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Take the medicine right away

Volkswagen scandal shows ethics can't just be words on paper

By Todd Humber

“We act with integrity and independence by holding ourselves and each other to be ethical and reliable in all we do. Believe me — no business deal is more important than that.”

Jim Smith, CEO of Thomson Reuters, wrote those words in the company’s Code of Business Conduct and Ethics. It’s a code every employee of Thomson Reuters, publishers of Canadian HR Reporter, must read and acknowledge.

I’ve personally seen the code of conduct cited to back up management decisions. And at Thomson Reuters, the code goes beyond general ethics statements and gets into very specific details. There are sections about discrimination and harassment, proper use of assets, conflicts of interest and records management — to name but a few.

Is it a guarantee the company’s 53,000 employees around the globe will act ethically at all times? That they will never act in an illegal or questionable manner? No. But having such a clear document cascaded throughout the organization goes a long way to sending a clear message about the types of behaviours that are considered acceptable and unacceptable.

Volkswagen has a similar document entitled Code of Conduct. It features Scrabble tiles on its cover that spell out the words “rules,” “follow” and “know.”

Upfront, it has the following statement: “Our products help to ensure that mobility is environmentally friendly, efficient and safe. In this context, the future obligates us to promote mobility in the interest of the common good, while doing justice to individual needs, ecological concerns and the economic requirements placed on a global enterprise.”

It’s hard to juxtapose that notion with the harsh reality at Volkswagen that has emerged over the last few weeks. According to the New York Times, the company used software that allowed its diesel-powered vehicles to cheat on emission tests. It started using the software in 2008 when it realized the new engines couldn’t meet pollution standards.

This appears to have been a conscious decision, made for financial reasons. Now, the embattled German automaker is facing the possibility of making very expensive repairs to as many as 11 million vehicles. And the damage done to the brand is even more extensive.

The potential fines are staggering. In the United States, the Environmental Protection Agency (EPA) has said the automaker could be hit with penalties as high as US$18 billion.

CEO Martin WInterkorn resigned last month over the scandal, and other executives have been suspended.

Given the fallout, there’s no doubt Volkswagen would have been far better off to suspend production and fix the emissions on the diesel engines. That too would have been a hugely expensive proposition, and heads would have rolled, but the damage would have been mitigated. And the message could have been spun in a positive way — “We won’t put cars on the road that don’t meet our standards.” Instead, the message is out of their hands and the company has a tremendous uphill battle to win back the confidence of its customers.

That’s the real lesson here for all organizations. That, no matter how bad the medicine may taste, it’s better to take it right away. It’s also why codes of conduct can’t just be words on paper. Managers at all levels, from the CEO right down to a front-line supervisor, have to live the words consistently and enforce the rules.

There is no small stuff to sweat when it comes to ethics. To borrow a few more pages from the Thomson Reuters code, here’s what it says about discrimination and harassment:

“Thomson Reuters has zero tolerance for unlawful discrimination or harassment, whether committed by an employee, supervisor, customer, vendor, supplier, consultant, visitor or any other person on Thomson Reuters premises or conducting Thomson Reuters business, regardless of location.”

It includes discrimination on the basis of race, colour, religion, age, sex/gender (including pregnancy), marital status, sexual orientation, gender identity or expression, national origin, citizenship status, disability, veteran status or any other classification protected by applicable laws or regulations.

That means an off-colour racist joke can’t go unchallenged. It means when someone makes a remark about immigrants, it has to be addressed.

It’s the “Broken Window Theory” applied to the workplace. That theory, developed in the early 1980s and made famous by the New York Police Department (NYPD) essentially states that by stopping minor crimes like vandalism, an atmosphere of law and order results. Therefore, more serious crimes are less likely to occur.

Whatever happened at Volkswagen, the culture clearly condoned such a massive error in judgement. And not only was it condoned, it was left unchecked for the better part of a decade. Having a code of conduct on its own didn’t stop the behaviour.

Perhaps it’s time for all organizations to dust off their copies and make sure all employees, at all levels, are actually living the words printed on the paper.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Todd Humber

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber
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