Bad decisions rarely start big. Lies, for example, typically start small. But the success rate of white lies encourages bigger and more elaborate lies that eventually escalate out of control. And as we all know, what goes up must come down, so when a serial liar gets caught, he comes down hard. This same logic applies to companies that pull a Bernie Madoff on their consumers into pouring money into faulty products and investments.
It’s interesting to consider why the already massively wealthy and established CEO of a company like Volkswagen would cheat just to watch his empire’s reputation crumble. With all of his millions and a #58 spot on Forbes’ list of “The World’s Most Powerful People,” Martin Winterkorn, former CEO of Volkswagen, has made misguided decisions that must have been based on more than greed.
Here’s what happened: last year, a lab in West Virginia discovered “defeat devices” cleverly installed in diesel-running Volkswagens that caused them to emit 40 times less-polluting exhaust during EPA-conducted emissions tests, but not on the road, where they puke out the rest of the harmful fumes. As a result, Volkswagen and all of its executives are under an international investigation that has destroyed the brand’s reputation as trustworthy and family-friendly. The individuals involved in intentionally programming cars to violate the Clean Air Act will not only suffer the same reputation-destruction of the brand, but will also face jail time for any combination of conspiracy, fraud and false statements.
Another massive corporate scandal executed by a deluded CEO was that of Enron, the American energy company that declared bankruptcy in 2001. Simply put, the CEO, Jeffrey Skilling, price-fixed the cost of energy during an energy crisis in California. Enron, California’s former principal electricity supplier manipulated the energy market and shut down pipelines until Californians paid their set price for electricity. After being tried for a laundry list of financial crimes, Skilling was sentenced to 24 years in prison. That’s a pretty far fall from a CEO’s office in uptown Dallas.
The whole scandal makes me wonder what would make a Harvard Business School graduate get involved in such a dicey operation. I mean, Skilling didn’t just cheat like Winterkorn; he screwed over the country’s biggest state just to turn a profit. Can we really blame him, though? Imagine doing something illegal, getting away with it and making millions of dollars in return. In hindsight he should have shied away from massively illegal corporate activity, but turning down success in the face of morality is probably easier said than done.
On the flip side, though, it’s remarkable that no one from the company’s inner circle of highly powerful businesspeople stepped back to question this scheme or at least consider what to do if they got caught. It’s unlikely that any of them were okay with filing a chapter 11 bankruptcy that would ultimately destroy the company and bring them all down with it.
Thirdly, Credit Suisse, a Switzerland-based financial services holding company, pleaded guilty to a royal screw-up that they will be dealing with for the next several decades. Basically, Switzerland’s hallmark offerings to the world are its delicious chocolate and banking secrecy, so when the United States accused Credit Suisse of assisting Americans evade taxes, Switzerland didn’t really care to respond, because they probably figured that, after all, they are Swiss — hiding money is their mantra. That is, however, until the U.S. government decided to go after the suspected Americans for tax evasion, informing them that they could carry on hiding their money in Switzerland, but if they got caught, they would go to jail.
The alternative — paying a fine and continuing to live their lives outside of a federal prison — seemed much more appealing. So they cracked and spilled their Swiss secrets. The government also threw a hefty threat at Credit Suisse, saying that if the bank doesn’t cooperate, the United States will lock it out of the American banking system, which is something, the bank cannot afford to do. Enter the $2.5 billion fine they agreed to pay in order to keep doing business with the United States. Although this scandal is harder to pin on any specific individual, CEO Brady Dougan and several executives decided to respectfully resign.
Although I’m no expert on criminal thought processes, I have to imagine that none of these executives started their jobs and thought, “I am going to be a mastermind criminal and deceive the entire world.” But success, especially financial success, is intoxicating and like any other drug, can minimize the importance of judgment in making serious decisions.
So the question remains: why do people in power, with so much promise and potential, lie? Perhaps they are after money, but that seems unlikely since they could already fill an Olympic-sized pool with hundred dollar bills and then cannon ball into it from a gold diving board. Perhaps it’s power, but that also doesn’t quite fit since they are all CEOs of the world’s largest companies. It’s a question only the liars and cheaters can answer, but they probably lose sight of reality when their schemes are successfully in play, which convinces them that they are invincible. But the honest truth is that wealth and power don’t make people untouchable. Clearly, Biggie Smalls had it right all along when he said, “Mo Money Mo Problems,” because no one makes millions and then decides to live a more modest and moral life.
Jessica Cherner is a College senior from Bethesda, Maryland.
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