Corporate 'Talent' Must Imagine Worst-Case Scenario, i.e., Ruination: VW, GM, Peanut Corporation

You would think a corporation with high-priced "talent" in its executive suites could imagine the risks -- to the corporation if not to consumers or their own employees -- if it crossed the legal line.
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You would think a corporation with high-priced "talent" in its executive suites could imagine the risks---to the corporation if not to consumers or their own employees---if it crossed the legal line. Of course, you'd hope those executives wouldn't even think of crossing that line. But if they did, you'd think they could imagine the worst-case scenario---corporate ruination---if their illegal risk-taking blew up on them.

Ruination, as in: Plummeting stock price. Screaming headlines. Recalls and fixes. Hearings and investigations. Lawsuits and damages. Employees thrown out of work. Consumer trust destroyed. Possible liquidation of the corporation itself and extinction of the brand. Prison. Ruination of a graphic and no-kidding kind.

Most corporations, through continuous mission review, operate with a sound sense of corporate self-survival. But in several outstanding cases of late---Volkswagen, General Motors, Peanut Corporation of America---apparently not. The consumer is left to wonder: What were they thinking? And if a corporation's product could kill them---such as a car or food---the consumer understandably becomes livid.

Take Peanut Corporation of America: Astoundingly, it knowingly shipped salmonella-tainted peanut butter paste to companies that then, unknowingly, used it to manufacture products such as cookies, crackers, and airline snacks, ultimately killing nine people and sickening as many as 20,000 others. Even though lab tests showed salmonella in their product, the bottom line trumped lethal implications: Emails from the CEO ordered employees to "Just ship it" and "Turn them loose" and complained that delay "is costing us huge $$$$$."

That CEO was recently sentenced to 28 years in prison, longest sentence in U.S. history for a food contamination case. Also doing time are his brother, the company's food broker, and (sick joke) the company's quality-control manager. Apparently, at no time did the brothers game out the downside of their criminal machinations, but doubled-down on them over the two-year period of the outbreak (2008-09). Meanwhile, their quality control was a joke: Despite lab reports showing otherwise, the company created fake certificates affirming salmonella-free product. So much for public safety.

General Motors, likewise astoundingly, continued manufacturing---for more than a decade---certain models whose ignition switch could automatically shut off the engine when the car was in motion, as attested to by upset customers and dealers. Exacerbating the problem: When the engine shut off, the air-bag could not deploy, which in a crash could be life-saving. The crash statistics: 124 dead and 275 injured, 17 of whom included brain damage, paralysis, or amputation (also here). Yet only recently, in 2014---despite knowing of this problem as early as 2001---did GM issue recalls of the questionable models.

Why didn't the red light go on at GM, signaling an imminent P.R. disaster for the company, not to mention a human one? Corporate culture may be the problem, according to an internal investigation: It cited a "resistance to raising issues" and "information silos" that block information-sharing. It also noted employees and managers were urged to report "smart," not use words like "defect" but neutral ones like "issue." Cost concerns also leach the human from the equation: A GM manager closed down an investigation into the ignition defect, saying the "lead time for all solutions is too long," "the tooling cost and piece price are too high," and none of the proposed fixes "represents an acceptable business case." Clearly, "business case" needs rethinking.

Perhaps GM's new CEO, Mary Barra, can rescue the company. Certainly she came in asking the right question: What took the recalls so long? She is also endeavoring to put the customer first and foremost in the company culture. But it remains to be seen if GM can recapture its storied name, given the raft of lawsuits, hearings, and even more recalls. (The regulatory agency overseeing GM, the National Highway Traffic Safety Administration, also needs to step up its game: It repeatedly held there was insufficient evidence to merit an investigation of the ignition problem.)

And now, the scandal commanding headlines is Volkswagen. Astoundingly---pardon the repetition, but it's the best word describing all these scandals---for seven years, since 2008, Volkswagen has been installing a "cheat device" in their diesel models that turns off the emissions system when undergoing an emissions test, but out on the road spews 40 times the legal levels permitted. The hypocrisy: proudly touting "clean diesel" while pumping ungodly amounts of toxics into the atmosphere!

VW stock has fallen 30% and market value 43% since the scandal broke; VW owners trying to resell are finding few buyers for their car, diesel or standard. But this is not only a corporate and consumer scandal, it is a national scandal for Germany: Vaunted "German engineering" and the country's post-World War II rehabilitation as honest and trustworthy have taken hits, while the government expresses grave concern for the economy if its biggest manufacturer and biggest exporter falters. In Wolfsburg, the one-company town where VW is headquartered, a local newspaper reports workers and residents gripped by tension and fear.

Why didn't the red light go on at Volkswagen? The CEO during this era was famously ambitious, determined to grow market share in the U.S., where there's room for growth in diesel sales; he was also famously a bully of subordinates in the pursuit of those ambitions (he resigned when scandal broke). But VW managers are likewise famously known for their engineering prowess (also here): Did they not engineer a worst-case scenario, mapping out the ruination to come if they proceeded with the cheat device, and present it to the bullying CEO? As to the cheat device, with so many engineers in the mix, it beggars belief for them to claim ignorance.

And it beggars belief that no one---no one?---in the executive suites of these three
corporations saw catastrophe coming. Thus it is---through self-inflicted wounds, blindly delivered---the world's largest carmaker (VW) and second-largest (GM) are brought low and the Peanut Corporation of America is done and liquidated.

We all know of course about company loyalty and peer pressure and competitive career tracks getting in the way of reform, but they all count for nothing if the company is damaged or disappears. Why is it such a rare thing to see company loyalty translate into constructive self-criticism and course correction? Why should peer pressure keep one from raising the alarm about practices that could destroy the company the peers all serve?

Why is it almost unheard of for a corporate figure to make the moral case, that pushing bad product---salmonella-tainted food, a faulty ignition switch, a cheat emissions device---is simply wrong?

And how is it possible that a CEO who brings disgrace to the company, as in VW's case, gets a $66.9 million farewell package?

What would it take to make a corporation reform, apart from management growing a conscience? Perhaps a consumer advisory board, to convey the consumer's point of view, but only if it reported directly to the CEO. A staff ethicist might instruct the corporation on its compact of trust with the consumer and the public. A staff filmmaker might make a "The Day After"-type film, to make graphic the human and corporate toll when risk-taking goes bad or fatal (the lawsuits, the hearings, the coffins, etc.).

Even better at painting a worst-case scenario: a staff eschatologist, to map out the end-times of the corporation, complete with liquidation and extinction of brand, if redemption and reformation don't occur.

It also might focus a corporation's attention if its executives were brought up on murder charges. Unbelievably, legal action against Peanut Corporation and General Motors for fatalities caused by their products has been, of necessity, prosecuted as fraud cases, not manslaughter (also here). As the federal prosecutor who negotiated a settlement with GM said in his press briefing, it is not a crime "to put into the stream of commerce a defective automobile that might kill people." The law on this point would need changing, but if murder charges were added to the worst-case scenario of corporate risk-taking, we might see greater corporate responsibility.

Whatever the means, corporations need to imagine---fully imagine---their ruination if a company practice has bad results. It means taking full responsibility, maturing as a corporation. It could also mean---imagine this---lives saved and trust restored.

Carla Seaquist's latest book, "Can America Save Itself from Decline?: Politics, Culture, Morality," is now out. An earlier book is titled "Manufacturing Hope: Post-9/1 Notes on Politics, Culture, Torture, and the American Character." Also a playwright, she published "Two Plays of Life and Death," which include "Who Cares?: The Washington-Sarajevo Talks" and "Kate and Kafka," and is working on a play titled "Prodigal."

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