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Dangerous Liaisons: Big Pharma Facing Board-level Scandals Following M&A

April 30, 2015

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As Warren Buffet so succinctly states “it takes 20 years to build a reputation and five minutes to ruin it”. Financial performance and profitability are clearly at great risk from these hidden scandals, so why are pharma companies leaving so much to chance? And what other traps are they falling into when recruiting to high-level positions?

The Untouchables

While so much of pharma is highly regulated, recruitment processes are left to the discretion of each company. In some, complacency has crept in. Over half (53 per cent) of HR directors in the industry admit they ‘assume’ that candidates being considered for senior level positions have not lied about their history. In fact, in some cases (27 per cent), it is easier to go unchecked as a new CEO than a graduate. I

nstead companies tend to rely on a candidate’s industry reputation to make high-level hiring decisions. This is the case in nearly three-quarters (73 per cent) of pharma organisations –higher than in any other industry. Nearly half (47 per cent) of organisations rely on personal recommendations and three-fifths (61 per cent) of roles are won based on the individual’s connections.

Rules of Engagement

Fortunately there are a number of steps that can be taken to make sure that candidates are exactly who they say they are and can perform as required.

Organisations should have a robust, transparent and auditable process for recruitment that is consistent and fair across the company. Thorough research should always be conducted before a high-level appointment or board merger. In addition to work and education history, this could include checks into criminal record and animal rights activism.

In two fifths (40 per cent) of pharmaceutical firms, reputational risk is rising up the boardroom agenda but there is clearly still far more to be done to ensure that leaders are as exceptional as they need to be and that the recent M&A activity does not lead to unnecessary reputation and performance damage. As Warren Buffet adds “If you think about that, you’ll do things differently.”

Steve Girdler, Managing Director EMEA at HireRight, the candidate due diligence company. - 

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