In a democratic society, secrets and malfeasance are exposed at lightning speed. As such, the more influential and well-known an institution is in society today, the higher the standards bar is set. Any failure in this regard will have catastrophic world-wide implications. Think no further than the disaster at Bhophal of a subsidiary of Union Carbide. It would have been pointless for Union Carbide to insist that the safety standards at this plant complied with the local Indian Standards when the standards required in America would have prevented such a tragedy.
Notice what happened in South Africa when KFC was allegedly caught on video “recycling” burnt chicken. Would the same backlash have been experienced if the Take Away Joint had been McCleland’s Luscious Fried Chicken? I doubt it. Perhaps a few lines, if that, in a local newspaper but little else besides.
Early in my management career I learnt a sharp lesson on the implications of this principle. During the days when Barlows was an industrial juggernaut in South Africa, being the largest company on the JSE, I was a Financial Manager at a subsidiary, a puny little galvanising plant in Germiston which probably accounted for less than .001% of Barlows’ assets, turnover or profit.
Early one afternoon, in stormed a black employee, clearly inebriated, who claimed that he was being harassed by a certain supervisor and wanted to resign. I gladly acceded to his request and let him storm off the premises shouting obscenities. I thought nothing further about the episode. A month passed. The incidence was parked on the done rack in my mind. One day out of blue I received a phone call from the local NUMSA official claiming that I had unfairly dismissed their employee. As such, he demanded that their member he reinstated with immediate effect – with back pay of course.
To cut a long story short, the Group HR manager insisted that I reinstate this employee as I had not follows the “resignation procedure.” I was aggrieved as the employee was clearly in the wrong and I had done nothing illegal, unfair or unethical.
The coup de grace was as follows: “If our company with its paltry 250 employees out of Barlows’ 250 000 employees went on strike, the newspapers would be claiming that Barlows was on strike.” The risk of reputational damage was too great to permit this situation to degenerate into a strike.
During the same era, Barlow’s owned a subsidiary called Federated Timbers. This Company operated a string of builders’ merchants across South Africa. As a sideline, they manufactured roof trusses. As part of their expansion plans, they acquired a truss manufacturing plant in Swaziland. Apparently this operation had been extremely successful and as such had produced a steady stream of profits. A few months subsequent to the acquisition, the plant was subjected to a Health and Safety Audit. Based upon the fact that the plant had always passed these audits with flying colours, the management of the plant was blasé. Instead they received a scathing report which castigated them for the quality of the ablutions and various other aspects of the health and safety procedures and equipment. On contesting the finding that, if anything, the adherence to health and safety issues had improved since its acquisition by Barlow’s and that the plant’s rating should have been greater than what was previously achieved, they were summarily informed that as Barlow’s was a “rich” company, they could afford to make these changes whereas the previous, some “impecunious” locals could not. Shortly afterwards Barlow’s exited the business as the changes required would have made it a marginal business.
In his audio book, The Real Life MBA Jack Welch imparts many pearls of wisdom relating to business that he has either gleaned or bears the scars to prove it. Some of them relate to the issue of ethics and doing the right thing.
On a similar vein to Barlow’s experience in Swaziland, he maintains that as a multi-national one must always adhere to the standards of the most demanding jurisdiction. Of course he concurs that the annual costs will be greater, but over the longhaul the company will reap the rewards either through higher sales, fewer regulatory hic-cups or boycott campaigns.
The requirement to maintain the highest ethical, quality, health and safety standards is a sine qua non for business especially the largest as they have the most to lose should they not adhere to these norms.
No only will VW be incurring direct costs in the form of fines, reacll costs and the like, but more insidiously there will the opportunity cost of lost focus. Instead of satisfying the customers’ requirements, a defensive laager culture will be inculcated with the customer’s needs furthest from VW’s mind.
Why did these individuals not learn this lesson on their rise within VW’s hierarchy or were they the so-called “untouchables”?
Perhaps even more despicably, they even castigated and tormented those who raised their valid concerns openly?
Whatever the reason, VW, Germany and VW’s workers will all surely pay a high price for this failure of ethics.