In May 2014, and after a 10‐month investigation into corruption in the Chinese operations of the British pharmaceutical giant GlaxoSmithKline (GSK), the Chinese government accused the company of ‘massive and systemic’ corruption. By July 2014 the situation became more fraught for GSK with revelations concerning covert sex tapes. Events began in 2012 when China’s State Administration for Industry and Commerce had received anonymous emails claiming corruption at GSK. Then in 2013 a whistleblower emailed GSK executives suggesting that bribes had been paid and records had been altered. One particular email from March 2013 revealed a covertly filmed video of Mark Reilly, Head of GSK’s Chinese operations, in a sexual act with his girlfriend. Mark Reilly remonstrated that this was part of a smear campaign against him.

GSK responded by hiring corporate investigator Peter Humphrey, head of Shanghai‐based company ChinaWays. GSK withheld knowledge of the accusations of corruption from Peter Humphrey who was asked to investigate the source of the video and the background of Vivian Shi, a previous employee of GSK who had denied being the whisteblower. GSK’s engagement in China was important for the company as China’s healthcare spending was set to jump from US$357 billion in 2011 to US$1 trillion in 2020. Initially, Humphrey’s investigations did not establish who had planted the video recorder. However, after the investigation GSK shared the accounts of the corruption accusations with Peter Humphrey, and in a sharp twist to the story Peter Humphrey himself was arrested and his American wife Yu Yingzeng was detained. He was later exposed on Chinese television in handcuffs and confessed to the illegal appropriation of personal data, saying that he was ‘very regretful’ and apologising to the Chinese government.

Furthermore, the Chinese government had shown that corruption was endemic throughout GSK. For example, corrupt practices included the use of internal units to bribe medical staff and officials with money and gifts, paid for with higher priced medicines. The company responded by stating that the matters relating to its Chinese business were ‘very difficult and complicated’ with some employees being dismissed after an external audit. Overall, however, the company claimed that the ‘investigation did not find evidence to substantiate the allegations made in the “whistleblowers emails”’. The investigations into GSK’s commercial practices, however, did not end there. Following a report by the UK Serious Fraud Office, US$2.2 billion was wiped off GSK’s share value.

More broadly, corruption is rife in China and the Chinese government is keen to make an example, especially of foreign companies and corrupt Communist party officials. As Xinhua, the state‐run news agency, states, ‘GSK is a warning’. The Chinese healthcare system is susceptible to corrupt practices due to poorly paid doctors and hospitals dependant on the sale of pharmaceutical drugs. However, the GSK case has startled foreign pharmaceutical companies keen to take advantage of the huge emerging market in China.

QUESTION

Do you believe there is a link between corruption and motivation? Why/why not?