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Wednesday, October 24, 2012

Strategic CSR - GSK

The article in the first url below shows what is possible when one of a firm’s stakeholders holds that firm to account for its actions and responsibilities:

Drug maker GlaxoSmithKline PLC agreed to plead guilty to criminal charges of illegally marketing drugs and withholding safety data from U.S. regulators, and to pay $3 billion to the government in what the Justice Department called the largest health-care fraud settlement in U.S. history.


Under the deal, which requires court approval, Glaxo will plead guilty to criminal charges involving three drugs—the antidepressants Paxil and Wellbutrin and the diabetes drug Avandia. … The guilty plea covers a range of behavior by the U.K.-based company, including illegally promoting the antidepressants in the U.S. for uses that weren't approved by the Food and Drug Administration, a practice known as off-label marketing, and withholding important safety data about Avandia from the U.S. regulator.

In addition to these illegal activities, a pattern of practices was identified that resulted in this settlement, GSK’s fourth with the U.S. government in the past few years:

Over a period of more than a decade, the government's latest investigation found, the company plied doctors with perks such as free spa treatments, Colorado ski trips, pheasant-hunting jaunts to Europe and Madonna concert tickets, Justice Department officials said.

I firmly believe that there are two sides to the “responsibility” that we talk about when we discuss “CSR.” The first responsibility is the responsibility of companies to meet the needs and demands of a range of stakeholders, broadly defined. It is in firms’ best interests to do this because it helps secure the societal legitimacy necessary for long-term survival. The second responsibility, however, lies with stakeholders to hold firms accountable for their actions. This responsibility is equally (if not more) important than companies’ responsibility because I also believe that firms respond to market forces much more effectively than they can predict market forces (see also: ‘Why Aren’t We Stressing Stakeholder Responsibility?’). As such, if stakeholders are not willing to hold firms to account, only a small percentage of firms will alter their behavior sufficiently.

If we are going to talk about a corporate social responsibility (the responsibility on firms to act in accordance with stakeholder needs) and, in particular, if we are going to talk about the business case for CSR, therefore, we also need to be talking about corporate stakeholder responsibility (the responsibility on a firm’s stakeholders to hold that firm to account). Both sides of the responsibility coin are equally essential to the extent that, without one, we are unlikely to see enough of the other.

Additional reporting on the GSK case is available in the article in the second url below.
Take care

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Glaxo Sets Guilty Plea, $3 Billion Settlement
By Jeanne Whalen, Devlin Barrett, and Peter Loftus
The Wall Street Journal
July 3, 2012

Drug Firm Guilty in Criminal Case
By Katie Thomas and Michael S. Schmidt
The New York Times
July 3, 2012