Glaxo’s China Probe Means a Bonus Cut for the CEO

andrewwitty

GlaxoSmithKline’s (NYSE:GSK) executives saw smaller bonuses this year than “they might otherwise have been,” due primarily to the aftermath of a massive corruption scandal in China. The scandal has led to a Chinese investigation, which began in July, regarding bribery allegations against the company, the Guardian reports.

Chief executive Andrew Witty collected 1.9 million pounds ($3.18 million) in salary for 2013. All total, Witty received a pay and shares package of 6.5 million pounds, collecting approximately 3.5 million pounds in share awards and 67,000 pounds in benefits. The company’s remuneration committee, however, decided against awarding him the maximum possible bonus of 2.12 million pounds as a result of the Chinese bribery scandal.

Despite the scandal, Witty’s annual pay and shares package almost doubled in 2013; the chief executive received 6.5 million pounds in 2013, up from approximately 3.9 million pounds in 2012.

“Both Sir Andrew and the board are mindful of the impact this issue has had on the reputation of the company,” said Tom de Swaan, chair of the board’s remuneration committee in a statement, per the Guardian. “As a result, the bonuses awarded for 2013 were lower than they otherwise might have been.”

The scandal in China effectively wiped out two-thirds of Glaxo’s business there; Chinese authorities branded the company a “criminal godfather.” Chinese authorities claim that the company was running a 320 million pound slush fund that it used to bribe doctors with cash and visits to prostitutes.

The allegations Glaxo is currently facing in China aren’t the first bribery allegations the company has faced: in 2012, Glaxo paid a $3 billion fine for mis-selling drugs in the U.S., marking the biggest instance of healthcare fraud in U.S. history. At the time, Witty promised to crack down on such practices within the company, only to face similar corruption charges in China a year later, per the Guardian.

It was a great year in 2013 for Glaxo’s labs. However, the company counts six major products approved in the U.S. in 2013, and Glaxo’s approvals accounted for nearly a fifth of all drug approvals in the U.S. in 2013.

“Andrew Witty’s bonus reflects GSK’s very strong performance in 2013, which included receiving the highest number of product approvals of any company, meeting the top end of our financial guidance and delivering the best total shareholder return since the formation of the company with more than 5 billion pounds returned to shareholders,” Simon Steel, a spokesperson for Glaxo said in a statement, per Bloomberg.

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