An ethical fall is not a slip or a stumble. When a for profit or even a nonprofit has an ethical implosion, it affects the entire organization. An ethical failure results in bad publicity, a loss of revenues, the departure of key employees, increased competition, a damaged reputation and legal and civil consequences.
This is the first of a five-part series about an ethical fall. Perhaps your organization is heading for an ethical fall, or perhaps you are there. Damage can be minimized as much as possible, but we cannot forget that the best prevention is to recognize the potential consequences of our actions.
The Pressure to Continue – ethical fall
Organizations who head for ethical falls generally put undue and unrealistic pressures on themselves to succeed. It sounds antithetical, oxymoronic even. Oftentimes, what leads to scandal as the result of pressure is a fear that the competition is gaining too quickly. Ethical organizations sit down and attempt to improve sales and marketing efforts, or to improve products or even to bring in executives who have a better track record selling into certain niches.
Unethical organizations will create and even perpetuate harmful incentives. I call this “The Pressure to Continue.” The organization knows it is wrong, their sales force knows it is wrong and surprisingly, even some of their customers know it is wrong, but they persist. Even more surprising is if they are caught, they will fight any efforts by outside parties to get at the truth. In this “fighting,” the organization finds itself in an ethical quicksand. Let’s take a look at some recent examples:
Wells Fargo Bank Corporation – The retail bankers were forced by management to open numerous “fake accounts” for customers. The scandal was widespread throughout all branches and resulted in firings of key management.
Volkswagen – Engineers, fearing the pressure from sales and marketing, faked emissions data on some of their models. The faked data was eventually discovered and it has resulted in huge fines and a major loss of reputation.
Mylan – Mylan, the manufacturers of the EpiPen, boosted prices ahead of the introduction of competitive products from overseas. The boosted price was exorbitant and artificial. The investigations resulted in CEO firings, fines and investigations into pricing.
These are major examples, but numerous examples exist across virtually every industry from the adulteration of natural sweeteners with high-fructose corn syrup to hospital and clinic over-billings to legal and accounting fraud.
In each case, executives feel a sense of pressure and convince themselves that the only way to fight that pressure and to continue operations is to commit unethical actions.
From the Top
The pressure is invariably from the top down. Employees, generally hard-working and ethical employees are forced to yield to the pressure. They may be given incentives for wrongdoing but they know they are being unethical. They are driven by fear. They are afraid of standing up to management for fear of losing their jobs. They feel trapped.
The engineers at Volkswagen knew they were perpetuating false data, but they also knew the dangers to their careers if they dared say anything.
Recently several supermarket brands of Extra Virgin Olive Oil were found to be diluted with lesser oils. The sales forces were pressured to sell the product even though they were aware of the inferior product. This was certainly not an isolated incident from the food industry. A few years ago, a peanut butter company was caught intentionally selling product that contained salmonella. The company sold the product fearing what would happen to their costs were they to dispose of the tainted product.
The problem with “top down” types of pressure is that it is initially difficult to prove. Executives in the middle are often those to get caught first and they suffer the consequences. Sooner or later those at the top do get caught and it has catastrophic effects on the organization.
“The Pressure to Continue” sees unethical behavior as the only solution to perpetuate the company by its false incentives. In fact, they speed the demise of the organization or seriously damage its reputation.
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