‘Dieselgate’: The famous emissions scandal case of Volkswagen
During 2010, the U.S. Environmental Pollution Agency (EPA) issued new guidelines for auto manufacturers to reduce emissions. Many companies complained about the increased costs but eventually met the new standards of EPA . In April 2016, the EPA discovered Volkswagen (VW) cheated the testing system and failed to meet the new standards.
The Decision/s:
The unethical leaders instructed VW engineers to trick the system by only activating emissions-saving features when the car was running in test conditions.
The Consequence:
When the company was charged with unethical behavior, VW offered to buy back almost 500,000 cars and offered parts to upgrade systems in other models. Several high-ranking executives lost their jobs as a result of the scandal.
Similar scandal was reported in another famous case involving Enron, where an unethical climate fostered conscious rule breaking within the organisation, which resulted in both reputational and financial consequences.
These cases provide an insight into the iconic abuse of power and it is interesting to note the recent PwC’s Global Economic Crime and Fraud Survey (2020) stated that among the total loss of US$42 billion faced by the business landscape due to unethical conduct, 26% were due to the unethical practices of top management.
Does these cases provide an indication that the ‘Chair of Leadership’ corrupts people?
Well, based on twenty years of behavioural research, Dacher Keltner , a professor of psychology at University of California, states that ‘Power tends to corrupt people’ and leaders more likely to engage in unethical behaviours than others. The author also states that though people gain power through traits and actions such as empathy, collaboration, openness, fairness, and sharing; but when they start enjoy a position of privilege, those good qualities begin to drop.
As we can understand here that leadership position itself is one of the antecedent for unethical behaviour (any organisational member action that violates widely accepted moral norms), how organization can develop leaders to be ethical?
There are various measures suggested by researchers and here are the two best measures:
- Creating Accountability
Accountability is accepting responsibility for the actions and being open to owing the outcomes of the choices, decisions, and actions. Accountable leaders not only help in running ethical business but also create in building trust in the organization.
In a study, participants were placed in the role of a leader and were assigned to one of two conditions. In the first condition leaders were to receive a bonus based on their followers’ performance on a task, and in the second condition, leaders did not receive a bonus.
Following that, half of the leaders were told that their followers’ performance would be visible to the others and the experimenter (high accountability), and the other half were told that followers’ performance would be kept confidential (low accountability).
Leaders showed the highest levels of disapproval for unethical behaviour when:
(a) accountability was high and
(b) they did not personally benefit from the behaviour (that is, in terms of receiving a bonus).
The findings suggest that in situations where accountability is low, and the opportunity for self-benefit is high, leaders may not always act in the interest of the organisation. The findings also suggest that leaders may rationalise unethical behaviour of followers when leader bonuses are tied to follower performance.
- Empowering People to Speak :
It is essential to create a safe and effective whistleblowing channels for employees to speak where they can raise a concern or report an issue an activity that he/she considers to be illegal, dishonest, unethical, or otherwise improper. A recent study stated that the whistle-blower protection can act as an anticorruption tool.
There is no silver bullet for compliance and ethical behaviour, from minor indiscretions
to major scandals, as a multitude of factors contribute to or undermine them. However, there is strong evidence, it is clear that employers can take effective action on ethics.
Author:
Ms. Gayathiri Sridharan; Industrial & Organizational Psychologist, Organizational Development Consultant, EQ Brain Profiling
Reference/s:
Hoogervorst, N., De Cremer, D., & van Dijke, M. (2010). Why leaders not always disapprove of unethical follower behavior: It depends on the leader’s self-interest and accountability. Journal of Business Ethics, 95(1), 29-41.
Omojola, O. (2019). Whistleblower protection as an anti-Corruption tool in Nigeria. JL Pol’y & Globalization, 92, 173.
