Companies should recognize the need to keep their customers’ trust if they’re to survive in the dog-eat-dog business world.
But when enlightened self-interest and professional ethics aren’t enough to keep businesspeople in line, criminal charges may do the trick.
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That’s the big takeaway from the U.S. Justice Department’s decision to file charges against Martin Winterkorn, former CEO of Volkswagen, in connection with the automaker’s diesel emissions cheating scandal.
CEOs must lead by example and accept responsibility for the actions of the people below them. That’s why they get the huge salaries and other perks. If Mr. Winterkorn played any role in the widespread fudging of emissions data or allowed malfeasance to take root in Volkswagen’s corporate culture, he should pay the price. The charges also should help to correct any residual misconduct at Volkswagen — is everyone toeing the line at this point? — and sound alarm bells at any company doing shady things.
Federal and state authorities may seek civil and criminal penalties when companies stray, but they don’t go the latter route often enough. Dozens of states’ attorneys general are investigating drugmakers and distributors in connection with the opioid epidemic. No findings have been announced. However, if drug company executives flooded communities with highly addictive opioids, knowing the risk they were creating, they should be hauled into criminal court in manacles. If convicted, they should share prison cells with some of those whose lives were ruined by addiction.
The get-tough approach should apply to many other business fields. Amid the 2008 financial crisis, the federal government bailed out overextended financial institutions deemed “too big to fail.” The corollary for wayward executives should be, “Never too big to jail.” When executives encourage or fail to prevent the cheating of customers, the only difference between them and the convenience store robber is a mask.
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Federal regulators last month fined Wells Fargo $1 billion because it improperly charged extra fees to customers with mortgages and billed auto loan customers for unnecessary and unwanted insurance policies. In thousands of cases, it repossessed vehicles when customers failed to pay for the insurance. This is the same Wells Fargo previously fined $185 million for opening credit card accounts for customers without their consent and charging fees on those accounts.
While a $1 billion fine sounds like a lot to average folk, it isn’t to Wells Fargo, which issued a bland statement expressing a desire to do better for its customers. If a criminal case also can be made against the company, authorities should pursue it. Loss of liberty, not money, is the biggest attention-grabber of all.
First Published May 23, 2018, 9:45 p.m.
