Setting a Higher Standard
How can we raise the bar?
Photo: Doug Tengdin
Cheaters cheat. That’s the lesson from Wells Fargo’s fraudulent accounts, the NFL’s “Deflate-gate,” VW’s emissions scandal, the fraudulent mortgages at the heart of the Financial Crisis, and a whole host of other scandals. In the early ‘90s GM had a special chip in its Cadillacs that shut off their emissions controls when the air conditioner was on. Since we don’t usually run the a/c when getting our cars tested, the got away with it for a while.
Corporate scandals have been great fodder for Hollywood, from Erin Brockovich where Julia Roberts confronts PG&E’ management about asbestos in people’s drinking water, to A Civil Action with John Travolta as a crusading – but self-obsessed – lawyer. They serve as modern morality plays, with greedy corporate executives, put-upon common folks, and a convenient story-arc. It’s like the scene from Casablanca, where Inspector Renault pretends to be “shocked, shocked” to find gambling going on in Rick’s café – just before a clerk hands him his winnings.
As long as there are profits to be made, people will try to game the system – whether it’s emissions testing or high school grades or football or investment management. This has been the case ever since Adam and Eve hacked their supervisor’s ethics-management system in order to “know good and evil.”
For companies exposed in a web of deceit and fraud, it takes a while to re-build. Companies like VW last year or Wells Fargo earlier this year have to clean house and examine their systems, as well as make things right with consumers. But no one is exempt from the temptation to cheat. That’s why we have audits and controls.
Illustration: Svjo. Source: Wiki
We’re all born to trouble as the sparks fly upwards. And we bring much of that trouble on ourselves.
Douglas R. Tengdin, CFA