Corporate scandal exposed!! But insiders not feeling guilty?

Wrongdoing had become commonplace

So-called “corporate scandals,” social incidents happening in company organizations, are reported daily in the news.

However, corporate scandals can imply various types. Some companies might get caught up in personal behaviors such as defalcation and breach of trust, while for others it could be organizational wrongdoing such as collusion and false declaration of origin (fraudulent display). In any case, it could be said that scandals are cases in which behaviors that deviated from norms such as laws and socially accepted ideas were revealed in public.

When a wrongdoing whose agent is a relatively large organization is discovered, a press conference will be held, and managers will explain the situation and respond to the pursuit by the media. There, points such as the possible lack of ethical awareness among the management and employees seem to be particularly questioned.

However, can the background of all the wrongdoings be explained based on the good and evil dualism? It is actually not that simple.

In the case of scandals whose agents are organizations, we who are not the parties involved can understand very well how much the relevant behaviors are deviating from society. However, it is often the case that the people within the organization were not considering that the behavior itself was a “bad thing.”

In other words, they are cases where they were involved in wrongdoing as a group because the wrongdoing was commonplace in the organization.

Nowadays, various guidelines and systems related to corporate governance and corporate ethics are introduced to actual company sites. However, such preparations are insufficient. It is also necessary to think about efficacy in the case where it is difficult for the involved parties to recognize their deviations from the norms.

Instead of a secretive wrongdoing which is committed by a person or a few persons, when a wrongdoing is a so-called customary wrongdoing which is widely known and recognized in the organization, the involved people are following the organizational rules. Thus, we cannot simply call it deviant behavior. Therefore, it can be considered that merely introducing compliance systems to require agents to be normative cannot be effective in preventing wrongdoing.

These types of corporate scandals are often seen in wrongdoing such as skipping a part of a processes before shipping products and using different methods and procedures from the stipulated production and testing methods.

Wrongdoing issues in Japanese manufacturing are occurring frequently since the latter half of the 2010s. For example, there are the fuel economy fraud scandals of Mitsubishi Motors, etc. in 2016, the fraudulent testing of Kobe Steel in 2017, the fraudulent testing of Mitsubishi Electric in 2020, and the wrongdoing concerning a production procedure of a generic drug manufacturer in 2022. Almost every year such cases are found. Moreover, in the spring of 2023, the wrongdoing related to side collision tests for vehicles at Daihatsu Motor, a Toyota affiliated company, was just revealed.

Mechanism of normalizing wrongdoing at organizations

Strictly speaking, some examples of the above-mentioned wrongdoings were already ongoing for many years but were unearthed only recently. When we dig deeper into the problems, the start of the wrongdoing was more than 10 years ago, or in some cases, almost 30 years ago, and it is not unusual for people in charge to say “We do not know when the wrongdoing started.”

For instance, as for the fuel economy fraud issue of Mitsubishi Motors, which was discovered in 2016, in the experiment concerning fuel economy for their own products, they used a different method (Y) from the method (X) which was prescribed by national regulations for their measurement. Within the company, the conduct itself of measuring without using X is said to have started in 1990s at the latest.

According to the material by the special investigation committee, etc., in fact, before the problem became publicly known, there were multiple opportunities for the wrongdoings to have been discovered internally. Specifically, it is said that the leader of the group in charge of product development at that time, who was questioning the measurement using Y, had ordered the subordinates to verify the difference in running resistance between X and Y around 2000. In addition, a few years later, another person, who was a newcomer, by the suggestion of a superior, proposed that the company should use X complying with the regulations at a proposal presentation event by newcomers.

However, even after these events, the product development department continued to use the unofficial method Y, and they did not lead to the correction of the wrongdoing. This is one of the points that was criticized by the public.

On the other hand, according to the special investigation committee material, it was not that the internally raised voice was ignored, but because the difference between the methods X and Y was small (the level of error that can occur in the sampling inspection of completed vehicles), it was judged as “not problematic,” and therefore it was intentionally left untouched for many years.

Why was conduct which could never be permissible continued for several decades in an organization?

One of the causes is a structure in which once a wrongdoing becomes routine in an organization, it is difficult to stop it.

For better or worse, a job is something that becomes fixed. Without being especially conscious, our body remembers the path of daily commuting. Similarly, for our work, we start thinking less in repetitive actions. We call it an organizational routine. This enables tasks to be carried out efficiently.

However, when a wrong pattern of problem-solving action in an organization is repeated, people start thinking that that is the correct behavior and is permitted by the organization. Especially the testing task in manufacturing has characteristics of being conducted repetitively and for the long term. It also inherits past results, which have important meaning for a company. Thus, it is considered that they are in a situation where the wrongdoing is all the more susceptible to becoming routinized.

When the wrongdoing is repeated, such behavior will be established as an organizational rule, and will be prioritized over a general social norm, and then will go into the loop of becoming fixed and repeated again. It will become more and more difficult to change the rule that is only allowed within the organization (but deviating from the social norm).

Of course, even if the wrongdoing is routinized, it is unusual that not a single person noticed the anomaly, and sometimes there is a chance of discovery along the way. A person who is not yet socialized in an organization, such as a new graduate or a mid-career employee, a person from an external collaborating company, or an internal organization for which checking functions are granted, can observe an organization with fresh eyes.

However, companies which escalated the problem to a scandal do not seem to be taking advantage of those forces. For example, if a newcomer ran a risk to say something and such remark was completely dismissed, the person will not think further about expressing more opinions to improve the company.

Mistakes are unavoidable, but how do we recover from them?

Inherently, organizations have the ability to pass on their knowledge beyond individuals. However, unfortunately, this also applies to undesirable behaviors. Therefore, just because a small number of people were replaced in the regular change in personnel, newcomers will still follow the organizational rules by thinking “That is the way it is” and it does not lead to reversing a wrongdoing that has already developed a certain pattern. Thus, it will be established as a customary wrongdoing.

A customary wrongdoing implies another problem. That is the possibility to further deviate from the conduct that they have already been engaged in, and escalate the wrongdoing.

In fact, amid the overheated competition of fuel economy in Japanese small motor vehicle market, Mitsubishi Motors not only abandoned the measuring method established by the regulations, but also falsified data to achieve the fuel economy goal.

This suggests a problem that once a customary wrongdoing is left unhandled, as soon as there is pressure accompanying an organizational challenge such as excessive goal setting and increased competition, it is easy to step into further deviation.

For the involved parties, perhaps it was a rule within the organization and they did not expect any problems to arise. However, even if it was a very small deviation at the beginning, they will suddenly notice that the gap between it and society became so wide that it reached the point of no return.

On the other hand, when a corporate scandal becomes an issue of society and is criticized publicly, both the company and the public want to know who and what is to blame and start looking for a culprit. For sure, it is important to find out the root of the wrongdoing, and people tend to focus especially on whether there were instructions from the top management and the management class.

However, just like the above-mentioned fraudulent testing case, as for the wrongdoings which developed a certain pattern in an organization, it becomes difficult to locate where the responsibility lies. The issue of existence or non-existence of instructions is also not that simple. We can imagine the situation where a command is given to achieve a highly set goal by the management, and such pressure causes the wrongdoing. However, to establish an actual causal link is not so easy. Rather, we should think that just by looking at partial instruction links we cannot figure out the whole picture in the case where the wrongdoing became customary.

People tend to understand a complicated event by reorganizing it as an easily comprehensible story. However, from the perspective of organizational theory, within a company, many organizations, multiple people, and various tasks are lined up, and it is realized by the chain in each decision making. We cannot clarify the problem by focusing only on the final part where the wrongdoing was determined.

Why was it impossible to improve the mechanism? How could they have enabled the right behavior? Do they have a system where people can raise their voices without fear and can have proper discussions? There is always the possibility of wrongdoing in an organization. I think the importance lies not so much in eradicating mistakes as in how they can recover from mistakes that were made.

* The information contained herein is current as of December 2023.
* The contents of articles on Meiji.net are based on the personal ideas and opinions of the author and do not indicate the official opinion of Meiji University.
* I work to achieve SDGs related to the educational and research themes that I am currently engaged in.

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