2012. The terrible things GlaxoSmithKline did wrong—And the thing it’s doing right. [online] Available at: [Accessed 7 January 2014]. Hirschler, B., 2013. Bribery scandal slashes GlaxoSmithKlines Chinese drug sales. [online] Available at: [Accessed 7 January 2014]. IBE, 2012. Concerns & Ethical Lapses, 2010 & 2011. [pdf] IBE Available at: [Accessed 6 January 2014]. Jennings, D., 2013. GlaxoSmithKline Rocked By China Bribery Scandal. [online] Available at: [Accessed 7 January 2014]. Jordan, A., 2013. GSKs Chinese executives, but not company, likely to face charges in China: sources. [online] Available at: [Accessed 7 January 2014]. Kassirer, J. P., 2007. Pharmaceutical ethics? Open Medicine, 1(1), pp. 58-59. Market Watch, 2013. GlaxoSmithKline Rocked By China Bribery Scandal. [online] Available at: [Accessed 7 January 2014]. Peppas, S. C., 2003. Attitudes toward codes of ethics: The effects of corporate misconduct. Management Research News, 26(6), pp. 77-89. Rankin, J., 2013. GSK boss says firm wont pull out of China despite corruption scandal. [online] Available at: [Accessed 7 January 2014]. Rossouw, G. J., 2009. The ethics of corporate governance: Crucial distinctions for global comparisons. International Journal of Law and Management, 51(1), pp. 5-9. Scott, J., Gilliard, D. and Scott, R., 2002. Eliminating bribery as a transnational Marketing strategy. IJCM, 12(1), pp. 1-17. Shobert, B., 2013. Why Glaxo’s China scandal needed to happen. [online] Available at: [Accessed 7 January 2014]. Svensson, G., Wood, G. and Callaghan, M., 2006. Codes of ethics in corporate Sweden. Corporate Governance, 6(5), pp. 547-566. Tuan, L. T., 2011. Corporate social responsibility, ethics, and corporate governance. Social Responsibility Journal, 8(4), pp. 547-560. Read More