Drug Company Changes Behaviour by Changing Incentives

business_ethics_highlights_2This story is a good example of one of the levers that (some) organizations have at their disposal to reduce unethical behaviours on the part of employees — namely, to change the way employees are incentivized. On the other hand, it’s also a good example of how companies can (wittingly or not) incentivize bad behaviour — again, through the way employees are incentivized.

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LINK: Novartis revises bonus structure to promote ethical behavior (by Alison Kanski for MM&)

Novartis has again changed a company policy in an effort to move past the Michael Cohen scandal. This time, it has revised how its salesforce is compensated, putting less emphasis on bonuses.

The company disclosed the change on an investor call on Monday. Sales associates’ “variable” pay, or bonuses, were reduced to a maximum of 35% of their total compensation.

Shannon Klinger, Novartis group general counsel, suggested the change is meant to discourage unethical sales practices.

“We’ve seen a 39% reduction across the division in the number of reported cases with respect to ethical conduct within the field in August of 2017 compared to August of 2016,” Klinger said on the call. “Internally, we’re encouraged by these results, but will continue to monitor to make sure that our compensation structures, writ large, drive the right behavior for this organization.”…

What do you think?


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