Drugs company GSK has just been fined an astonishing $3 billion by regulators in the US for fraud which Deputy US Attorney General James Cole described as “unprecedented in both size and scope”. GSK marketed drugs for purposes for which they were unapproved, including to children, and failed to report adverse cardiovascular trial safety data. The three GSK drugs concerned were Paxil, Wellbutrin and Avandia.
What a surprise that GSK, just like Barclays Bank, is another institution with a history of grossly excessive executive pay. Chief Executive, Andrew Witty, saw his pay increase from £3.7 million to £6.8 million in 2011 but now shareholders need to find $3 billion to cover the costs of GSK misdeeds which took place while he sat on the GSK Board as CEO-elect. Apparently the poor man is underpaid, according to the remuneration committee member, Sir Crispin Davis, himself appointed by corporate trougher extraordinaire, JP Garnier. Andrew Witty was a member of the GSK Board whilst this fraudulent behaviour was taking place and the excessive payments to former CEO JP Garnier for his ‘performance’ during this period are long gone.
Excessive pay, weak corporate governance, greed and lack of ethics go together. Investors and analysts need to wake up to the fact that corporate greed and ‘thick skins’ is an early warning of other excessive and illegal corporate behaviour. Unethical and illegal behaviour has cost the shareholders of GSK and Barclays Bank a staggering $3.45 billion this week, with the sum likely to rise as civil law suits hit Barclays Bank. The behaviour of these two giants has hardly done the reputation of UK plc and the City of London any favours either. Yet again, it is the US authorities who take corporate crime seriously. In contrast, of course, the UK has given Andrew Witty a knighthood.