ALEX BRUMMER: GSK muddle response to China crisis a threat to Witty’s reputation
By ALEX BRUMMER
PUBLISHED: 21:37 GMT, 24 July 2013 | UPDATED: 21:49 GMT, 24 July 2013
In normal circumstances Sir Andrew Witty might have expected a smooth ride at GlaxoSmithKline’s first-quarter press call as he waxed lyrical on arguably the most promising drugs pipeline in the pharmaceutical word.
Its new lung drug Breo, along with two new melanoma-fighting compounds, have won US approvals and there are another 13 medicines on the way.
Instead, Witty was confronted with troubling questions about the command and control of GSK’s China operations. The chief executive began with the ritual condemnation of shameful behaviour, vowed to root out corruption and promised to get to the bottom of events.Bribery crisis: It is crucial that GSK boss Sir Andew Witty makes China his priority, writes Alex Brummer
But like many corporate leaders before, he seems to misread the public mood. His assertion that GSK has ‘a lot of things [to do] beyond focus on China’ misses the point.
Allegations of bribery, sexual favours and other corrupt activities in a major and fast-growing market (albeit only 3 per cent of the business) can destroy reputations.
It is irrelevant to Western stakeholders in GSK whether or not this is a mischievous campaign by the Chinese to discredit Western drug companies. What is certain is that Beijing does appear to have identified wrongdoing.
The key lesson from previous high-level corporate crises is not to hold back material. GSK has a history of not being as forthcoming as it might. Adverse studies on the potential side-effects of the anti-depressant Seroxat/Paxil were suppressed. It also had an expensive run-in with the authorities in the US over the incentives provided to medical practitioners to prescribe its drugs.
So it is crucial that Witty makes China his priority. He may well have been working around the clock to deal with the crisis, but from the group’s initial muddled responses it is hard to recognise that.
No one is suggesting Witty should get on the first plane to Beijing and set up a situation HQ there in the way that Tony Hayward took up residence in Houston after the BP’s Deepwater Horizon disaster.
Hayward played into the hands of BP’s critics by underestimating the scale of a problem and overpromising on his ability to deliver quick and neat engineering solutions.
Instead of batting away questions about China operations by saying individuals have been ‘operating outside of our systems’, Witty should be telling us who they are, what they did, how much money is really involved (the £300million quoted is thought to be an exaggeration) and what the potential long-term consequences for the business are.
Moreover, he should have placed himself above personal criticism by committing to no bonuses – or even some claw back of past pay – until the high ethical standards promised in GSK’s annual report have been fully achieved. This is basic stuff for a company with a danger to its reputation, especially one operating in the sensitive area of healthcare, where integrity is everything. It is one thing delivering new compounds and earnings growth and quite another leadership task to manage your way through crisis.
Best in the class in modern times was Johnson & Johnson in the ‘Tylenol’ tampering crisis and more recently ABF, owners of Primark, over the tragedy in Bangladesh.
In the latter case ABF chief executive George Weston saw it as a matter of personal pride that everything was done to provide immediate assistance and prepare for the future as soon as possible, even if it was not his company’s responsibility.
In GSK’s case the facts clearly are incomplete and the mixture of politics and commercial interest is toxic. But when reputation is at stake there can be no excuses for failing to make the fullest and worst case disclosures and dominating the narrative.
Vince Cable’s description of a ‘capital Taliban’ at the Bank of England is hugely unfortunate. It is disrespectful to the Bank, which is legally required to make the UK’s financial system safer, but more seriously its trivialises the work of all those laying their lives on the line to combat the Taliban in Afghanistan.
The reality is that there has been regime change at the Bank and the new governor, Mark Carney (give him a chance), may have a different approach to his predecessor. Indications are that he regards recovery as a priority, and encouraging bank lending, above the immediate rebuilding of balances sheets, might well be one of his goals.
It is highly commendable that Nationwide members raised over £175,000 for Macmillan Cancer Support at the building society’s AGM in Manchester, as highlighted in a press release.
But was this the real story of a meeting where almost 9 per cent of members refused to support chief executive Graham Beale’s £2.25million remuneration package? Perhaps, Beale could match the generosity of ordinary members.
Read more: http://www.thisismoney.co.uk/money/markets/article-2377011/ALEX-BRUMMER-GSK-response-China-crisis-threat-Wittys-reputation.html#ixzz2a609lHBb
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