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GlaxoSmithKline

GlaxoSmithKline (GSK) is a global healthcare business, with pharmaceutical, vaccines and consumer healthcare divisions. It employs over 100,000 employees and had a combined turnover of £27.9 billion (€31.8 billion/$37.7 billion) in 2016.

Engagement Objective - Social, Strategy, Risk and communication:
Bribery and corruption, competitive and sustainable marketing strategy

Background

In 2016, GSK was – for the fifth year running – the highest ranked pharmaceutical company in the well regarded Access to Medicine Index. It has been recognised for its commitment to research and development (R&D) for low- and middle-income countries and has a large number of R&D projects that target independently identified, high-priority product gaps.

However, the company’s reputation for sustainable business practices has been significantly affected by two high profile scandals. In 2012, the company agreed a $3 billion settlement – the largest in the industry to date – with the US Department of Justice for its role in promoting drugs for unapproved purposes. In 2014, a Chinese court found GSK guilty of bribing non‐government personnel between 2007 and 2013 and the company was fined nearly $500 million, with suspended prison sentences for four executives.

What we did

 In 2012, we spoke to the chair to understand the lessons learned by the company to avoid a repeat of the mis-selling scandal in the US. In 2013, shortly after we learned of the further scandal in China, we engaged with the company to gain assurances that it would take the issue seriously. We spoke to the chair and later the senior independent director to express concerns that in spite of a review of the remuneration of its sales force in the US, further issues had arisen in China.

We continued to raise questions about the company’s response throughout 2014 and 2015 with the newly appointed chair and the CEO. In early 2016, we received a detailed briefing from the head of ethics and compliance on the changes to the company’s expenses system which were put in place to help ensure that the company avoids any bribery payments in future.

We also met the chair of the corporate responsibility committee in 2016 and 2017 to discuss implementation of the changes to the company’s sales model to make sure the company avoids further mis-selling incidents, while at the same time remaining competitive.

Results

Following news of the Chinese scandal, the CEO announced an independent investigation into its causes by a law firm.

In January 2015, the company completed the roll-out of a new remuneration model for its sales teams, replacing individual rewards based on sales or market share with rewards based on the quality of interactions with health care professionals. A year later, the company stopped paying doctors to speak on its behalf, instead engaging with them through digital channels and providing direct contact with its own medical teams. The company also strengthened the training on its code of conduct and put in place tighter controls on the authorisation of business expenses and external payments.

We have received assurances that GSK is carefully monitoring the impact of these changes and that there have been no adverse consequences. Indeed, we were comforted to hear the company report that in a survey of US-based healthcare professionals in 2016, the company ranked first for customer trust and company value.

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