How to dodge more corporate scandals like 7-Eleven, VW and ExxonMobil

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Professor Carl Rhodes draws on recent corporate scandals involving 7-Eleven, VW and ExxonMobil and argues that business ethics is far too important to be left in the hands of business.

THE ETHICS of corporations have been a dominant feature of public discussion over the past few months. At the end of August ABC’s Four Corners revealed how 7-Eleven stores had been systematically exploiting workers. The scam meant employees were working as many as twice the hours they were paid for.  

On 18 September, the United States Environmental Protection Agency issued a notice accusing Volkswagen of cheating on emission tests. It was later revealed that this had gone on for seven years and that eleven million vehicles had been rigged.

If that’s not enough Martin Shkreli, CEO of Turing Pharmaceuticals, feathered his nest with a 5,000 per cent increase in the price of a drug used to treat infections associated with HIV and AIDS. We also found out that the ExxonMobil Corporation had known for decades that fossil fuels were causing global warming. All that time they denied and obscured the truth so as not to damage their business interests.

These events have caused massive consternation around the world. How could corporations get away with such well-orchestrated and deliberate deceit, fraud, law breaking, exploitation, and crass profiteering?

The common answer is that there has been a failure in business ethics. We are told software engineers at VW would have benefited from a code of ethics, and that 7-Eleven is trying to solve its problems by offering incentives for ethical conduct. Shkreli’s price gouging is decried as morally wrong, and ExxonMobil has been labelled evil and greedy.

The revelations of September 2015 show clearly that corporations are capable of pursuing their own business interests with scant concern of their deleterious social, environmental or personal consequences. Can we still believe that corporations like these can be expected to become ethical? Should we imagine businesses, of their own volition and out of the goodness of their corporate hearts will become dedicated to the wellbeing of others?

The general discourse of business ethics is about corporate self-regulation, coupled with the types of practices and policies that businesses can themselves put in place to ensure their own righteousness … or at least the appearance of it. This approach is entirely misguided. 

Business ethics should be about corporations being held to account for their behaviour and the effects of their actions. What September’s events show is that corporations cannot be expected take on this responsibility. Quite the contrary, they are entirely capable of actively trying to avoid any duties that are beyond their commercial self-interest.

Business ethics is the responsibility of society not of business. Corporations are chartered by society through law. Ultimately, they are responsible to the societies which have given them license to exist. It is up to society to take charge for business ethics.

September’s scandals are best seen as a triumph for business ethics. A triumph because they exemplify how the people and institutions that make up democratic society are successfully able to hold corporations to account when they behave in ways that are widely regarded as morally reprehensible.

Let us not forget that Volkswagen emissions cheating was initially discovered by a clean air NGO working with University based Scientists. The 7-Eleven wage scam was uncovered by investigative TV journalists. 

Turing’s price gouging was revealed by medical specialists and their professional associations and went viral on social media. ExxonMobil’s two-faced climate denying was exposed by investigations by the Los Angeles Times and the independent non-profit news organisation Inside Climate News

While the actions of the corporations were reprehensible, the fact that they were caught and brought to justice is a victory of democracy and a victory for civil society. Each of these corporations is now paying the price for its actions. 

At VW, the CEO has resigned, the cost of the scandal is budgeted for at least 6.5 billion Euros and the very future of the world’s largest car manufacturer is in question.

On a smaller scale, 7-Eleven has seen a clean-out of senior executives, a new wages bills being introduced to parliament and individual store owners facing legal action. 

Meanwhile, Martin Shkreli has been dubbed the “most hated man in America”, and ExxonMobil is looking down the barrel of a possible federal inquiry. 

What we can learn from all of this is that business ethics is far too important to be left in the hands of business. What is required is an active and vigilant democracy that will work steadfastly to ensure that businesses are held to account and take responsibility for what they do.   

The events of September showed us just how this can be done. 

If we want ethics we need more scandals. 

Carl Rhodes is Professor of Management and Organizations Studies, Macquarie University Faculty of Business and Economics, Sydney. 

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