GlaxoSmithKline found itself in the hot seat, after China’s authorities started an investigation into its bribery practices and one of its executives was broadcasted on central tv, confessing his crimes. But in some industries, including pharma, bribery is endemic, tells marketing analyst Ben Cavender at CNN.
It’s not yet clear how much damage the scandal will do to GSK’s reputation or bottom line. But the episode underscores the challenges of doing business in China, an enormous, rapidly developing market in which bribes and corruption are often deeply ingrained.
“There are certain industries where corruption is still very common,” said Ben Cavender, an associate principal at China Market Research Group. The pharmaceutical industry, he said, is one in which bribery is endemic.
“GSK is not special in terms of what they do,” Cavender said. “Most companies in this sector are probably using kickbacks or bribes.”
It’s not yet clear whether the GlaxoSmithKline allegations are tied to a probe of price setting practices at 60 pharmaceutical companies announced last month by authorities. But there are signs that investigators might soon name and shame more drug companies as part of a larger anti-corruption crackdown….
Medical workers are thought to be particularly susceptible to bribery in China because their salaries often lag other fields — even though extensive education is required to enter the profession.
“Doctors are severely underpaid relative to what they do,” Cavender said. “They tend to have very low salaries and their compensation levels don’t allow them to live a middle class lifestyle.”…
Cavender said that the GSK investigation is likely part of a much larger trend — one with consequences for companies that draw the attention of authorities.
“For foreign companies doing business in China, it’s going to be really important to keep to the exact letter of the law,” he said.
Another industry marred by corruption is the food industry, causing strings of scandals. Food security was at the agenda of the China Weekly Hangout on March 21 with sustainability expert Richard Brubaker, Andrew Hupert and Chris Brown and how the ongoing problems will lead to massive food inflation. In the end we (both in China and outside) will have to pay the price for safe food. Moderation by Fons Tuinstra of the China Speakers Bureau.
The +China Weekly Hangout will hold on Thursday 18 July an open office where you can drop in to discuss upcoming subjects, panelists and current affairs in China. Here is our announcement, or you can register for participation right away on our event page.