Who is responsible for corporate misconduct? (2017)

“VW’s cheating was not the act of a single rogue engineer, but when scandals like this occur, where does the moral responsibility lie?”

Craig Smith, INSEAD Chaired Professor of Ethics and Social Responsibility, and Eric W. Orts, Wharton Professor of Legal Studies & Business Ethics 

INSEAD Knowledge, 7 April, 2017

VW may have taken a big step towards resolving its emissions scandal in the US with its recent guilty plea (at a cost of more than US$4.3 billion!), but its troubles in Europe are far from over. Luxembourg has launched criminal proceedings and more countries may follow…

It seems safe to assume that VW’s cheating was not the act of a single rogue engineer, but when scandals like this occur, where does the moral responsibility lie?

…holding corporations morally and legally responsible can encourage firms to create opaque organisations allowing individuals to act with impunity, effectively creating “a scapegoat which diverts legal responsibility from the executives, managers, and employees who have committed wrongful acts.”

…most scholars of business ethics agree that corporations should be doing more to create a culture where bad behaviour is neither condoned nor ignored, and where misdeeds are not covered up but are attributable to both individuals and organisational factors.

Better appreciation of moral responsibility in firms will allow managers to structure internal incentives, rules and policies to achieve the economic objectives of firms in an ethical manner. It will also help in providing an appropriate external legal framework to encourage good business conduct.
Access the full article here: Who is responsible for corporate misconduct?