Proactive Corruption Prevention

Ed ButhusiemSenior Vice President & Special CounselGlaxoSmithklineNovember 12,2009

Performance with Integrity will enable GSK staff to grow a diversified global business and build trust among our internal

and external stakeholders

Our Commitment to Integrity is a Strategic Priority

GSK Staff must always act with integrity and honesty and

must protect the Company’s public image and reputation in

relationships with customers, competitors, suppliers,

business partners and staff

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GSK employees must understand and strictly comply with GSK Policy which mirrors anti-corruption laws (US, UK, and other

nations anti-bribery law)

GSK -Approved Corruption Messages

GSK values integrity and transparency and has zero tolerance for corrupt activities of any kind, whether committed by GSK employees, officers, or third-parties acting for or on behalf of the Company.

Employees and officers of the Company are responsible for upholding these values, conducting themselves in an ethical manner and where the legal framework allows, reporting any instances of suspected misconduct.

Senior management, starting with CET, unequivocally support the principles of the Anti-Corruption Policy as well as individuals who demonstrate these principles. GSK policy of non-retaliation against employees who make a good faith allegation or raise questions or concerns will be rigorously applied.

…..Integrity and transparency, principles not loop holes,GSK and third parties.

…... Personal responsibility to act.

…... Unequivocal support and rigorous application of non-retaliation.

Objectives of the program

1. GSK Policy Regarding Prevention of Corrupt Practices2. Describe the pressures in the external environment, including

regulatory enforcement, associated with corruption3. Identify industry specific considerations4. Discuss the corruption potential of common GSK business practices,

current controls and monitoring practices, and enhancements that can be made

5. Consider business scenarios and appropriate actions6. Identify how to get information and access resources related to the

prevention of corruption

GSK Policy Regarding Prevention of Corrupt Practices

GSK Anti-Corruption Policy

Contains two set of rules:– Preventing Corrupt Practices: GSK deals with 3rd Parties with the

Highest Standards of Integrity and Compliance with Laws and Regulations

– Maintaing Standards of Documentation: Accurate, clear and detailed information required for proper records documentation

Prohibits payments of anything of value to individuals with the purpose of:

– Influencing or inducing an act to secure an improper advantage– To otherwise improperly assist the company in obtaining or

retaining business

Applicable to business arrangements both in public and private sector

Payments to government officials are of particular concern due to specific anticorruption laws

GSK Anti-CorruptionPolicy

Third parties should adhere to the same ethical and legal standards

High risk parties should undergo higher scrutiny and specific due diligence requirements:

– 3rd parties acting on behalf of GSK;– 3rd parties over which GSK exercise ownership or control;– 3rd parties that engage with government officials;– 3rd parties operating in high risk markets.

Facilitating payments (those to secure a routine government action) are prohibited

The policy does not prevent GSK from conducting legitimate business activities:

– Promotion of GSK’s products and services– Execution of a contract with government– Reasonable– Bona fide

GSK Anti-Corruption Policy Enhanced FocusRecent changes to Policy include:

Expanded scope: includes GSK entities and third partiesDealings with government officials and with private partiesNo political contributionsFacilitating payments are explicitly not allowedInclusion of permissible activitiesClarification of interplay with other GSK Policies (Interactions with HCP)

Policy Language: Examples of “Anything of Value”?

The term “anything of value” includes but are not limited to:– Cash or cash equivalents– Gifts– Services– Employment offers– Loans– Travel expenses– Entertainment– Political contributions– Charitable donations– Subsidies– Per diem payments– Sponsorships– Honoraria or – Provision of any other asset, even if nominal in value.

The term “anything of value” should be

considered broadly. This list is not inclusive

Who are “Government Officials”?

Government officials at all levels are very broadly defined– Any officer or employee of a government or any department, agency or

instrumentality of a government– Any person acting in an official capacity on behalf of a government or any

department, agency, or instrumentality of a government– Any officer or employee of a company or business owned in whole or part

by a government– Any officer or employee of a public international organization such as the

World Bank or United Nations– Any officer or employee of a political party or any person acting in an

official capacity on behalf of a political party– Any candidate for political office

NOTE: In many countries HCP may be considered “government officials” because they work or receive remuneration from the government (e.g. public hospitals or universities)

What is “Corrupt Intent”?

Benefit conferred or offered to induce a government official to abuse or misuse his/her position or authority through action or inaction

Quid pro quo generally assumed– Gift/payment made with reasonable expectations of some official

favor in return– Quid pro quo need not be executed– Official need not be able to deliver “quo” him/herself

Corrupt intent may be proven without establishing that the defendant knew his/her conduct violated the law

External Environment

Increasing Enforcement Activity

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Increasing External ExpectationsLegal Environment

Expectations Interpretations by Experts

Third parties - ensure they act in a manner that upholds the company’s position against corruption

-conduct due-diligence in advance of engaging -make company policy known (in local language) to all agents and intermediaries-communicate the expectation that all activities carried out on the company’s behalf be compliant with policy-express agreement of third-party to comply-any payment reflects appropriate remuneration-record of all payments paid to third-parties who interact with governments and monitor conduct of third-parties-demonstrate policy enforcement; e.g., do not engage, or fire third- parties who don’t align with policy

Have a clear program to prevent corruption and demonstrate commitment to countering bribery

-strong tone from the top; consistent messages-CEO is responsible; clear lines of authority to ensure program is operating effectively-visible and active commitment of Board and senior management-compliance program and internal control structure tailored to company size and risks-demonstrate what you are proactively doing to detect and deter

External ExpectationsLegal Environment

Expectations Interpretations by Experts

Prevent bribery by establishing policies and giving guidance on daily business dealings

-clear policy that is not just a high-level value statement-guidance at a very practical level; needs to be meaningful for front-line employees-real processes and controls to back the policies and guidance

Prevent bribery by proven messaging on anti-corruption policies and laws to employees

-deliver the right risk-driven targeted training-training for employees and agents, then contractors and suppliers as needed-actively track training; retain evidence-local management representations are not enough

Monitor payments to know where the money goes.

Monitor and enhance program

-ensure all payments with exposure to corruption risk are monitored regularly-monitoring means knowing the recipient and how they will use the company’s funds-perform risk assessments, identify corrective action plans, and implement improvements.

Industry Specific Considerations

Risk Assessment and Priority areas

Tier 1 - HCP Interactions - Contract Sales Forces - Import / Export - Agent Relationships - Equity Acquisitions (partial or

full) - Joint Venture Agreements - Non-HCP Consultants - Tender Business - Lobbying Activities - Distributor Relationships - Procurement Processes

Tier 2- Product Registration- Product Licensing- Investigator Interactions- Formulary Decisions- Institute Collaborations- Licenses/Permits- Research - Government Inspections (e.g., Tax,

MoH, Environment) - Hiring Practices

Tier 3- Sponsorships / Conferences- Conflicts of Interest- Charitable Donations- Grants- Outlicencing- Community Partnerships

Each BU to conduct its own assessment with particular focus on relevant areas and

government touch points.

High Risk Business Areas

Doctors and other Healthcare Providers may qualify as “government officials” in countries with socialized medicine, if:

– Employed by a government-owned or funded hospital, clinic, university, etc.

– Receive funding, professional service fees or other remuneration from a government-owned or funded hospital, clinic, university, etc.

International congresses, symposia and other bona fide research or educational activities create potential appearance issues and careful consideration should be paid to these high risk areas.

The Pharmaceutical Industry is a highly regulated Industry with various government “touch points” when bringing products to market

– Drug registration, access, formularies, tenders, etc.– Clinical trials, product samples, investigator initiated trials, study groups,

etc.

High-Risk Business Areas cont.

Challenges of Global Distribution and Sales– Tax and customs issues– Reliance in certain markets on third-party distributors, resellers,

promoters, etc.– Varying degrees of transparency within local markets in terms of timing of

tenders, criteria used to evaluate product dossiers, and presence of local generic competitors create challenges

Third Party Risks

Third-party service providers (e.g., distributors, importers, promoters, sub- contractors, etc.) may have international operations and partners complicating legal due diligence effortsVisibility into pricing arrangements, rebates, and other agreements between third-party distributors and customers may not be available making it difficult to monitor end-user sales channelBenchmarking of compensation paid to third-parties, agents and consultants market specific and difficult to obtain in certain cases

Identifying High Corruption Potential Behaviors

ActivityDivide into groups of 3-5 participants gathered around a flip chartDivide the chart into two columns; A and BRespond to the following questions: (10 minutes)

1. What are the business activities, including those listed within the Risk Tiers, within the remit of my team that hold the greatest potential for corruption?

2. What are the controls GSK has placed on these high risk areas of the business and how are these controls monitored?

Choose a member of your group to report the content of your flipchart to the whole group (15 minutes)As a whole group consider, (5 Minutes)

3. What can you do as a Leadership Team to enhance the corruption prevention related to your area of the business?

Review of Challenging Situations

ActivityDivide into groups of 3-5 participants Consider the scenario that your group has been givenAnswer the following questions for this situation: (15 minutes)

1. What is the possible corruption potential in this situation?2. What questions would you ask yourself? Ask others

involved?3. Where would you go for additional information or company

resources in this situation? Does GSK have a policy or process that relates to this situation?

4. What would you do?

Describe your scenario and your group’s thinking to the whole group (15 minutes)

What to Do if You Discover a Problem

Report any genuine concerns about misconduct or unlawful conduct you believe is taking place

– Confidential process, no recrimination

Report to:– Line management or functional personnel (HR, Quality Organisation,

Finance Director, GIA) for non fraud related cases

– Finance Director or Corporate Security for fraud

– Corporate Ethics and Compliance Integrity helpline or Confidential Reporting Line (see Corporate Ethics and compliance Community Page for US, UK, and International reporting line numbers)

GSK Policy Training 2006: Preventing Corrupt Practices

QUESTIONS?