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« Andy Spalding on soccer and social change: It’s not about the sport | Main | Kenya arrests two Chinese construction company executives for bribery »
Monday
Sep282015

VW aftermath: Message about Compliance 2.0 is finally a no-brainer

The chief of Volkswagen USA admitted the company screwed up, and the global CEO has resigned. Prosecutors and regulators, along with aggrieved buyers of its diesel vehicles, are lining up for retribution and justice.

It's now clear, as the New York Times said, that the "VW scandal is shaping up to be one of the great corporate scandals of the age."

Siemens in 2008, Walmart in 2012, GM, the banks, and now VW -- the parade of screw ups on a global scale seems without end. So here's the question: Why did those companies and organizations think they could operate without the right tools to prevent massive compliance failures?

Law firms, consultants and pundits will have their say. But it's the Compliance 2.0 community that can best diagnose what went wrong at a good company like VW. We can also explain why similar screw ups are going to happen at other good companies.

Compliance failures happen when you build and run a big complex company without a first class compliance system. VW’s compliance system must have been defective for a long time and through those gaps, the risks poured in.

Business is a jungle filled with pressures and temptations. It's always a struggle to maintain business integrity. A screw up is a lapse in integrity -- despite a good work ethic and decent attitudes.

VW is not a rotten, irresponsible company. It's a good company that was running without a Compliance 2.0 system. 

For example, what happened at VW to internal whistle blowers? The media has not reported any at VW. How can that be true? Production and engineering of the cars took years. Among over 250,000 engineers and employees, there must have been many who knew about the “defeat devices,” an open secret at VW and the whole industry.

Every major business scandal has “smoke before the fire,” and whistleblowers. In companies that screwed up, the whistleblowers were ignored or suppressed. Indeed, without a Compliance 2.0 system, it's too easy to bottle up and silence entire compliance departments.

The compliance world can do better than join the general chatter about the mess at VW. It can be on message about why Compliance 2.0 is absolutely crucial for today's giant, complex companies.

We need to convince business leaders that compliance is a business system every organization, including theirs, must have. With so many examples of screw ups to pick from -- and the new, tough message from the Yates Memo about individual responsibility -- we have plenty of tools to work with.

The compliance community has a powerful story to tell (again) after VW, and an obligation to stay on message until the message is heard.

________

Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.

Reader Comments (1)

With all due respect, I think it's far too early to talk about an aftermath and to conclude that "VW just needs a modern compliance program". In fact, VW Group did appoint a Chief Compliance Officer in 2011, reporting to the now resigned CEO. He has been building his organization and in 2014 also appointed a chief compliance officer at VW Automotive. Has anyone tried to get in touch with these people to hear about their compliance program and cultural challenges they faced? Were they asleep at the wheel, were they completely blind-sided, did they focus on other things (2005 scandal surrounding bribery of works council)? News reports are now coming in on a daily basis about whistleblowers deep within the organization who warned management about unethical or even illegal goings-on in the engine development department. Why were these whistleblowers ignored? Who did they report the issues to? It will be interesting to follow these developments in the next few days, weeks and months.
September 29, 2015 | Unregistered CommenterKraut
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