Article originally published in the Philadelphia Business Journal on June 15, 2020.
Over the years, I have written many Business Journal articles about the damage caused by individuals who lack common sense and critical judgment. To these two traits, I now add a moral/ethical compass.
I watched the videos of George Floyd’s death while in police custody and police officers taking aggressive action against people protesting racial injustice. I watched police officers showing empathy and treating protestors with respect, and watched police officers salute Floyd’s coffin at his funeral. I have also watched the destruction caused by looters, in many cases destroying stores of black-owned merchants who provide food and services to the community and employ neighborhood residents.
Most all police officers have the highest regard for morality and ethics. Some do not. I look forward to the day when black parents do not have to give “the talk” to their children on how to remain safe during an encounter with a law enforcement officer. I look forward to the day when my black friends and colleagues will not feel some trepidation on occasion if they are stopped by a police officer for a traffic offense.
In no way am I diminishing the importance of morality, ethics and people’s attitudes in solving the issue of racial injustice by stating that in the corporate world, individuals also need to be guided by a moral/ethical compass. Those who lack common sense, critical judgment and a moral/ethical compass will eventually cause significant reputational harm to their organization and destroy shareholder value. I share the following three examples:
Wells Fargo
Nearly everyone is familiar with the scandal that rocked Wells Fargo bank in 2016. In a press release, the Consumer Financial Protection Bureau stated, “Spurred by sales targets and compensation incentives, employees [within the Community Banking Division] boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges.”
These illegal acts occurred to meet incentive targets for bonus payments.
Some employees who reported the illegal acts on the Wells Fargo ethics hotline to the board were terminated. A January 2017 CNN Money article stated, “Wells Fargo says it has found evidence that at least some of these whistleblower retaliation claims … may have merit.”
The reputational and financial cost to the bank in lost business and fines were in the tens of billions of dollars.
Volkswagen
In September 2015, a scandal emerged involving Volkswagen, whose employees purposely installed software on their diesel cars that would give lower than actual readings in the emissions testing process. Not only did this action permit these cars to pass emission tests, the results were also used in VW’s strategy to market their “clean diesel” vehicle technology.
To state that VW’s actions were a gross violation of trust is an understatement. This was not an unintended action that can occasionally embarrass a company who has every intention to do the right thing. This was a deliberate action to violate the law and fraudulently sell cars to customers who thought they were buying vehicles that met mandated pollution standards. Where was their common sense, critical judgment and moral/ethical compass?
The cost of the scandal to Volkswagen was in the tens of billions of dollars, not including damage to its reputation.
Massey Energy
On April 5, 2010, an explosion in the Upper Big Branch (UBB) mine of Performance Coal Co., a subsidiary of Massey Energy, resulted in the deaths of 29 miners.
In May 2011, an independent investigative report commissioned by the governor of West Virginia on the explosion showed that production of coal had a higher priority than the safety of the miners.
The U.S. Department of Labor’s Mine Safety and Health Administration (MSHA) imposed a fine of $10.8 million on Massey Energy. The MSHA report on the explosion stated, “Massey’s corporate culture was the root cause of the tragedy. MSHA issued Massey citations … for an unprecedented 21 flagrant violations.”
MSHA Assistant Secretary Joseph A. Main stated, “Every time Massey sent miners into the UBB Mine, Massey put those miners’ lives at risk. Massey management created a culture of fear and intimidation in their miners to hide their reckless practices. Today’s report brings to light the tragic consequences of a corporate culture that values production over people.”
Was the Massey board ever concerned about former CEO Don Blankenship’s poor history of compliance with federal mine safety standards and a corporate culture not focused on safety? The company had a history of safety issues. Why wasn’t Blankenship held accountable to a higher standard of performance by his board prior to the explosion? Where was the common sense, critical judgment and moral/ethical compass of Blankenship and the board of Massey Energy in protecting the company’s miners?
Employees want to work for companies who have a moral compass, are ethical and who do the right thing. These are the companies that customers want to buy from.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.
