Doing Business in a Connected Society

The GSK Bribery Scandal in China

Personal connections have always mattered greatly both in societies and businesses throughout the world. What a connection is and how that connection is used, however, is subject to interpretation as well as abuse. This Article examines Chinese reforms to combat “connection-based bribery” in multinational corporations through a series of recent scandals involving the global healthcare giant, GlaxoSmithKline LLC (“GSK”). In 2012, GSK plead guilty and paid the largest combined federal and state healthcare fraud recovery in a single case in the history of the United Sates to resolve criminal and civil liabilities related to bribery. Only a year later GSK was involved in another large-scale bribery scandal in China that resulted in the largest corporate fine ever imposed in the country as well as multiple convictions of GSK managers. The GSK China scandal created a ripple effect that led to bribery investigations of GSK operations in the Middle East and Europe, a joint investigation of the Chinese operations of French pharmaceutical company Sanofi, and possible charges from the U.S. Department of Justice and Britain’s Serious Fraud Office. In light of these scandals, this Article analyzes the complicated harms triggered by the alleged corrupt practices of GSK and other multinational corporations in the context of Chinese culture in order to identify the causes of these scandals and accompanying suggestions for reform. Finding that internal processes, such as GSK’s evaluation and incentive systems, significantly facilitated the alleged corrupt practices, the Article concludes that multinational corporations should play the leading role in changing traditional corporate governance by reorienting corporate purpose, gaining a deeper understanding of the host country culture, and adopting and employing serious corporate governance policies against corruption.

The full text of this Article is available to download as a PDF.