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Volkswagen – What Were You Thinking?

I was saddened by the revelation of VW’s gaming the system, knowingly doing something wrong as well as illegal. When initially confronted by the Environmental Protection Agency (EPA), they denied doing anything wrong. When finally confronted with irrefutable evidence by the EPA, they came clean, admitting wrongdoing. Apparently for over five years, VW perpetrated a fraud on the public, knowingly allowing their autos to release up to 40 percent more NOX than allowable and represented by them to the public, securing awards and accolades for their purported “clean diesel” technology. So much for the awards for innovation and the environment.

VW's famous 1960 "Lemon" ad. (Source: Julian Koenig / Helmut Krone)

As someone who grew up in the 1960s and 70s, becoming sentient to the workings of the world around me during that period, VW’s deception was made that much more painful in light of their cultivated image. The original Beetle design and ad campaign tapped into the ethos and anti-status quo of the time. Its ad campaign of the 1960s, with “Think Small,” “It’s ugly but it gets you there,” “If you run out of gas, it’s easy to push,” and “Live below your means,” were the antithesis of what the major U.S. auto makers of the time were promoting.

For U.S. auto manufacturers, it was luxury, power, and status. The ads appealed to the Counterculture, the adherents to the Whole Earth Catalog ethos. The VW beetle and VW van became the vehicle and a symbol of the Counterculture. In 1969, the publication of “How to Keep Your VW Alive” (by, somewhat ironically John Muir), spawned a movement of mechanically-challenged backyard mechanics.

Unfortunately, caught up in corporate greed, lack of morals, or base stupidity, this revelation of corporate deception threatens whatever reputation VW had cultivated over the last 50 years. With one stupid move, VW has possibly irreparably damaged their image and credibility with the public. Unfortunately, VW is not the first to game the system to hide their corporate deception.

Exxon – Ignore the Science

The recent revelation that Exxon had a team of scientists investigating the effects of burning fossil fuels on the climate since the 1970s has revealed some damning evidence against this oil behemoth. Based upon their own scientific research, Exxon knew as early as 1982 about the harmful environmental effects of the continued burning of fossil fuel and its potential to impact global warming. Throughout the 1980s, Exxon’s scientists continued to work with other climate scientists to analyze and validate the data they were gathering, delivering and publishing in peer-reviewed journals and at conferences. Exxon’s own climate models forecast that rising CO2 levels, if not reduced, could cause catastrophic and potentially irreversible impacts by as early as 2030. Their conclusions were widely circulated to Exxon’s management through a 46-page memorandum.

The Exxon Valdez three days after it ran aground on Bligh Reef, Alaska. (Photo: NOAA)

The Exxon Valdez three days after it ran aground on Bligh Reef, Alaska. (Photo: NOAA)

Interestingly, the predictions of their models appear to be in line with other climate scientists’ conclusions 30 years later. By the end of the 1980s, Exxon seemingly abandoned this research.

In 1989, Exxon, along with a number of other corporate giants, British Petroleum, Shell Oil, General Motors, Ford, Daimler Chrysler, Dow, Dupont, as well as many industry organizations, utility companies and members of the coal industry, formed the Global Climate Coalition, an organization formed to lobby and disseminate information opposed to taking any immediate action to reduce greenhouse gas emissions while supporting research focused on disproving fossil fuels impact on climate change. Once again, ironically, their scientists, as early as 1995, in an internal memo, came back with, “The scientific basis for the Greenhouse Effect and the potential impact of human emissions of greenhouse gases such as CO2 on climate is well established and cannot be denied.” The organization disbanded in 2002, as many of its original supporters resigned.

Birds killed as a result of oil from the Exxon Valdez spill. (Photo courtesy of the Exxon Valdez Oil Spill Trustee Council.)

Birds killed as a result of oil from the Exxon Valdez spill. (Photo courtesy of the Exxon Valdez Oil Spill Trustee Council.)

Exxon (along with Koch affiliated and funded groups) has been one of the largest funders of climate change denial. The Chairman and CEO of Exxon, Rex Tillerson, at an annual stockholders’ meeting in May of 2015, reiterated his position on climate change initiatives, saying that climate models that seek to predict the outcome of rising temperatures “just aren’t that good” and that Exxon “is wary of making efforts to reduce emissions that may not work or that will be deemed unnecessary if the modeling is flawed.” (He should take another look at what his scientists predicted 30 years ago.)

This is a position Tillerson has taken since becoming CEO in 2006. Of the major oil companies in the World, only Exxon and Chevron appear to still take this position.

Corporate Responsibility: The Moral Imperative – Do the Right Thing

There is a long history of corporate giants abusing their iconic roles in society and their  political clout.

Cigarette. (Photo Credit: Pixabay)

Cigarette. (Photo Credit: Pixabay)

The tobacco industry knew about the harmful health effects of their product as early as the 1950s, yet they continued to deny this connection, covering up their own research for 40 years. Congressional hearings and lawsuits in the 1990s uncovered internal documents of tobacco industry scientists acknowledging the dangers of their product. For decades, false advertising, obfuscation and lobbying Congress protected them from regulation.

The dangers of working in the coal mines have been well known for a century. What – until the 1950s – received little public scrutiny was the harmful nature of the emissions from coal-fired power plants. Strong lobbying and political clout protected them from meaningful regulation for years. It was only with the passage of the Clean Air Act in 1967 that Congress acknowledged the need for pollution regulation, but it wasn’t until amendments passed in 1990 that they actually addressed such issues as acid rain, ozone depletion and toxic air pollution caused by stationary power plants. The coal industry had long been aware of the harmful effects of their greenhouse gas emissions.

Other corporate moral compass failures have become iconic. Enron knowingly and illegally manipulating the power trading markets; the Savings and Loan crisis of the 1980s and 1990s, when bankers, corporate CEOs, and Wall Streeters actually received jail time; GM’s failure to inform the public of its faulty ignition switches when it had knowledge of it; and the recent subprime banking scandal which nearly took down the world financial system; all seem to have their roots in greed and the consistent failure to “do the right thing.”

Arthur Andersen witnesses testify at the Subcommittee on Oversight and Investigations in January 2002. (Source: US Government)

Arthur Andersen witnesses testify at the Subcommittee on Oversight and Investigations in January 2002. (Source: US Government)

The most recent morally-questionable corporate action belongs to Valeant Pharmaceuticals, which recently raised its name brand drug prices by an average of 66 percent (five times the industry average), and upon their purchase of Turing Pharmaceuticals in August of 2015,  raised the prices of some of its lifesaving drugs in excess of 500 percent.

Legal or Illegal, That Is Not the Question

The actions of these cited industries should make us reflect on the existential question of corporate ethics. Should a person or (thanks to the Supreme Court’s ruling in Citizens United) corporation be governed solely by whether something is legal or illegal, or should they be expected to transcend this rational and evaluate their actions based upon whether it is morally “right or wrong?” I believe that if you ask any individual on the street, the vast majority will opt for moral obligation. Unfortunately, too many corporations have chosen the latter, oftentimes citing the argument that they have to base their decisions on what is best for their shareholders (with the caveat, as long as it is not illegal). The answer to this question  may in fact be the litmus test of whether or not a corporation should enjoy the benefits of free speech given them under the Citizens United ruling.

Charles Keating mugshot.

Charles Keating mugshot.

Did Exxon have a legal responsibility to disclose their scientific findings on the dangers posed by the burning of fossil fuel? Or was there simply a moral obligation to disclose, based upon what their scientific research was indicating? Was Exxon simply exercising its free speech when it chose to deny the use of its product had an adverse impact on climate change?

Two U.S. congressmen have called on the Department of Justice to investigate whether Exxon violated the law by “failing to disclose truthful information” regarding what it knew about its activities and climate change. It may be an interesting investigation to follow. Based upon tort law, did Exxon have a duty to warn? Under tort law, a party may be held liable for injuries caused to another, where the party had the opportunity to warn the other of a hazard and failed to do so. Manufacturers of hazardous products have a duty to warn customers of a product’s potential dangers and to advise users of any precautions they should take to avoid the danger, something the tobacco industry obviously failed to do.

But this argument ignores the most basic question. It is obvious VW violated not just a moral obligation, but the letter of the law and its legal obligations. The question becomes, did Exxon have a moral obligation to warn the public of the potential dangers its activities presented to the public? The Pontiff’s recent encyclical on the environment may hopefully become the operation manual for corporations when determining their actions relating to the environment. It might save them some legal fees down the line.

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One Response

  1. Margaret Casely-Hayford says:

    Absolutely right. The VW activity appears to have been carried out without regard to the fact that it could have brought down a long established brand, putting in jeopardy the jobs of many employees, and other businesses e.g. of the many retailers who transact with the company, in addition to the adverse impact on the environment that the concealed emissions have continued to have on the environment. These are all relevant considerations. So much so that in the UK, at least, consideration of these additional interests is no longer left to chance.

    Hence, it’s enshrined in UK legislation by s.172 Companies Act 2006 that the director’s duty to promote the success of the company is sufficiently wide as to require proper consideration of how decisions would impact on more than just the shareholders. The relevant section reminds us that

    (1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—

    (a)the likely consequences of any decision in the long term,

    (b)the interests of the company’s employees,

    (c)the need to foster the company’s business relationships with suppliers, customers and others,

    (d)the impact of the company’s operations on the community and the environment,

    (e)the desirability of the company maintaining a reputation for high standards of business conduct, and

    (f)the need to act fairly as between members of the company.

    The activities of VW were clearly wanting in so many ways. A number of directors need to ask themselves some hard questions.

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