VW scandal another case of business as usual

By David Steingard

What does Volkswagen's emissions cheating scandal have in common with Enron's accounting fraud, the BP Deepwater Horizon oil spill catastrophe, the global financial meltdown of 2008, Barclay's Libor rate rigging, and General Motors' ignition recall? Why do these colossal breakdowns of public trust in corporations continue to repeat themselves?

At the heart of these scandals is an unchallenged attitude of "business as usual" that privileges financial metrics of success over all else and assumes that maximizing shareholder returns is the raison d'être of a corporation.

In the case of VW, the desire to surpass Toyota as the world's largest and most profitable automaker has put enormous demands on its management to deliver results: More profit. More growth. More market dominance.

The emissions test fraud clearly exposes the expectation to produce results at any cost: Customer brand loyalty evaporates. Public confidence erodes. Government agencies pursue damages. Employees challenge their loyalties. The natural environment experiences more toxic emissions. And, ultimately, the venerated shareholders suffer an initial 20 percent decline in the value of their investments, with more losses arguably to come.

What would drive VW to commit fraud on such a grand scale that every one of its valued stakeholders is harmed and betrayed?

In VW's efforts to game the emissions test, this episode represents yet another manifestation of "If you're not cheating, then you're not trying." We now shift from deflated footballs to deflated integrity, let down by a great brand that once offered us Fahrvergnügen - "ultimate driving pleasure."

Consumers will have issues of confidence not only in VW but also in other carmakers whose vehicles have passed the tests. The spillover of VW's selfish act may have effects on its peers and rivals, BMW, Mercedes, and others. In fact, Caterpillar and Cummins settled similar accusations in October 1998 for $1 billion. How did they pass the test?

As other corporate scandals have shown, the pursuit of profits without principles ultimately destroys profit itself - and sometimes the corporation as well. To avoid business ethics breakdowns of this magnitude, this misdirected mind-set of profits over principles must change. Companies need to reconnect with the true corporate purpose their legal charters demand - to serve society, sustain the natural environment, and foster well-being for all their stakeholders. Its time for "business as unusual."

David Steingard is an associate professor of leadership, ethics, and organizational sustainability and the acting director of the Pedro Arrupe Center for Business Ethics at St. Joseph's University in Philadelphia. steingar@sju.edu