The Worst Corporate Misconduct of 2020
Corporate misconduct continued in 2020. The litany of scandals reminds us that every executive and board must work to reduce the frequency of misconduct and the damage to it does to the lives of real people. Sadly, incidents in 2020 follow immediately on the commitment by 186 of America’s major CEOs that they would embrace a new responsibility to their stakeholders in a statement sponsored by the Business Roundtable.
When Marc Epstein and I completed the manuscript of our new book ROTTEN: Why Corporate Misconduct Continues and What to Do About It, in March, we included the first major scandal of 2020 in our 20 year record of misconduct—widespread bribery by Airbus Industries to sell planes around the world.
Here are my nominations for 2020’s most significant and troubling incidents of corporate misconduct:
Airbus Industries: Worldwide and longstanding pattern of bribery to sell aircraft.
Goldman Sachs: Knowing participation by Goldman executives in the 1MDB scandal in which more than $4 billion was stolen from Malaysian sovereign funds.
J & F Investments: M&A transactions neglect obvious ethical risks which result in extensive corruption and fraud at this Brazilian investment firm.
Deutsche Bank’s facilitation of Jeffrey Epstein and Donald Trump: The willful blindness of financial institutions to questionable behavior was highlighted this year by scrutiny of Deutsche Bank’s involvement with these two noted figures. The bank has already paid one fine of $150 million for lax oversight of Epstein.
Santander and TD Bank: For fraudulent and illegal banking practices that led to significant costs for customers. Each paid huge fines for their behavior; Santander for predatory loan practices that raised the costs of auto loans and TD Bank for unauthorized debit card and overdraft fees.
McDonald’s and “Bro Behavior”: Every time we think gross sexist behavior has been wiped out from companies, it once again emerges, usually involving high flying executives who think their business success insulates them from normal standards of behavior. The McDonald’s board was criticized for being slow to see this behavior and fire its CEO and other top executives who created it.
Applications for PPP Forgivable Loans by companies, law firms and other professional organizations that lied to state they really needed the loans: In addition, J.P. Morgan and Wells Fargo bank admitted hundreds of their employees had participated in a scheme to create fake employers and apply fraudulently for PPP loans.
Companies, though profitable, which laid off employees who would have few employment prospects during a national economic emergency.
In addition, several egregious past corporate scandals were revisited in 2020.
Boeing’s gross mismanagement of software upgrades to the 737 Max, which led to two tragic crashes, were dissected and chronicled in detail. Distrust of Boeing’s systems and motives delayed the plane’s return to service, which occurred just this final week of the year.
Wells Fargo, which fired more than 5,300 employees several years ago for creating false customer accounts to win bonuses, had to fire more than 100 more employees this year for creating fake employers in order to collect PPP forgivable loans. Many argue the culture of Wells Fargo is not yet “fixed.” This year Wells Fargo paid a $3 billion fine for the fake accounts scandal and a $500 million fine for misleading investors about company strategy.
Volkswagen struggled to change its workplace culture that tolerated and championed deceptive practices to meet diesel environmental standards using defeat devices. The company admitted its culture was particularly resistant to change. Two more executives were changed in criminal cases for the deception.
Takata air bags were again the news, as late in the year GM recalled an additional 7 million vehicles for replacement of the defective airbags. Honda had added more vehicles in January.
Executives at Blue Bell Creameries, where gross disregard for product quality led to a listeria outbreak several years ago, were the target of executive criminal indictments.
My next blogpost in early January will identify five corporate scandals likely to erupt in 2021!