Bad Apples or a Bad Orchard?: Scandal and Corporate Culture

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6 min read

In the past year, we've seen ethical failures and the scandals that follow lead to the decline of many major companies. It was about a year ago that Susan Fowler, a former Uber engineer, posted a report on her blog that pulled back the shades on Uber's hyper-competitive, frat party-like office environment. Her details of rampant sexism and bureaucratic failures outraged many Uber customers. In response, instead of hailing a ride, customers used their phones to rally around hashtags like #antiuber and #DeleteUber, as thousands of them deleted their Uber accounts and moved to competitors like Lyft and Juno.

More recently, sexual misconduct allegations have forced Steve Wynn of Wynn Resorts to step down from his position as Chairman and CEO, losing any potential for severance pay. In the wake of his announcements, Wynn Resorts' shareholders have filed charges against the board of directors, claiming that the board knew the risks Wynn's alleged behavior put the company in, but failed to do anything about it.

And in February, we learned that a trio of German automakers ' BMW, VW and Daimler ' supported research that intentionally exposed humans and primates to exhaust fumes in order to help prove their diesel engines were, in fact, cleaner. Ironically, some of these engines were equipped with the fraudulent diesel exhaust kit that landed VW in so much legal and public relations trouble last year. While it is unclear how this latest revelation will affect these companies, the previous exhaust scandals cost Volkswagen somewhere in the neighborhood of $25 billion, not to mention drastically tarnishing its public image.

While company spokespeople will often try to minimize such scandals by placing blame on a few bad actors, what is clear in many cases is that something in the company's corporate culture has encouraged or allowed the problematic behaviors to exist. Writing for the Brookings Institute, Larry D. Thomson described corporate culture as, 'a web of attitudes and practices that tends to replicate and perpetuate itself beyond the tenure of any one individual manager.' If corporate reputation is the story outsiders are telling each other about your company, then corporate culture is the story insiders are telling themselves about the company. Framing this story is an important part of creating a productive, positive place for your company and employees. In the space below, we'll look at some key steps to building a positive corporate culture and consider what other companies have done to promote a negative one.

1. Codify Your Expectations

In 2007, the International Federation of Accountants conceived a working definition of a corporate code of conduct:

'Principles, values, standards, or rules of behaviour that guide the decisions, procedures and systems of an organization in a way that (a) contributes to the welfare of its key stakeholders, and (b) respects the rights of all constituents affected by its operations."

These documents may take many forms, including compliance codes, corporate credos or management philosophy statements.

  • Compliance Codes define required company or employee actions in relationship to ethical behavior.
  • Corporate Credos explain a company's accountability to its stakeholders.
  • Management Philosophy Statements outline the management's positions and required actions pertaining to business ethics.

Topics commonly covered by corporate codes of conduct include:

  • The company's commitments to its employees
  • Employee honesty expectations
  • Sexual harassment and discrimination policies
  • Product and workplace safety
  • Confidentiality of records
  • Policies relating to drug use

It is vital that these expectations be clearly articulated, readily available and consistent across the organization. When creating a code of conduct, it is important to articulate the values most important to the company and the expectations you have for your employees. It is common for HR to be involved in these discussions, but it is just as important to solicit feedback from current employees in order to understand what pressures or challenges they face during the execution of their jobs.

2. Start at the Top

Once the expectations for corporate culture have been clearly explained, it is imperative that the leaders ' from the CEO on down to group supervisors ' model positive behaviors for their employees. This modeling sets the tone for the employees to follow and tells them what is really important to the company. This starts with the actions and behaviors of the board of directors, who can demonstrate a pattern of acceptable and positive behaviors. If the board or upper management looks upon ethical standards with a wink and a nod, then employees will quickly come to understand that whatever codes of conduct they learned in orientation are just empty platitudes.

We can see this kind of disconnect in the alleged behaviors of Steve Wynn. He was more than the CEO of Wynn Resorts ' his name is on the buildings; his signature is the logo. Though the company may report their dedication to a harassment-free workplace and require its employees to go through sexual harassment training, Mr. Wynn's alleged harassment set the bar for behavior more than any company document could.

3. The Carrot and the Stick

This may seem like a pretty obvious directive, but many companies forget the need to reward good behavior. If those managers have ever raised a child, they should remember the power of positive reinforcement. By praising and rewarding the behaviors you value, you create an atmosphere more conducive to performing those behaviors. These rewards need not be solely in terms of promotions or salary increases. Recognition, awards and social reinforcements for desired ethical behaviors can help support your company's call for an ethical environment.

By contrast, in a study of the ethical breakdown that led to VW's emissions testing scandal, Luann Lynch writes:

The company's leadership set aggressive goals, and senior executives involved themselves in even minor decisions. Former employees described a workplace in which subordinates were afraid to admit failure or contradict superiors. Company leaders bullied employees. Pi?'ch bragged that he forced superior performance by 'terrifying his engineers.'

Clearly, this method of using the stick instead of the carrot did little to promote a sense of safety, competency or well-being. Instead, it may have pressured engineers to create false claims about their products and to rig the tests to support those claims.

4. Involve HR

The role of HR in the maintenance of an ethical corporate culture is many-fold. Through robust programs of orientation and ongoing employee training, HR can help make sure that employees know the actions expected of them, and what to do if they feel these expectations are not being met. HR should also serve as a safe place for employees to bring their concerns or challenges, whether those cases end up being full-blown ethics violations or not.

In the case of Uber, Susan Fowler's repeated consultations with HR proved fruitless. In that situation, it is clear that the HR department had abdicated its role as employee advocate and had instead taken on the position of defending the behaviors of top earners in the organization. This underscores the need for ethical standards to apply across the organization, not only at the employee level.


Cultures are meant to last. They are the outward behaviors of a collective of people; an understood way of being that is larger than any individual member. That said, cultures can be shaped and cultures can be changed, particularly in the corporate setting. By being aware of the type of culture your company embraces, you can help avoid the disastrous consequences of poor ethical choices and guide your company to further, lasting success.