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Corporate Scandals – Time to Face the FACTS

Will corporate scandals ever end? Do a few bad apples cause the scandals that fill our headlines or is the barrel rotten? What do we do if it is down to individuals or the system as a whole?

US corporate scandals dogged the early 2000s, with Enron, Tyco, and WorldCom (see infographic). More recently scandals plagued the global economy particularly in the banking sector since the financial crash. Here are some 2013 news stories:

  • KPMG resigned as the auditor of Herbalife after one of its senior partners engaged in insider trading in Herbalife stock. The Guardian 10 April 2013.
  • Pope Francis on Thursday strengthened monitoring of the Vatican bank to prevent money laundering or the financing of terrorism as part of his campaign to clean it up after decades of scandal. The Telegraph by Reuters 8 August 2013.
  • More than 20 City workers face being investigated in relation to the alleged conspiracy to fix the Libor interest rate. The Telegraph 21 October 2013.
  • Police have arrested Paul Flowers, the former chairman of the Co-operative Bank who is at the centre of a drugs, expenses and impropriety scandal that has plunged the group into crisis. The Guardian 22 Nov.
  • RBS has been accused by government adviser Lawrence Tomlinson of pushing struggling small firms into its “turnaround” unit, so it could charge higher fees and interest, and take control of their assets. The Telegraph 27 November 2013

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These are just a few examples, there are many more. So what is causing these scandals? One reason is that personal interests outweigh the interests of the system as a whole. Individuals seek to maximise their own needs, not considering the knock on effects and long term consequences. This has been, and still is reinforced by personal bonuses. Andrew Rawnsley in The Observer newspaper said on 24 November 2013, “City bonuses are still structured in a way that rewards and incentivises short-term risk-taking. The law lacks serious penalties for reckless or fraudulent trading.”

Here’s another quote about corporate scandals: “Let me set the context by using my “apples and barrel” metaphor. We have seen many attempts to explain what happened, and they fall into two broad classes. One puts primary responsibility on a few bad apples and sees the solution as catching them, prosecuting them, putting them in jail, fining them—whatever is appropriate. That’s one pole of the continuum. At the other pole, you have people who really believe there’s something extremely wrong with the barrel. Thus it’s not just a matter of a few bad apples; what we really need is a wholesale revamping of the systems of governance and the web of laws and regulations.” What is interesting is that these remarks were made by the Harvard Business School Dean Kim B. Clark on February 26 2003! Ten years on, what has changed?

So what can we do? Do we just accept that these things happen and wait for the next scandal, or do we try to make a change? I’m reminded of the famous quote by Margaret Mead: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”

We can all play a role; we can change the system one conversation at a time. We can challenge the status quo, we can speak our truth, we can say that the Emperor has no clothes, and we can deal with the ‘elephant in the room’. We can provide feedback on the organisational system. This takes courage and conviction. As coaches we work with coachees to raise their awareness. We can specifically raise awareness relating to the interconnectivity of our lives and the system we inhabit. Through awareness comes action and change. As John Whitmore said “coaching is bigger than coaching”. How true, let’s set the example and change the world.

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