Corporate Governance and Ethics - GlaxoSmithKline - Case Study Example

Corporate Governance and Ethics Name Professor Institution Course Date Corporate Governance and Ethics Executive summary This report is formulated to identify and discuss groups of stakeholders affected by The GSK Code of Conduct and CQ University’s code of conduct, and the emerging business ethics issues that are addressed these code of conducts. these report highlights the both the aspect of these codes of conduct that are mandatory and ones tat are voluntary with regards to practice. The report also will reflect on corporate governance and transparency at these institutions. GlaxoSmithKline is a London based company which is ranked third amongst the largest pharmaceutical companies group. With presence over 100 countries and more than 97,000 employees globally, the company must have single and united plan to make sure that its business is carried out with integrity (GlaxoSmithKline 2014). This does not only take place in GlaxoSmithKline, but also other organizations which have realized how well a proper practices and ethics in business can help maintain customers and have a market advantage. One such institution is the CQ University, which is a public university based in Queensland, Australia (CQ University 2013). Both of these organizations have an elaborate code of conducts and ethics that outlines the responsibilities of every stakeholder on board. Table of Contents Table of Contents 3 1.0 Introduction 4 2.0 Stakeholder groups affected by the codes of conduct 5 3.0 The emerging business ethics issues in the two organizations 9 4.0 Reflection on corporate governance and transparency 13 5.0 Conclusion 14 6.0 Reference 14 1.0 Introduction Jacobs (2004, p. 17) claims that in the last one decade, corporate governance has drawn a lot of public attention due to its apparent significance for an economic growth of businesses and organizations in general. In the recent past, people’s attention has been drawn to a sad headline concerning corporate ethics both positively or negatively, especially in companies such as Anderson, WorldCom, Merrill Enron, Lynch, Martha Stewart, Qwest Communications, Global Crossing, Tyco International, Computer Associates, Adelphia Communications, Parmalat, Xerox to mention but just a few (Jacobs 2004, p.17). In these companies, practices like corporate failures, Falling stock markets, dubious accounting practices and abuses of corporate governance have been reported. Criminal investigations have shown that the whole economic system on which the investment returns have relied on have demonstrated stress signs which have weakened investor’s confidence. Currently, some of these companies have failed. Whilst some of the failures were as a result of fraudulent accounting and other dishonest practices, several of these organizations shown real corporate governance risks like conflicts of interest among stakeholders (Harshbarger & Holden 2004). Following closely, but separately on these concerns, both GlaxoSmithKline and CQ University, Australia have put in place code of conduct to help run integrity based institutions. 2.0 Stakeholder groups affected by the codes of conduct Whilst several of the governance matters that institutions experience cannot be considered new, the atmosphere where they tackle them is now more challenging than before (Harshbarger & Holden 2004). The governing councils and boards have now applied considerably increased more aggressive philosophies and resources towards confrontation the lapse in governance lapses through increased awareness amongst those people who are directly affected including the business community in general. One of the philosophies used is the code of conduct of code of ethics. A code of conduct is defined as a collection of rules explaining the proper practices or responsibilities for a person, party or organization. In organization perspective, it outlines the proper practices and responsibilities for top managers, employees and customers (Williams 2000). Related conceptions consist of ethical and honor codes. Sharbatoghlie, Mosleh & Shokatian (2013, p.330) claim that in the 2007 International Federation of Accountants defined code of conduct as the "Values, Principles, standards and rules of behavior which guide the procedure, decisions and systems of the organization in a manner that contributes to the interests of its major stakeholders, and consider the rights of every component affected during its operations. On the other hand, ethical codes are implemented by an organization to help members in recognizing the dissimilarity between 'right' and 'wrong' in their key decisions (Serenko & Bontis 2009, p.391). As mentioned before GlaxoSmithKline is one of the leading pharmaceutical companies in the world which deals with a larger range of health and pharmacy care products lines (GlaxoSmithKline 2014). The company employs many workers, operates in over 100 countries and serves millions of customers around the world. These people operate in different location with different culture and one would expect them to use different practices to fulfill the needs of different customers and hospitals (Oketch 2004, p.7). However, good conduct and ethics are universal. Whether written or communicated informally, a code of conduct defines behavior expectations for both management and other employees. Whilst these codes do not avert fraud or improper behavior, they do present employees with ethical and legal standards which will impact their commitment and performance (Weiss 2009). These aspects also represent the GSK spirit, the company culture which inspires an employees' sense of collective purpose and personal responsibility, and supports the company global mission, which is to “enhance the quality of life by enabling individuals to feel much better, and live a long life” (GlaxoSmithKline 2014). Healthcare law expectations and diversity regulatory affect the company in several different modes; though at the center the company has a solitary, unified policy which makes sure their business atmosphere is carried out with integrity. According to Hansen (2004), the code of conduct not just governs the general behavior within organization, but also enables individual employees to establish professional attitudes towards work. This performs wonders for the spirit of the company as it makes employees competes with the present competition for the clients. Employees who possess these attributes will positively appeal to clients. Williams (2000) argues that an organization or an institution cannot perform well without a code of conduct formulated to guide employees’ behavior. People, employees and executives in an organization may have difficulty interacting appropriately without understanding the goals of the organization. The company will lack vision for professional employees’ growth, claims (Marcoux 2009, p. 18). An organizational, professional code of conduct set up suitable standards of behavior for all staff. Some departments may have codes unique to employees operating in areas like the human resources and sales. This is not applicable in GlaxoSmithKline because this may cause confusion with its large presence in other countries. The code of conduct is aimed at serving as the internal communication channel on top of a device in protecting the organization in situations in which it has to terminate a member of staff for a cause (Williams 2000). With the code of conduct in place, employees and executive negligence is minimized. In case of negligence the company can find someone to hold responsible for the same. The company deals with customers from all over the world who depends on its pharmaceuticals, for that reason employees must understand that they hold the lives of many people in their hands. As such their must act with at most responsibility. Murphey et al. (2007) argues that the Code of Conduct harmonize a range of organization policy standards, and presents an operating guide for how staff should employ GSK Behaviors and values across all the business working styles and practices. GSK is having a network of agreed business partners and external suppliers (third parties and vendors) on whom the company also set higher expectations and standards for moral conduct. These anticipations entail just labor practices (consisting of protecting of human rights), health and safety and environment management, and good quality controls and performance (GlaxoSmithKline 2014). Some staff would rather understand particularly what is acceptable and what is not at place of work and the implications of wrong decisions. To maintain confidence and trust, every employee has to take individual responsibility for adhering to the set Code of Conduct (Frederic 2002). Good judgment and integrity ought to be the foundations for all the decisions the managers make. In sales department, there are concerns in connections with customers giving or accepting gifts, conflicts of interest, confidentiality and exposure of information and the code of conduct with reference to sales employees is supposed to provide employees major guidelines in every area so as to avoid indecision and uncertainty (DeGeorge 2010). No matter which part the presence of GSK is in the world, employees and executives must Values transparency, respect people, have integrity and focus in their interactions with prescribers, patients, payers, governments, and one another. CQ University Australia is an institution of learning whose main stakeholders are the top management, subordinate staff, students and suppliers. The institution employs several staff on its many campuses in Queensland, Brisbane, Melbourne, Sydney, Gladstone, Emerald, Bundaberg, Mackay and the Gold Coast (GlaxoSmithKline 2014). This means that there is a lot of competition among the campuses as well as with other institutions of learning in Australia and beyond. In competition, people can do anything to be at the top. The employees may involve in some unfair practices to get promotion or to get salary increment; the students may also cheat in exams so as to get good grades (Capaldi 2006, p.68). Professors also may get themselves in a conflict of interest situation. For instance a student may offer a professor some money so as to get him or her good grades. In all theses cases, the institution has set up a code of conduct will help to regulate these unfair practices. They also act as law upon which Chancellor, other top management, subordinate staff, professor, students and supplies are held accountable for any offense. In a nutshell the code of conduct affects all these stakeholders in one way or the other. Since the university provides every stakeholder with a document, it is the obligation of every member to understand the Code and obey it (Capaldi 2006, p.72). Every University member is anticipated to agree to and be led by both the letter and spirit of the Code. Every stakeholder of the university is required to treat each other in a respectful way with justice and equity (CQ University 2013). The professors must also instill and train the students with necessary knowledge without misleading them. The Code reiterates CQ University’s pledge to the ethical standards defined in Queensland Public Sector Ethics Act of 1994 (u7klCQ University 2013). In upholding an atmosphere of respect and collegiality, students will treat fellow students, staff and the community with respect, courtesy and honesty, and have consideration for the needs and dignity of individuals with whom they interact with. 3.0 The emerging business ethics issues in the two organizations Harshbarger & Holden (2004) contends that with globalization take place rapidly in business platform, competition ids becoming stiff. In that competition every business people would want to take advantage of the market through thin and thick. Therefore, unfair practices are so prone in the business sector. This brings attention to the topic of business ethics and whether the managers and employees adhere to it. Ethics are defined as a collection of standards or principles of human behavior which govern the behavior of people, employees and the organizations (Anand & Rosen 2008, p.97). In the business context, business ethics are set to regulate the behavior. Business ethics are described as the application of ethical values to business practices. The business ethics, scope is not limited to human resource or legal role of GlaxoSmithKline, but includes all the functions as well as compliance, production, product testing, price fixation, sales, marketing, compensation, occupational safety, discrimination issues, accounting, finance, insider trading, employee problems, intellectual property rights, environmental issues, operations (GlaxoSmithKline 2014). The pharmaceutical industry in which GlaxoSmithKline operates in is one of the important sectors because for other sectors to run smoothly people have to have a healthy life. Nobody can refute that the pharmaceutical industry has made considerable contributions to the progress of human beings (GlaxoSmithKline 2014). The pharmaceutical sector being responsible for drugs have saved lives of millions, cured several types of cancer, and made sure that HIV/AIDS diagnoses do not lead to usual death sentence. According to the GlaxoSmithKline code of conduct, ethics demand that GSK make the good quality drugs for the right treatment which cannot put the life of a person into danger. A lot of research should be conducted before manufacturing a given drug. There are several ethical issues that require to be tackled on how the GSK can be a better business citizen. Some of the ethical issues are conflicts of interest, acceptance and provision of entertainment & gifts, information protection, following competition rules and adhering to political donation restrictions among others (GlaxoSmithKline 2014). GSK through its code of conduct reminds its employees, management and suppliers to always be free from potential or actual conflicts of interest. In GSK a conflict of interest takes place when the potential of direct or indirect individual gain might influence or deem to influence management or employees' actions or judgment whilst carrying out GSK business transactions. Some may be tempted to sell company drugs at personal level to get extra cash on top of the salary (Harshbarger & Holden 2004). Some of the suppliers may also want to be bribed to provide raw materials or else they go to the competitors. Sometimes carry out business could entail special business-related exchange of gifts of any value. The GSK the code of conduct outlines that its vital not to offer or accept improper entertainment or gift. This is because such form of actions can form conflicts of interest, or brings the question that the employees’ judgment could be impacted by the gift they receive from, or offer to the third parties (Weiss 2009). Obviously this can harm the reputation and relationships of GSK with external partners. The company recognizes that information is their best valuable assets. It is true that they have to provide information about their product to their customers, management and employees are advised to safeguard confidential, proprietary, and personally identifiable information (PII) at all times to avert harm to shareholders and third parties and make sure that these people trust them with regard to information (Weiss 2009). GSK company values strongly influence the ethics compliance because it looks more self explanatory. The spirit, values and aim s of this organization conform to organization culture which shapes the attitudes, beliefs, values and experiences of individual members. On the other organization, CQ University Australia is an institution which brings together people, student and employees of different cultural background. Diversity in such places is known to have various advantages with conflict of interest, favoritism, discrimination and other unfair practices being some of the unethical issues taking center stage (Capaldi 2006, p.81). To curb these unethical issues the CQ University has adopted a code of conduct do not just emphasize on the compliance with the law and regulations but also ethical principles too. Some other issues that may be present in the organization are corruption, nepotism and favoritism (Serenko & Bontis 2009, p.393). Some people may swindle or have the university money for their personal gains. Other students may want to join the institution through bribery of officials. This is addressed article four of the code of conduct of the university. The act provides that a university member must enhance and maintain public confidence through integrity for the common good of institutions and individual reputation. Students or individual students would want to cheat in exams so as to get the best grades, the integrity clause again wars about the act and could lead to expulsion. Conflict of interest is one thing that is killing institution of learning. Capaldi (2006, p.71) states that conflict of interest include getting paid to train a student, and then again receiving money or sexual favors from the student to leak an exam for him or her. In such a situation, the code provides that an academic staff member must not get into double role relationships with their students, which can probably detract student growth or result to perceived or actual favoritism. Leakage of information or exam is considered a breach of the law of confidentiality (Capaldi 2006, p. 75). In nature, it is unethical to expose confidential information about an employer to the public. The code therefore provides that members of CQ University have a responsibility to uphold the security, confidentially and integrity of the official information which they hold (CQ University 2013). In both codes of conduct for CQ University and that of GlaxoSmithKline, the aspect that talks about integrity, protection of information, intellectual property, discrimination and conflict of interest are mandatory and the employees must abide by them. It should be noted that these clauses are punishable in the court of law. This is unlike clause which talks about respect, dignity, gift acceptance and organizational commitment which are a voluntary aspect of clause (Frederic 2002). 4.0 Reflection on corporate governance and transparency The business environment is changing so fast and a clear direction and sound management is needed by the managers to make sure that the organization remains as competitive as possible (Marcoux 2009, p.24). Competition has forced companies to involve in illegal practices to make profits. In the face of such practices employees and managers have had personal interests and have fraud the company. As such these companies have collapsed or are struggling to gain their lost glory. This has called for focus on corporate governance. According to Harshbarger & Holden (2004), Financial Aspects of Corporate Governance of UK define corporate governance as the system where organizations are directed and controlled. It concerns the relations amongst the Board, management, stakeholders and stakeholders. Thus, it regards how or the way the boards manage the company operations by its manager, and the responsibility of members of the board to the company and the shareholders and its transparency (Jacobs 2004, p.17). Looking at both organizations, CQ University and GlaxoSmithKline show that company emphasizes strongly on corporate governance. This is mainly entrenched in the company code of conduct. The code of conduct provides that both the company and the university must be managed with integrity, trust, respect and values among of components. Harshbarger & Holden (2004) posit that from the definition in can be seen that corporate governance consist of the connection of an organization to its stakeholder to the public through factors like transparency, accountability and fairness. This is reference to systems which are employed to “administrate” managers and make sure that their conducts are in agreement with the key stakeholder interests (Weiss 2009). The major issues of focus in corporate governance thus comprise of issues of accountability and transparency, and legal, regulatory atmosphere, proper risk management steps, and the senior management and the board of directors responsibilities. 5.0 Conclusion Lack of clear code of conduct and corporate governance is a true threat to the future performance of each corporation. The presence of these elements anchored on the core values of trust and integrity CQ university and GlaxoSmithKline will have a competitive edge in attracting and retaining talented employees and making positive responses in the market – if these companies have a repute for ethical conducts in the current market it prompts not just loyalty of the customers but also employee loyalty. Sound management can be realized by embracing a set of best practices and principles in the code of conduct of ethics. This relies heavily on fairness, integrity, honesty and the way in which these organizations carry out their affairs. 6.0 Reference Anand, V & Rosen, C 2008, The Ethics of Organizational Secrets, Journal of Management Inquiry, Vol. 17, No. 2, p. 97-102. Capaldi, N 2006, 'What Philosophy Can and Cannot Contribute to Business Ethics', Journal of Private Enterprise, Vol. 22, No. 2, p. 68-86. CQ University 2013, Code of Conduct, Viewed 15th Jan 2014 from http://policy.cqu.edu.au/Policy/policy_list.do DeGeorge, R 2010, Business Ethics, 7th, Upper Saddle River, Pearson Education, Inc GlaxoSmithKline 2014, Code of Conduct, Viewed 15th Jan 2014 from http://www.gsk.com.ng/common/pdf/GSK-Code-of-Conduct-POL-GSK-001.pdf Frederic, R 2002, A Companion to Business Ethics, Massachusetts, Blackwell. Hansen J 2004, Business Ethics: Platitude or Commitment Ethics Matters, Center for Business Ethics, Bentley College, MA. Harshbarger, S & Holden, T 2004, The New Realities of Corporate Governance, Ethics Matters, Center for Business Ethics, Bentley College, MA. Jacobs J 2004, Corporate Governance Reform: What It Means for Associations, Association Management, Vol. 56, No. 1, p. 17-23. Marcoux, A 2009, Business-Focused Business Ethics. in Normative Theory and Business Ethics. J. Smith, Plymouth Rowman & Littlefield, pp. 17–34 Murphey, et al. 2007, An ethical basis for relationship marketing: a virtue ethics perspective. European Journal of Marketing, Vol. 41, No. 1&2, p. 37-57. Oketch, M 2004, The corporate stake in social cohesion: Corporate Governance, International Journal of Business in Society, Vol. 4, No. 3, 5-19. Serenko, A. and Bontis, N 2009, A citation-based ranking of the business ethics scholarly journals, International Journal of Business Governance and Ethics, Vol. 4, No. 4, p. 390– 394 Sharbatoghlie, A., Mosleh, M & Shokatian, T 2013, Exploring trends in the codes of ethics of the Fortune 100 and Global 100 corporations, Journal of Management Development, Vol. 4, No. 5, p. 327–345 Weiss, J 2009, Business Ethics: A Stakeholder and Issues Management Approach With Cases, 5th ed., Mason, OH: South-Western Cengage Learning. Williams, O 2000, Global codes of conduct: An idea whose time has come, Notre Dame, IN: University of Notre Dame Press. 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