Recently German automobile manufacturer Volkswagen hit the headlines for all the wrong reasons. Not two weeks after having been declared “Industry Leader” in the 2015 DJSI Annual review, they were found to have installed software in vehicles allowing them to cheat on US emissions testing. Not only is this unethical, it is of course hugely illegal.
There’s been an abundance of writing published since on the issue, but I’d like to ask a slightly different question: how does a leading global brand allow such behaviour to take place? By looking at this instance in the context of other high-profile scandals – specifically those involving BP and Tesco– perhaps we can find some answers.
In all cases of wrongdoing, the actions of certain individuals will be the cause. However, it’d be naive to think that one or a collection of individuals were and are the sole cause at the root of the issue. It all comes back to culture, or more specifically, the lack of an ethical/responsible culture. There’s much academic writing that suggests individuals’ actions are the result of an organisation’s culture, not it’s values or even the individual’s beliefs.
For multinational companies as large as Volkswagen, BP and Tesco are, it’s fair to assume that nearly all of their staff have and will act in a responsible and ethical manner. However, company or department cultures caused certain individuals to act in unethical ways. Below are four potential catalysts for an unethical culture:
Inappropriate goals – Chasing sales targets, acquiring market share, obtaining new contracts are just a few goals that could create the pressure to act unethically
Inappropriate reward system – Similar to goals, companies that reward results but don’t look at how they were achieved could allow for unethical behaviours to prosper
Inappropriate testing – Research has found that 9 of 10 diesel vehicles on the road in the EU exceed EU pollution limits. This implies that current testing allows for unethical behaviour to go unchecked
Lack of transparency – If a company doesn’t encourage open dialogue or allow for bad behaviour to be reported, then an unethical culture can evolve
The CEO’s actions – The CEO sets the tone, values and beliefs of an organisation. If a CEO doesn’t state that responsibility comes before profits, and more importantly sets the company’s vision around this, then employees could take the culture as being one that isn’t responsibly lead, and feel that acting ethically is futile
What’s most surprising, and sometimes overlooked in these cases, is that in all three instances there were and are regulators and governing bodies that are tasked with preventing this from occurring.
BP works in an industry that’s has strict regulations around working hours and project systems. Tesco reports were audited by PwC, one of the world’s leading auditors, who were tasked to ensure the reports presented a clear reflection of the business. Volkswagen’s cars were tested by the US EPA who should have systems to identify when there’s software manipulating results. There’s a famous Latin phrase Quis custodiet ipsos custodes? Or in English: “Who will guard the guards themselves?”
Creating a responsible culture
There’s plenty of literature written on the subject of creating a culture that acts responsibly. Below are just four ideas that will help in building an ethical culture:
Communicated and accessible guidelines – The majority of organistaions will have a mission statemtent, codes of conduct, or organisational values. It’s critical that these are continually communicated to employees, and that they’re all fully aware. Also the guidelines and mission statements shouldn’t be hidden away on a website, they should be upfront easily accessible
A system that rewards good behaviour – Setting KPIs that are non-financial which reward the person and in turn company in acting responsibly. Celebrate ethical and sustainable behaviour just as much as you would financial successes. Promote staff based on them acting in line with the values, culture and ethical beliefs of the organisation
A means to report unethical behaviour – Employees should be encouraged to flag wrongful behaviour. They should feel empowered and safe in reporting unethical practices. I’m sure in the three state cases of Volkswagen, BP and Tesco there were workers that knew what was occuring and weren’t happy with it
Training to support a responsible culture – Ethical and responsible behaviour should be embedded into training. Employees should be taught and reminded of the culture of the company and ways to deal with certain situations.
The Volkswagen scandal won’t be the last that we see to hit a global corporation; history is littered with these wrongdoings and scandals. Companies that follow the above examples and ideas, and truly embed responsible and ethical behaviour into the heart of its operations, should never fall foul of such a scandal. If they do, then it’s likely they didn’t foster the correct culture.