Volkswagen and the failure of corporate ethics

Business, Money, News

The VW scandal, in which Volkswagen engineers intentionally manipulated internal software to rig emissions-test results for their diesel vehicles, has taken a toll on the carmaker’s stock price and corporate value—not to mention infuriating consumers who thought they were buying an environmentally friendly automobile. The company is currently facing at least 34 federal lawsuits over the scandal.

How can a well-funded, well-respected multinational manufacturer with a rich history and badges that include not only Volkswagen but also Audi, Porsche, Bentley, and Lamborghini have such a breakdown in basic corporate ethics?

The potentially huge impact of the situation is not lost on VW, as evidenced by the nine-point statement issued by the Volkswagen AG’s Supervisory Board on September 23. The eighth point in that documents states that “The Executive Committee is aware that coming to terms with the crisis of trust will be a long term task that requires a high degree of consistency and thoroughness.”

Long term indeed. As Jonathan Takiff of the Philadelphia Inquirer predicted on, VW’s deception will “likely set back U.S. sales of diesel-powered cars to zilch for another ten years, as VW is far and away the leading marketing of the technology here.”

Far from the first time

Other companies have found themselves in crisis following behavior that runs egregiously afoul of seemingly robust corporate ethics policies. In a country with no shortage of corporate malfeasance, what hope do we have if the most principled businesses can’t stay on the right side of the integrity line?

Researchers have studied ethical breakdowns for decades. Max H. Bazerman and Ann E. Tenbrunsel wrote a book on the subject, Blind Spots: Why We Fail to Do What’s Right and What to Do about it . In a piece they wrote for the Harvard Business Review, Bazerman and Tenbrunsel broke down how “cognitive biases distort ethical decision making.” Here are five of the key “blind spots” they identify:

  • Ill-conceived goals: Ever had a review where you were given stretch goals that were next to (if not completely) impossible? Challenging targets can encourage hard work, but they can also indirectly encourage unethical behaviors.
  • Motivated blindness: When a person has a direct interest in something succeeding (like achieving engineering leadership in regard to emissions requirements,) sometimes they can be blind to shortcuts or questionable behaviors—seeing only what is convenient to see.
  • Indirect blindness: This happens when a task or behavior is delegated and that delegation provides distance from the problem. The idea is that putting distance (and deniability) between yourself and the problems can create an indirect blindness.
  • The slippery slope: This is pretty self-explanatory. It starts with a small, less-important infraction—something that seems okay, maybe, on its own. But then those little problems add-up, and over time you have a big problem on your hands without ever realizing it was happening.
  • Overvaluing outcomes: “I don’t care how you do it. Just get it done.” Who hasn’t heard a boss say that? Forgiving questionable choices because of positive outcomes doesn’t always work out. Businesses can’t allow themselves to fall into Machiavellian, “ends-justify-the-means”-style logic

So what’s the solution? Bazerman and Tenbrunsel say awareness and training. “Even the best-intentioned ethics program will fail if they don’t take into account the biases that can blind us to unethical behavior, whether ours or that of others.” They recommend project leaders ask themselves, “What ethical implications might arise from this decision?”

Evidently, it’s a question Volkswagen’s leadership failed to ponder.

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