When thinking through a risk assessment around the Foreign Corrupt Practices Act or other anti-bribery law, one thing usually not considered adequately is a company’s sales culture.
Most risk assessments focus on the mechanics and structure of a compliance program, consisting of policies and procedures or whether top managements “gets it.” Yet in many ways the culture around a company’s sales force is one of the key harbingers of potential FCPA risk. A recent article in the Nicosia Business Review considered the sales culture at GlaxoSmithKline PLC under its former (and now convicted) China business unit manager Mark Reilly.
According to the current head of GSK operations in China, Hervé Gisserot, the “mindset was more, more, more” for GSK’s sales in China. This led to a culture that allowed payments of bribes alleged to total nearly $500 million. Gisserot said this had to change, noting, “We will not win in the future as we have in the past 10 years. We have to invent a new model.”
For GSK, this means that the company will no longer compensate sales representatives primarily on how much GSK product they sell. It also means that the old ways of lavish entertaining of doctors and other healthcare professionals also had to come to a screeching stop. But beyond these structural changes, the entire corporate culture around sales had to be overhauled. The most basic structural change was to make 60 percent of a salesperson’s salary the base while the remainder is comprised of multiple data points, including such different factors as product knowledge to number of customer sales calls.
Gisserot also identified the strategic damage done to GSK’s reputation. Now doctors are reluctant to prescribe GSK products and do so as a last resort. Once again this demonstrates a key reason for compliance: to protect a company’s reputation. The failures of GSK around anti-corruption compliance put the company’s entire China growth strategy at risk. When you potentially put your company at risk in the world’s second-largest market for pharmaceuticals, you have a lot of work to do to catch up.