We hear phrases like “crime doesn’t pay” all the time. In compliance and ethics circles there are variations intended to assure us that being a good company is good business.
Well, here is the depressing, but not surprising news. Crime does sometimes pay and the definition of “good” is often a malleable one in corporate America.
The big banks that required bailouts as they crashed the global economy in 2008? Nearly all of them have subsequently rebounded with record-setting profits.
Uber, a train wreck of corporate governance, fired its co-founder Travis Kalanick from his role as CEO. That led to a difficult search for his replacement (ultimately Dara Khosrowshahi of the online travel company Expedia).
Among the reasons for Kalanick’s ouster, flagrantly bypassing Apple’s privacy restrictions with its app and trying to cheat state regulations. Worst of all, as the New York Times put it: “For the last few months, the company has been reeling from allegations of a machismo-fueled workplace where managers routinely overstepped verbally, physically, and sometimes sexually with employees.”
The company’s finances remain a wreck, but analysts surmise that, despite the bad behavior, Uber may finally be on its way to turning a profit. Ride volumes continue to rise.
New media company Axios shared this analysis: “Uber spent most of the quarter under the cloud of a well-publicized internal investigation into sexual harassment and other unsavory aspects of company culture, and ended it with the forced resignation of CEO Travis Kalanick. The ride-hail giant’s core business, however, appears to have kept humming along.”
Volkswagen, on the heels of a diesel emissions scandal that affected 11 million cars, garnered massive government fines, and resulted in troubling financial losses, is once again, enjoying a record-setting pace of new car sales.
Wells Fargo, after egregiously opening unwanted customer accounts and credit cards and a scandal involving subprime auto loans is still a banking giant and, despite below-par quarters, will likely rebound in the near future.
In a global economy with educated consumers, slow, steady, and reputable will win the race, even if bad behavior occasionally fuels short-term successes among your peers.
So, you might ask, why bother with compliance and ethics programs if fines and reputational backlash can be so easily overcome?
The answer leads to that ongoing debate over long-termism and short-termism. In our recent interview with John Ostergren, director of EH&S at 3M, he spoke of that company’s efforts to evaluate some strategies in terms of 25 years, rather than a single fiscal year or quarter.
That approach is as unique as it is savvy. We live in an age of disposable firms. So many public companies have merely one product or service, are not diversified, and are naked and exposed to any competitor that can duplicate what they do cheaper and more efficiently (for example, consider Blue Apron’s stock price plummet when Amazon suggested it might step onto its turf).
While we applaud entrepreneurism and see merit in efforts by the Securities and Exchange Commission to boost the withering number of IPOs in the country, the reality is that many of these one-hit wonders will die on the vine. We are just not incubating the blue-chip companies of tomorrow.
There is plenty of innovation out there. What is lacking in many cases is long-term vision and strategy.
The nimble, successful companies of the future will understand how to evolve. They must also master the delicate art of balancing risk management with embracing the sorts of risks that can bring about industry disruption and power greater innovation and success.
With the sort of risk-taking designed to propel companies forward, ethics and compliance remain vital, perhaps even more so. While behemoths of corporate America can buy their way out of trouble, young and hungry companies have no such option. Long-term success demands fiercely guarding your reputation and ensuring that customers feel good about doing business with you.
Yes, there will always be companies that get away with shocking indiscretions. Eventually, however, companies that maintain compliance, ethics, and avoiding reputation risk as core pillars will succeed and prosper. In a global economy with educated consumers, slow, steady, and reputable will win the race, even if bad behavior occasionally fuels short-term successes among your peers.