corporate evil

The Patterns in Corporate Misconduct

23 November, 2020

Patterns appear and reappear in corporate misconduct cases, beginning with fantastic commitments made from on high. All of which place personnel in a position of extreme strain. Even without strain, people tend to underestimate the probability of future bad events. Put them under emotional stress, some research suggests, and this tendency gets amplified. People will favour decisions that preempt short-term social discomfort even at the cost of heightened long-term risk. Faced with the immediate certainty of a boss’s wrath or the distant possibility of blowback from a faceless agency, many will focus mostly on the former. This reaction isn’t excusable. But it is predictable. In this article Jerry Useem looks at some of the more spectacular corporate ethical failures in recent times. He references Johnson & Johnson CEO James Burke’s conscious effort to tinker with the unconscious criteria by which decisions at his company were made, resulting in what he describes as “an incremental descent into integrity, a slide toward soundness, and the normalisation of referencing ‘Our Credo’ in situations that might otherwise have seemed devoid of ethical content.” Sadly, this didn’t last. Since that time, J&J seems to have lost its moral way, illustrating that “Perhaps the moral of the J&J story is ethical corporate behaviour is not like a faucet you can turn on and off at a whim. It requires consistent behaviour based on ethical values such as honesty, trust, respect, and responsibility.” Steven Mintz says ‘the underlying cause of the problem is a culture that has morphed from honesty to dishonesty accompanied [by] the failure of ethical leadership.

One day in 1979, James Burke, the chief executive of Johnson & Johnson, summoned more than 20 of his key people into a room, jabbed his finger at an internal document, and proposed destroying it.

The document was hardly incriminating. Entitled “Our Credo,” its plainspoken list of principles—including a higher duty to “mothers, and all others who use our products”—had been a fixture on company walls since 1943. But Burke was worried that managers had come to regard it as something like the Magna Carta: an important historical document, but hardly a tool for modern decision making. “If we’re not going to live by it, let’s tear it off the wall,” Burke told the group, using the weight of his office to force a debate. And that is what he got: a room full of managers debating the role of moral duties in daily business, and then choosing to resuscitate the credo as a living document.

Three years later, after reports emerged of a deadly poisoning of Tylenol capsules in Chicago-area stores, Johnson & Johnson’s reaction became the gold standard of corporate crisis response. But the company’s swift decisions—to remove every bottle of Tylenol capsules from store shelves nationwide, publicly warn people not to consume its product, and take a $100 million loss—weren’t really decisions. They flowed more or less automatically from the signal sent three years earlier.

On the face of it, you’d be hard-pressed to find an episode less salient to the emissions-cheating scandal at Volkswagen—a company that, by contrast, seems intent on poisoning its own product, name, and future. But although the details behind VW’s installation of “defeat devices” in its vehicles are only beginning to trickle out, the decision process is very likely to resemble a bizarro version of Johnson & Johnson’s, with opposite choices every step of the way.

The sociologist Diane Vaughan coined the phrase the normalisation of deviance to describe a cultural drift in which circumstances classified as “not okay” are slowly reclassified as “okay.” As this article details, time and time again in company after company, everyone involved found a way to make what were clearly problems acceptable, and this behaviour became so routine it became what organisational psychologists call a “script.” Which ultimately resulted in some enormous, expensive and fatal failures for organisations such as Ford, Volkswagon, NASA and, ultimately, Johnson & Johnson.

The Atlantic, Jerry Useem, January/February 2016. Read the full article here.

Cranlana Centre for Ethical Leadership’s programs include the 2 day Executive Ethics, 6 day Executive Colloquium and year-long Vincent Fairfax Fellowship. We also deliver online and tailored corporate programs. Find the right program for you. They are all held under the Chatham House Rule to encourage genuine and open debate, and allow participants to candidly discuss sometimes sensitive issues in private while allowing the topic and nature of the debate to be made public, and contribute to a broader conversation. The alumni program offers ongoing leadership development support and a lifelong connection with Cranlana.

Photo by Imthaz Ahamed on Unsplash