The cancer of corporate cheating will kill capitalism
Jean-Pierre Lehmann on the Renault scandal
And now, it’s Renault! The French anti-fraud agency (DGCCRF) has accused the carmaker of having cheated on its emissions test data for the last twenty-five years. This brings Renault in line with Volkswagen which was also discovered to have engaged in comparable skull-duggery over a comparable period, as has been the case with many major automakers worldwide. But corporate cheating is a cancer by no means limited to the auto industry, but to be found across most sectors – notably also in finance.
One is so inured to the idea of corporate cheating that the news regarding Renault does not surprise. Par for the contemporary corporate ethical card, one might shrug! Still one is – or should be – deeply shocked and alarmed.
There is, among many contemptible things, the egregious hypocrisy leading to a monumental gap between the rhetoric of corporate CEOs and corporate practice. Imagine, for example, the proverbial Martian coming to planet earth and landing in Davos in time for the World Economic Forum Summit. There she would be enthralled by the superb sermons of the world’s admirals of industry speaking in highfalutin tones about their commitment to society, health, environment, education, poverty and so nauseatingly on. The Martian (who on earth goes by the name of Betsy) would return to Mars full of praise for the Earthlings and urge her fellow Martians to emigrate. (There is no ban for the moment on Martian immigrants, so long of course that they are not Muslim!)
A subsequent Martian fact-finding mission to Earth would uncover the huge chasm between words in the lofty heights of Davos and the grubby realities in the corporate world. Cheating is a corporate way of life.
Let me add and stress that of course, there are notable exceptions and many corporations do not engage in malfeasant cheating. Still there is far too much of it and the behavior of the cheaters casts a shadow over the entire corporate world, which, in turn, leads to a mammoth trust deficit. Corporate leaders are deemed to be liars.
As the adage has it: “The Trouble with Socialism Is Socialism; the Trouble with Capitalism is Capitalists”. In other words, the problem with socialism is inherent in the very system, its practices and underlying values. The “great” experiment behind the Berlin Wall went kaput over a quarter of a century ago.
The fall of the wall was meant to herald a great age of liberal capitalism. And look in fact where we are now: rise of populism, protectionism, racism and illiberalism. The depressingly alarming state of the world is not, of course, entirely due to corporate cheating, but it definitely has played an important part in undermining and weakening the institutions and ethos of the global political economy. The corporate ethical deficit has resulted in a massive social trust deficit, as revealed, among others, by the Edelman Trust Barometer. This is alarming as it harkens social disintegration.
To cure the cancer of corporate cheating one has to diagnose the causes. What drives this malady? Why does, for example, Alain, a Renault engineer, an upstanding member of society and a family man, who kisses his children at breakfast, leaves for work and then proceeds to jeopardize the health of his children (and children all over the world) by cheating on the emission tests? Does he have no conscience?
Among the causes of the corporate cheating cancer, I believe, is excessive materialism, short-termism myopia, the absence of a sense of citizenship, reflected in the egregious absence of a proper moral compass – as illustrated by the narrative of Alain above.
These are not easy causes to cure. Some (the cynics) will argue they are an integral part of capitalist corporate DNA. But we must try. We imperatively and urgently need an ethical reformation. There are roles here for civil society, the media, business schools and of course corporate executives. (I have not included politicians deliberately for at the moment they represent more the problem than the solution – e.g. look at the deplorable current French presidential election!)
An example from the media. The FT annual MBA rankings place as the highest criterion the increase that is obtained post-graduation in salary. (This is surprising from the FT whose editorial philosophy seems more attuned to a more humanistic capitalism.) This reflects, to paraphrase the quote attributed to Winston Churchill (“We make a living by what we get, but we make a life by what we give”), a great emphasis, even obsession, with “getting” as opposed to “giving”. It acts as a disincentive for business schools to encourage their students not only to do well, but also to do good. This should change.
Fortunately many ignore the disincentive and go off and do good anyway with, in the case of a number of my ex-MBA students, impressive and inspiring results.
Furthermore, business schools emphasize – indeed vaunt – “action-oriented learning”. This is far too much at the expense of “thinking-oriented learning”. The humanities – philosophy, history, anthropology, sociology – should be far more present in the learning experience.
But corporate executives also need to do far more themselves. Alain, if only for the sake of his children, should refuse pointblank to be accomplice to the unethical cheating that his management is demanding. There has to be an ethical revolt from below.
If we cannot achieve an ethical humanistic capitalism, we will see an acceleration of current trends leading us to anarchic mayhem, as dramatically experienced in the first half of the last century. As the philosopher George Santayana stated: “Those who cannot remember the past are condemned to repeat it.”
Jean-Pierre Lehmann is Emeritus Professor of International Political Economy at IMD and visiting professor at Hong Kong University.