How come, despite so much visibility and surveillance mechanisms, so many of the worlds largest companies lapse into sustained crookedness?
When business misconduct like the massive frauds at Wells Fargo and Volkswagen
With increasing competition, business misconduct in the pursuit of profit is at the heart of every major corporate misconduct scandal.
A Culture of Greed and Self-interest
Good or bad, we are constantly primed to believe that the acquisition of excess material wealth suggests something positive about one’s social status and personal worth. From media messaging, to the design of educational curriculums, our social and organizational systems are designed such that the pursuit of material wealth for oneself is perceived as the sole, or at least, the most important measure of success.
In business, as in other walks of life, we have learned to glorify managers and leaders so long as the wealth bubble and market share valuations keep soaring. Until the bubble bursts, few questions get asked. or when wrong-doing becomes public knowledge. Even when tough questioning could reveal recklessness or fraud (Theranos).
A significant underlying cause of ethical misconduct is our prevailing culture of greed and self-interest. From it flows our unhealthy obsession of wealth/profit maximization and the abuse of power that preserves it.
As agents of a company – managers and by implication their staff – are responsible to act as trustees in the interest of all stakeholders while pursuing its objectives. However, instead of acting in the interest of all stakeholders, managers and leaders frequently forget their social and societal responsibilities, and often put their personal interest above the interests of other stakeholders. This is partly because prevailing ideologies on ‘management’ and ‘business’ remain anchored in constraining paradigms of profit maximization that is widely misinterpreted as pursuing profit at all cost. Particularly when incentive structures reward performance at any cost.
This translates to pursing business goals with the limited (short-term) view of the interest of owners/investors as the only “value” of concern for businesses and their managers.
This explains why corporate performance measures are powerfully oriented to quantitative economic indicators like profitability, growth rate and stock market valuation, etc., and why managerial compensation arrangements are often linked to meeting these business targets.
The Abuse and Misuse of Power
This profit-at-any-cost mindset results in managerial practices and cultures that espouse behaviors of greed and self-interest. The massive frauds at Wells Fargo were
It is this obsessive pursuit of profits and abuse of power that sometimes de-humanizes management and breeds obnoxious unethical practices from unequal payment to employees, employing child labor, marketing unsafe products, bribing government officials for favorable contracts, exploitative or inhumane personnel practices that harm the interest of employees and their families, to outright frauds and deceptive disclosures (Theranos, VW, ).
Of course, money is necessary for comfortable living. So too is profitability for commercial success and sustainability. The problem, however, is we’re often trapped by false choices involving means and ends. That is, given our goals and objectives, we choose ends over means in our pursuit of success. t comes that not getting confronted by these choices is at the heart of enduring success.
In companies like Alphabet, Adobe, etc., that have adopted more humanistic ideologies, profit may still be the most important goal, but investment in their human resources are powerful subgoals.
The Abuse of Power Just like civil societies develop legal structures and processes to check the abuse of power, such democratic structures and processes to check the abuse of power by senior and top level managers are vital.