It's appalling that most corporate job descriptions focus only on what the applicant needs to know or do. Hire and promote only honest, accountable people and get rid of the rest. If the class-action lawsuit against Honda, Nissan, Toyota and Ford rules in favor of the plaintiffs he notion of making money at all costs will also prove to be catastrophic at these companies. Whatever financial benefit Takata might have enjoyed in the short term, the long-term consequences are nothing short of dire. Overall, executives are paid nearly 4% less than their peers, and that can grow significantly bigger years down the road. In the September 2016 Harvard Business Review article, researchers say people who work for a company that has been enmeshed in scandal make less money when they leave to work elsewhere. It's not just the CEO or the company's stock that takes a hit when the organization is enmeshed in scandal. And the Toshiba accounting scandal in 2015 forced president and CEO Hisao Tanaka to resign. Pharma company Valeant's shares dropped 75% after a short seller accused it of using a pharmacy to artificially inflate its sales. Some examples: There is "no end" to dire financial consequences to Volkswagen after the emissions scandal that emerged in 2015, wrote Fortune's Geoff Colvin in January. That seems to provide evidence that the frequently quoted belief, "There's no such thing as bad publicity," is true.īut the results of this study can't be extrapolated to every area of business. Believing you're smarter than people trained in a subject you're not isn't just obnoxious, but also deadly as the Challenger and perhaps Ford cases show, the lives of human beings are on the line.Īvoid the 'there's no such thing as bad publicity' myth.Ī study conducted at Stanford and University of Pennsylvania revealed that when books penned by unknown writers were reviewed in the New York Times, sales of their work increased by a third, even if the reviews were negative. Knowing that you don't know something belongs at the top of that list of constraints. "A man's got to know his limitations," said Dirty Harry in Magnum Force. McDonald's superiors refused to heed the warning, and all seven astronauts, including a schoolteacher from New Hampshire, were killed. The shuttle's O-rings, essential to the proper functioning of the spacecraft, had never been tested in the unusually low temperature predicted for Cape Canaveral on launch day. In 1986 when space shuttle Challenger exploded, NASA consultant Allan McDonald alerted his superiors about the potentially deadly consequences of proceeding with the launch. If true, Ford's hubris is brazen, self-defeating, and deadly - but it's also hardly the first example of such behavior. Supreme Court is clear and straightforward on this, she says: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not." But as the class-action lawsuit implies, there may be enough companies out there who haven't gotten the memo. Stout, professor of corporate and business law at the Cornell Law School, notes that there is no legal duty to maximize profits. The reason that companies get away with reducing decision making to risk/benefit calculations, Block said, "is because the government doesn't penalize them enough when there's a problem." There are only expenses," said Joel Block, CEO of the real estate hedge fund Bullseye Capital, adding that many too many business leaders view their operations too narrowly. Maximizing profits at all costs is dangerous. Even if the auto companies triumph in court, however, four potent leadership lessons emerge, and smart leaders would do well to heed them. In a separate suit, Takata has admitted to criminal wrongdoing and agreed to pay $1 billion in damages for their lethal product. The suit claims that Honda, Toyota, Nissan, and Ford knew that the Takata airbags were defective, but for financial reasons the companies used the bags anyway.
But a class-action lawsuit filed recently in Florida suggests that serious ethical lapses remain a defining part of the industry. automobile industry would have learned from GM's financial, legal, and public relations nightmare wouldn't happen again. You'd think that after the hue and cry of that scandal, the U.S. General Motors' cost-cutting measures made its signature product a death trap, and Ralph Nader's groundbreaking book, Unsafe at Any Speed, led the automaker to discontinue the model. "Perhaps the granddaddy of all automotive scandals." That's how a Fortune article once described the problems surrounding the Chevrolet Corvair in the 60s.
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