Sunday, September 25, 2016

Who Gets To Set the Rules of Business?

As we continue our journey into the 21st Century are global businesses setting higher standards for themselves or are they becoming more selfish and greedy?
If the latter – maybe we should be asking some basic questions on social media and elsewhere to try and get some substantive change. For example, who gets to set the rules in business? And how well are they doing their job? What values should these rules reflect? What’s fair and how is this defined? And what, if anything, do we owe to one another?
The 21st Century has seen large global brands being caught misleading their customers for financial gain. The global financial crisis was a tough time for most consumers across the world, who must have been saddened (and more) to find that many of the financial institutions they trusted to look after their hard earned cash were misleading customers or had colluded to make financial gain through for example rigging forex rates.
More recently we had the Volkswagen (VW) emissions cheating scandal allegedly brought about when VW realized that a new generation of diesel motors could not meet United States air quality standards legally. The company officially admitted the cheating to regulators, but not to the public, on September 3, 2015, after the E.P.A. threatened to refuse to allow 2016 models to go on sale.
According to the documents reviewed by The New York Times, a confidant of Mr. Winterkorn (the Chief Executive of Volkswagen at the time), wrote to him in May 2014, warning that regulators might accuse the carmaker of using a so-called defeat device - software that recognized when the car was being tested for emissions and activated pollution-control equipment. At other times, the cars produced up to 35 times the allowed amount of nitrogen oxide emissions, which are linked to lung ailments and premature deaths.
On September 1, 2016 the Australian Competition and Consumer Commission (ACCC) sued Volkswagen AG (VW) and its local subsidiary for misleading customers. The suit alleges that VW engaged in misleading or deceptive conduct, made false or misleading representations and engaged in conduct liable to mislead the public in relation to diesel vehicle emission claims. Specifically, the ACCC claims that between 2011 and 2015 VW misled customers in relation to the significantly higher nitrogen oxide emissions being produced by the vehicles, misled customers to believe that the vehicles complied with Australian and European standards and all Australian regulatory requirements, and marketed the vehicles in Australia as being environmentally friendly, clean burning, low emission and compliant with stringent European standards when this was not the case under normal driving conditions. The ACCC claims that this constituted multiple breaches of the Australian Consumer Law. The ACCC is seeking declarations, pecuniary penalties, corrective advertising, findings of fact and costs.
On September 7, this year Bloomberg Business Week asked the question “can ExxonMobil Be Found Liable for Misleading the Public on Climate Change? Where it’s alleged that scientists at the biggest U.S. oil company understood as early as anyone that fossil fuel emissions were heating up the earth’s atmosphere. The world’s largest oil explorer by market value had been hit by a pair of multipart investigations by InsideClimate News and the Los Angeles Times. Both reported that as early as the 1970s, the company understood more about climate change than it had let on and had deliberately misled the public about it. One of Exxon’s senior scientists noted in 1977 - 11 years before a NASA scientist sounded the alarm about global warming during congressional testimony - that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels.”
And then there’s Wells Fargo.
Two former Wells Fargo & Co employees have filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired. The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas.
"Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts," the lawsuit filed in California Superior Court in Los Angeles County said. Wells Fargo has fired some 5,300 employees for opening as many as 2 million accounts in customers' names without their authorization. On September 8, a federal regulator and Los Angeles prosecutor announced a $190 million settlement with Wells.
If the fraud isn’t bad enough it’s worth highlighting that institutional investors now want Wells Fargo to reclaim money it gave to Carrie Tolstedt - the executive who oversaw the Wells Fargo unit during the time it carried out a massive fraud. Tolstedt resigned earlier this year with a $124 million severance payment, plus equity.
One can sadly Google many other organizations misleading the consumers in some form or other – which begs the current question – who’s setting the rules of business? As individuals ‘we’ have two simple choices – we can either turn a blind eye to forms of corporate corruption and greed and thereby tacitly approving these bad practices, which at a minimum are ripping us off and at worst will destroy the planet – or we can start to ‘fight’ and stand up for the world we want our children and grand-children to inherit from us.
If we’re going to put our heads in the sand thinking ‘I have no power to make a difference; I don’t drive a VW or bank with Wells Fargo; or I don’t know what to believe anymore so I just won’t get involved’ – then sadly we’re accepting that it’s okay for businesses to cheat, lie and be focused on selfish greed. In which case why don’t we start teaching our kids the skills required to be good at lying and corruption - as we might as well ensure our future businesses and associated nations are best equipped to maximize this apparent tacitly ‘acceptable’ approach to business.
The business ‘buzz words’ of the past few decades have focused on leadership development; corporate governance and corporate social responsibility – in fact many organizations are making millions of dollars supposedly ‘developing’ these importance areas of business.
But if businesses are corrupt – then it’s the fault of their leadership; their corporate governance and their approach and belief in corporate social responsibility.
One of the key rules of business should be to have stringent corporate governance rules in place to ensure the organization is operating at the highest ethical standards, for the good of their stakeholders, their community and when appropriate the planet; for organizations to embrace and genuinely understand the long-term and sustainable benefit of corporate social responsibility; and to have the right leadership in place to ensure these first to rules are upheld each and every day.
When organizations cheat – then the leadership must be held to account and be held personally liable to their stakeholders.
Until this happens we are sadly allowing and tacitly approving greedy corporations and institutional investors to make a mockery of the concept of leadership and the accountability that comes with it – and taking the principled role of leadership back to the dark ages.