7-Eleven, Volkswagen cases show why we should push back on – corporate ethics #harvard #business
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7-Eleven. Volkswagen cases show why we should push back on ‘corporate ethics’
Professor of Management and Organization Studies, Macquarie University
Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.
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Chairman and major shareholder of 7-Eleven Russ Withers sits in a Senate Committee hearing in Melbourne. Julian Smith/AAP
There is perhaps no phrase more hackneyed in the corporate world than: “good ethics is good business”. Against the image of the ruthless business baron who will stop at nothing in the pursuit of wealth and power, the slogan tells us there is no friction between being good and being successful.
As luck should have it (for corporations that is) it is argued organisations can stand up and be righteous about their do-gooding, and this will actually lead to the achievement of self-interested business results. The cake can be had and eaten.
But does this ethical catch phrase really hold sway in the corporate world? Events this September suggest not.
The month of the corporate scandal
September 2015 was mired in corporate scandal. German car manufacturer Volkswagen was raked over the coals for installing software in its cars that ensured it falsely passed emission tests. Eleven million cars were involved over a period of seven years. VW’s CEO Martin Winterkorn resigned over the affair and now faces possible criminal charges .
American corporation Turing Pharmaceuticals was publicly vilified for its predatory pricing when it raised the price of the drug Daraprim by 4000%. This is a drug used to treat infections associated with HIV and AIDS. Turing’s CEO Martin Shkreli was described by the Washington Post as “the most hated man in America”.
In Australia trouble arrived at convenience store chain 7-Eleven when the ABC’s documentary series Four Corners revealed its use of exploitative and illegal work practices to reduce its labour costs. Employees were being paid less than half the legal minimum wage. Young and foreign workers were especially targeted. The scandal saw the resignations of 7-Eleven’s chairman Russ Withers, and its CEO Warren Wilmot.
Bad ethics is good business
Each of these scandals has been scrutinised in terms of business ethics. We are not talking here about contentious and nuanced debates about the nature of morality. In these cases the ethical issues relate to cheating, lying, deception, law breaking, exploitation, and merciless profiteering. As far as any common understanding of ethics is concerned these things are on the far side of the thick and grey line that separates right from wrong.
What do these cases have in common? Each one suggests there was an ethos in place in these corporations that held that “bad ethics is good business”. Seven years of highly orchestrated cheating at VW meant increased sales. In 2009 VW became the world’s biggest car manufacturer .
Institutionalised wage fraud and labour exploitation at 7-Eleven kept store costs down, increasing profits both for franchisees and (especially) for the parent company. 7-Eleven has twice been names Australia’s “franchisor of the year”. Price gouging at Turing meant a drug listed on The World Health Organization’s essential medicines list could bolster the company’s profits by exploiting the sick and vulnerable.
Just don’t get caught
The “bad ethics is good business” approach was going well for these businesses until they got caught. These three cases have triggered debates still raging in all sectors of society. Heads have rolled and bottom lines are jeopardised.
Does this really confirm that “bad ethics is bad business”? Of course not. There is no doubt many other corporations are profiting handsomely from deceit, lies, fraud and exploitation. The scandals of September 2015 show that “bad ethics is good business … unless you get caught”.
It’s not just about not getting caught. It is also about the political, legal, social and economic implications of being found out. In the cases of VW, 7-Eleven and Turing there has been a massive public and media outcry about their reprehensible and selfish behaviour.
Bringing these corporations to justice was not the work of one heroic individual, nor the result of government action. It was a collective effort that involved NGOs, scientists, academics, politicians, the media and the general public. This was a victory of civil society and democratic dissent.
So, we can reformulate our proposal: “Bad ethics is good business … unless you get caught … and as long as you aren’t the subject of a public outcry”.
Democratic business ethics
When corporations speak of business ethics their idea is that they can keep it all in house. The ethics of business is largely seen as a matter of corporate self-regulation so that pesky outsiders won’t stick their noses into corporate affairs. The September scandals suggest an entirely different ethics.
If we want ethics in business, what we need is more corporations being caught and more public outcry. For business ethics to be effective they must be pushed onto corporations against their will. Business ethics is democratic, not corporate.
What we can learn from the business events of September is that ethics cannot be left to corporations themselves. Business ethics requires a vigilant democracy where the public and its institutions will hold corporations to account for their actions.
Business ethics, to borrow a phrase, is about keeping the bastards honest.