How do you come back from a major corporate scandal? That question was on the mind of The Man From FCPA back in 2012 when the New York Times broke the story of Wal-Mart’s alleged bribery schemes in Mexico. Later that year Matt Ellis admonished the Wal-Mart to “go big” when remediating its compliance function. Wal-Mart certainly did so in hiring some of the top compliance talent around and then instituting a worldwide best practices compliance program. Wal-Mart has demonstrated that with senior management commitment, a company can overcome what might appear to a be a crippling corruption scandal.
The Man From FCPA thought about the robustness of Wal-Mart’s response when reading about Volkswagen’s comeback from its emissions-testing scandal. VW used the scandal to rework its manufacturing towards increasing its electric car program. The company desires to have fully 50 percent of its fleet sales electric based in seven years. Indeed, the company hopes to become the world’s largest manufacturer of electric cars in just a few years. This initiative, coupled with the company’s robust remediation with its customer base, allowed the company to see a reported increase in 2017 sales, which will help to pay for the costs the company has incurred from the scandal.
All of this might not have come to pass if the deisel engine was still the primary type of car manufactured by the company. The entrenched stakeholders, dependent on deisel would never have allowed the company the latitude to make such a radical change. The shareholders would have sanctioned management through a dip in share price. Finally, some activist shareholder would have claimed the company was diluting shareholder value, demand a seat on the board, and then try to move the company backwards.
Wal-Mart demonstrated that you can use a scandal to clean house, as it got rid of the senior management in both Mexico and the United States whose attitude and actions led to the FCPA corruption scandal in Mexico. VW is currently demonstrating it can use a corporate scandal to wipe another type of corporate slate clean by refocusing on the emerging technologies for a greater business share.