Drawing Lessons from the VW Debacle
Before you shake your head in disbelief at how badly scandal-damaged Volkswagen must have been managed, you might want to first ask yourself a few questions to ensure that your organization has the mechanisms in place to avoid a similar fiasco.
By Susan R. Meisinger
I don't know any of the corporate executives currently working at Volkswagen, but I do know that they're not having much fun this summer. How could they, when major newspapers and the business press have headlines that read "Volkswagen Scandal Reaches All the Way to the Top, Lawsuits Say," "Volkswagen CEO Knew of Emissions Trouble 10 Years Ago, Prosecutor Says" and "VW Emissions Cheating Ran Deep and Wide, State Alleges"?
These latest headlines came alongside the news that three U.S. states were suing VW and individual executives for breaking state environmental laws. The lawsuits mean potentially hundreds of millions of dollars in fines for the automaker. This is in addition to the more than $15 billion VW has already agreed to pay to settle other claims with federal regulators and consumers after the company admitted last year that it had equipped millions of cars with software designed to cheat on emissions tests. More lawsuits are expected, and the U.S. Justice Department is still conducting a criminal probe.
Last year, when the company first admitted liability, I was amazed that, with a company the size of VW, no one had blown the whistle sooner. I wondered whether the company's claim that the fraud was limited only to a few people was really true.
The allegations contained in these new lawsuits, however, tell a different story. Pointing to information and documents obtained from VW, the states alleged that discussions concerning defeat-device development and implementation took place over a decade, and, included "dozens of executives, senior managers and engineers." New York described Volkswagen's corporate culture as one that allows for the "willful and systematic scheme of cheating."
But before you shake your head and say, "That could never happen here -- we're better than that!" I'd like to direct your attention to the findings of The Global Business Ethics Survey, a multi-country survey of worker conduct and workplace integrity published earlier this year.
(Full disclosure: I'm a former board member of the Ethics and Compliance Initiative -- formerly the Ethics Resource Center -- that conducted the research.)
The survey of employees in 13 countries, including the U.S., found that pressure to compromise standards and observed misconduct are commonplace in organizations. "A median of more than one in five respondents across all sectors (22 percent) felt pressure to compromise standards," the report said. "Observations of misconduct were even more widespread, with a median of 33 percent." Not surprisingly, where pressure to compromise standards was high, misconduct was also more common.
It's worse for multinational companies. The survey found employees of multinational companies are more likely to both feel pressure to compromise standards and to observe misconduct than employees at companies that operate in a single country.
Reader be warned: In world of rapid and constant change, the survey states that, "across all sectors, on average, key ethics measures decline at organizations undergoing profound change. Significantly, as the number of organizational changes increases, so does the impact on risk."
Many organizations, particularly large ones with government contracts, have some sort of whistleblower program in place to try to uncover bad behavior. After all, unless you know about misconduct, you can't tackle it -- and problems will only grow.
Fortunately, the GBES survey offers some good news: In most of the countries surveyed, employees do report misconduct when they see it. But even that good news comes with some bad news: Retaliation against employees who report misconduct is high -- at least one in three of those surveyed experienced retaliation in 11 of 13 countries surveyed.
Before you shake your head in disbelief at how badly VW must have been managed for the company to be in the position it's in, how would you answer these questions?
· Do you emphasize integrity as a requirement for hiring and promotions to all levels of leadership? (Or, put another way, is ethical leadership specifically identified an essential job function?)
· Do your performance-management and compensation systems measure and reward ethical leadership, or do they actually encourage and reward bad behavior?
· Do you have a system in place to promptly investigate reports of misconduct, and do you follow up and monitor for retaliation against those who made the reports?
· Do you consider the potential impact that organizational changes are having on how people behave, and recognize and plan for a potential increase in misconduct? For instance, are expectations of ethical behaviors and legal compliance part of the communications and training plans being put in place for a newly merged or acquired organization?
And finally, how would you answer this: As you look around, do you see misconduct by the very top executives of your organization?
If your answer is "yes," then why are you still there?
Susan R. Meisinger, former president and CEO of the Society for Human Resource Management, is an author, speaker and consultant on human resource management. She is on the board of directors of the National Academy of Human Resources.