Where Were GM's Ethics?

The company is doing many things right in the wake of a recall, but why did it take so long?

The Associated Press

Poor corporate decision-making is to blame for GM's costly slip-up.

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Possibly the shrillest warning alarm to outside observers that your company is in an existential crisis is when you decide it is time to hire Ken Feinberg. Hiring the renowned victim compensation specialist was the biggest news out of General Motors CEO Mary Barra’s testimony before a House subcommittee Tuesday. It was also an indicator that GM is capable of making some right steps in the wake of crisis that may have contributed to the deaths of a dozen or more people and led to a recall of millions of cars.

Were it not for the fact that it has apparently taken years for GM to act, the company is doing many things right from a crisis management perspective. The biggest question, however, is what led to this situation and why it has taken so long for the company to act.

Here is what Barra and her leadership team at GM are doing right:

  • The night before she testified to Congress, Barra met in person with members of 15 families of people who died in car accidents involving GM cars that are now being recalled. The meeting reportedly came at the invitation of the families’ attorney. Given the pending litigation, it was a high-risk meeting that must have given GM’s attorneys nightmares. But it was absolutely the right call from a human perspective.
  • Barra has unequivocally expressed sorrow and sympathy. Too often in situations involving a high potential for litigation, legal counsel will insist that executives qualify their expressions of sadness and regret for fear they will say something that hurts the company (and its shareholders) in court. Such qualifiers always diminish – if not destroy – the sincerity of such apologies.
  • She has expressed dismay and anger at the corporate decision-making that may have resulted in the decision to accept apparently substandard ignition switches and that kept the problem from being corrected much earlier. GM has resolved to understand how it happened by establishing a respected outside investigator, Jenner & Block LLP Chairman Anton Valukas, to lead an internal probe.
  • She gave Congress its pound of flesh by agreeing to testify before House and Senate panels and to not strike a confrontational tone, but also adroitly sidestepping some of the traps grandstanding members laid for her.

[Read blogger Susan Milligan on GM's recall debacle.]

I need to note that U.S. Rep. Tim Murphy, R-Pa., didn’t do himself or Congress any favors yesterday when he made the ill-advised decision to use one of late film actor Strother Martin’s most famous lines and say, “What we have here is a failure to communicate.” This is a serious issue. If you want people to take you and the institution of Congress seriously, try channeling John Quincy Adams next time.

To the larger issue of how GM got into this position and why it took so long to act, that will be the subject of much litigation and investigating for years to come. Right now, it looks an awful lot like the famously bad corporate decision-making that led to the Ford Pinto case in the 1970s. The Pinto was a compact car that became notorious for the location of its gas tank, which could leak fuel in rear-end collisions and burst into flames. More than two dozen people were killed or injured in accidents before the company corrected the problem. Even though engineers had discovered the problem and had fixes that could be implemented for $11 per car, the company used an accepted business school approach that concluded the costs from deaths and injuries resulting from the design flaw were cheaper than fixing the problem.

Business psychologists use this case as an example of how managers can become blind to the morality of some of their decisions. Cognitive biases can distort ethical thinking and result in a situation the author Professor Ann Tenbrunsel calls “ethical fading.” It’s a condition that arises when decision-makers fail to recognize the moral and ethical components of their decisions.

[See a collection of political cartoons on Congress.]

Tenbrunsel and her colleagues have concluded that we as a species are not nearly as ethical as we think we are. Some people will say ethics and morals are not things that can be taught. On the contrary, ethical decision-making requires deliberate thought and discipline.

I’ll bet GM managers from first level leaders through senior management will be getting a heavy dose of ethical decision-making seminars in the months ahead. And this would be a good time for leaders of organizations that aren’t in the midst of crises to take a good hard look at how they are making decisions and whether ethics are playing as important a role as they ought to be.