Scherzade Burden - Foreign Qualified Lawyer
The recent corruption scandal in China over multinational pharmaceutical companies giving bribes to doctors to encourage them to use their brand’s medicines has been widely reported by the media.
At the centre of the scandal is British pharmaceutical giant, Glaxo Smithkline. Glaxo stand accused of paying bribes of around $500 million to doctors, such bribes paid in the form of travel, entertainment, sexual favours and cash over six years. It is believed that whistleblowers at Glaxo handed documents over to Chinese agencies after they had been dismissed from their respective positions at the company.
These probes, not just of Glaxo but of numerous pharmaceutical companies in China, have brought the issue of compliance and corruption to the fore. The general public are concerned about what is being called the “network of corruption” in China.
Some of the most serious damage done to these pharmaceutical companies is not the social perception of them and the public’s newfound distrust of the industry, but the serious financial implications for companies that are found to be carrying out corrupt practices and not complying with the rules and regulations of their jurisdiction. Glaxo has had to cut back on all of its marketing activity in China. Some of the other multinational pharmaceutical companies have told their sales representatives to stay at home or take annual leave because business has been so bad.
Furthermore, breach of compliance and corruption legislation is punishable not only by fine but also by imprisonment, as breach is a criminal, not a civil offence.
It should not, therefore, be difficult to persuade anyone in business that having a robust anti-corruption compliance programme in place is essential for consumer confidence, to prevent scandals and ensure there are no adverse financial implications.
If you do want to tune up compliance in your business then ensure first of all that those at the top of your organisation buy in to the programme. It is important that the leaders of the business follow the regime strictly, are seen to be complying and lead from the front. That way, employees will learn that non-compliance will not be acceptable to the leadership.
It is also important to then ensure that the compliance programme is embedded in the HR department so when new employees join the company they are given at the outset a clear internal policy as to their duties and obligations both under the law and according to the company’s standards.
Understanding the risks associated with non-compliance and of corruptive practices is vital. You cannot design an effective anti-corruption compliance programme without knowing and understanding what adverse consequences exist. If you are unsure that you know all the risks and/or unsure you understand them then seek advice from a professional. Acting pre-emptively and investing in advice could potentially save millions of dollars in the long run.
Finally, controls should be in place so that if your business is accused of corruptive practices or non-compliance then you have the necessary infrastructure in place to act quickly to ensure effective crisis management. Having a good IT support structure and reporting system should comprise part of this infrastructure.
The consequences of non-compliance and corruption are too severe and financially risky to your business to not take action if action is needed. Don’t be the next Glaxo Smithkline.
Oldham Li & Nie would like to thank Miang Lee of Kroll Advisory for the informative talk “Tuning up your anti-corruption compliance programme” at the lunch and learn on 5th December 2013.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.