Risk Assurance & Audit Management: Glaxo Smith Kline (GSK)

According to Brink (2011), cooperate governance refers to regulations, procedures and mechanisms through which an organization is guided and controlled. Corporate governance is paramount for a business organization, because it brings together all the stakeholders and provides mechanisms that address and balance their interests. This report provides information pertaining to the governance of Glaxo Smith Kline (GSK). As such, it contains information about the governance of the firm that is currently in place. First of all, this report takes into account the efforts being put in place to improve the image of GSK. Additionally, it revisits the events of 2012, when GSK was fined heavily for its involvement in corruption and bribery. The report also highlights the management strategy adopted by GSK in its headquarters across the over 100 countries, where the company’s branches are present. Included is an insight into the management’s role as far as the events that preceded the fining of the year 2012 are concerned.

 

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The Governance of GSK

The governance of GSK has undergone various changes over the years in a bid to keep up with the changes in the healthcare industry and minimize incidences of impropriety among its employees. The current governance of GSK is designed in the way that was proposed by the current CEO, Andrew Witty. This governance structure has been designed to fit the company’s targets of expanding into new markets and improving the corporate responsibility at GSK. Following the events of 2012, the governance structure of GSK has also been redesigned to ensure that governance team is disciplined to avoid the reoccurrence of these events that tarnished the name of the company.

The governance of GSK comprises of the corporate executive team and the board of directors. At the top of the management is the Chief Executive Officer, Mr. Andrew Witty. The CEO is charged with the responsibility of the day-to-day management of the company (GSK, 2014). The CEO works closely with Corporate Executive Team (CET), which provides assistance to the CEO. The CET takes care of the daily activities of the company (GSK, 2014). The members of the CET have been assigned specific areas out of the many activities that the company engages in. For the purpose of taking care of various activities, many positions have been created for different members of the CET. These positions have been created with the intention of streamlining the operations of the company. These positions have been instrumental for the expansion of the company, which has enlarged its presence to various continents.

Whereas these positions have greatly assisted with improving the company’s operations, they have also played an important role in the elimination of corruption activities. The top management used to allow most of the members of the CET freedom to run certain activities of the company on behalf of the firm. This freedom created room for some of the CET members to misuse their powers by engaging in activities that were not in the best interest of the company. When companies appoint or employ people to fill the available job positions, they expect these new individuals to act with professionalism. However, the corruption scandals, such as the China bribery scandal, show that some involved individuals put their personal interests before the company’s interests (Brink, 2011).

This report acknowledges the fact the corruption scums that caused the company to lose large sums of money were not only a result of the freedom that members of the CET enjoyed. It should be noted that allowing members of the governance team to exercise autonomy gives the individuals serving in different positions room to introduce changes to improve the company without having to consult management through the complicated communication channels. By creating many positions in a bid to streamline the operations, the company has been too occupied to put in place a robust reporting channel. GSK has a big governance team, which has complicated the management structure of the company. This structure explains why the governance of GSK failed to prevent various corruption scums. This complicated governance structure has paralyzed the reporting lines. Consequently, most of the CET members and other top ranking managers were not accountable for their work.

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The governance of GSK has prioritized expansion, which has been seen through the company’s expansion into new markets. In particular, the current governance is credited for penetrating new markets, such in the Asian region (GSK, 2014). The latest expansion was preceded by new appointments, which were specifically done for the purpose of facilitating the expansion into the new markets. Under the leadership of Mr. Witty, the company has expanded into the markets that currently account for almost 25% of the company’s market share. However, the company’s ambition to realize its targets has been a letdown in reducing corruption. In fact, the corruption scandal that led the company into losing over $1 bln in fines came at a time when the company had heightened its expansion activities. The China bribe scandal clearly shows that the bribe was issued with intention of trying to influence the Chinese officials into helping GSK to gain access to the Chinese market (Brink, 2011). Therefore, the representatives of GSK, who have acted on their own, might have been pressured by the company.

Ways in Which Governance in GSK May Be Improved

The corruption scandal that faced GSK a few years ago tarnished the company’s name and made it lose a lot of money in fines. However, GSK can put behind the unfortunate event by embarking on improving its governance. GSK can improve its governance if the top management and the board of directors ensure that only individuals with good character fill the company’s positions. This strategy can be implemented by the human resource department (Pickett, 2005). The human resource department can set up special committees to be charged with the responsibility of collecting information about all individuals who apply or who are headhunted for the company’s available positions.

It should be noted that some candidates might have attractive performance records in other companies. However, these candidates may have used unscrupulous means to achieving organizational goals in their previous places of work. Such candidates may carry the same behavior into GSK and even go as far as influencing other employees of GSK. Therefore, as GSK sets its periodic targets, it should ensure that its employees stick to the acceptable methods of achieving goals. By being strict about the methods that should be applied to realize the company’s targets, the actions of the company’s employees will be controlled (Pickett, 2005). The shareholders and the board of directors should also ease pressure on employees as far as targets are concerned. The two parties should understand that markets are not the same, and, therefore, they cannot record similar results.

The governance of GSK can also be improved by nurturing the spirit of accountability, even at the top managerial positions. It should be noted that when employees or managers of GSK get involved in corrupt dealings while on duty, they taint the name of the company. Therefore, all people, who carry out the transactions on behalf of GSK, should be responsible for their actions. The CET members, who have been assigned with various departments in the company, should report to the board of directors on a regular basis. Regular reporting by employees who hold different positions will ensure that accountability is maintained. Building a culture of accountability requires contribution of all employees (Pickett, 2005). The company should also be accountable to the public and the shareholders with the help of the top management.

Conclusion

This report acknowledges the fact that the governance of GSK is doing a commendable job through its efforts to regain a good reputation. By pointing out the factors that may have failed to prevent corruption in the past, the report does not necessarily associate this issue with the current governance. However, this report acknowledges the fact that employing individuals, who have good reputation and instill a culture of accountability, can improve the current governance of GSK.