I learned about the car manufacturer Volkswagen cheating on diesel emissions a year or two ago. It wasn’t until now that I watched a wonderful documentary on the debacle, Alex Gibney’s expose featured on the Netflix series, Dirty Money. It was outlandishly bad corporate behavior. In this drama, however, the State and Federal authorities were the good guys. Here is my take on it, and a few quotations to channel my feelings about it.
I didn’t get the name of the individual interviewed on the Netflix trailer for the series, but his words are worth quoting anyway: “The system takes our best and brightest people, and they get paid outlandish sums to look the other way.” Indeed, that is a fair criticism of “the system.”
It is a long, twisty, amazing story this Volkswagen scandal. It is truly a scandal. It is cheating, subterfuge, obfuscation, and greed at the highest level. I suggest watching it; it only takes an hour. It will piss you off, however. As well, here is a good written summary.
In a paragraph, however, what happened was that Volkswagen was started in the time of Hitler, and he loved the company. It attempted to take some of the lessons learned from another racist, Henry Ford, and use that know-how to dominate car sales. The ’60s saw the Beetle and Bus sell amazingly, and they were decent cars. The 1980s were about the end of the once-successful company. Fast-forward to the early 2000s. Volkswagen had come back from the dead and wanted to be #1. They pulled out all the stops and engaged in an egregious scandal that went to the highest levels of corporate management. It had to do with pretending that the “clean diesel” emission system functioned well; however, harmful NOx emissions were an average of 40 (and up to 80) times what internal test results claimed. Volkswagen had to do a buy-back and face a stiff $15,000,000,000 in fines. At least one exec went to jail. They haven’t fully gotten the message, though (see this piece).
It was cheating, plain and simple. It reads like a gross recap of the Ford Pinto outrage (when Ford decided that it would rather take the lawsuits based on a faulty fuel tank rather than recall the cars because it would be cheaper to deal with the legal repercussions than to protect lives).
Here is a quote that pretty much sums up who knew what, when:
“A thorough explanation for the dramatic increase in NOx emissions cannot be given to the authorities. It can be assumed that the authorities will then investigate the Volkswagen systems to determine whether Volkswagen implemented a test detection system in the engine control unit software (so-called defeat device)….” (Frank Tuch)
It isn’t usually this egregious, but as we recently saw with Wells Fargo, or witnessed in the ENRON debacle, it recurs under lax corporate regulation. From Enrique Dans in Forbes:
“…[in the] vast majority of companies: a head of CSR [corporate social responsibility] is appointed, given an air of respectability, and runs a department the job of which is to keep the company’s image clean, despite the filth it is mired in, as is clearly the case with Volkswagen. Once again, we have allowed ourselves to be duped into believing that companies can and will regulate themselves, when of course the sordid reality is that as their actions show, beyond the occasional symbolic act, their sole objective is to maximize profit, and by any means.”
One interesting caveat: that California State authorities (the California Air Resources Board) and its leader, Dr. Ayala, Congress, researchers at the University of West Virginia, a European organization named JRC, and folks at the non-profit International Council for Clean Transportation.
Alberto Ayala, Ph.D., Executive Director of the government agency CARB, noted that: “[t]here was a lot of pressure that the company was putting on itself to be #1, and they wanted to get there at any cost.” Indeed, Volkswagen played a cat and mouse game with CARB, wasted resources, and obfuscation that lasted sixteen months. The design was so pernicious, it could have been invented by Hitler himself. Specifically, the engine software regulated its emissions when it was under testing conditions, and went to normal (i.e., polluting) when it was driving on the road. It’s just nauseatingly bad.
Frankly, the German accent that I would like to associate with intellectuals, representatives of Europe’s functional and more enlightened social democracies, and diplomats who counsel against American warmongering sounds more Naziesque when I watched the scenes of German executives dissembling, lying, and deceiving. 25-year veteran, Michael Horn, the CEO of Volkswagen of America: “Let’s be clear about this: our company was dishonest with the EPA and CARB and all of you, and in my German words, we have totally screwed up.”
Indeed you did, sir. NOx is peculiar to diesel engines, and when mixed with ozone in the atmosphere, becomes smog. I breathed it when I was growing up in a suburb of Los Angeles. I recall seeing an ugly haze between myself and the distant mountains, one that caused asthma and cancer. I had asthma when I was a child, and I distinctly recall that after a day of swimming in the pool in the summertime, my windpipe would be sore. I am not even kidding. The fact that a company would so volitionally and so diabolically cheat and allow the fouling of the world’s air is absolutely an outrage.
So, enough about how far below decent standards of corporate social responsibility Volkswagen sank. Suffice it to say, they did very bad things, knowingly, and attempted to play for time and throw off regulators, who were wearing the white hat in this scandal. Indeed, from what I can tell, Dr. Ayala and CARB deserve the highest praise; truly government doing what it is designed to do: protect precious resources – human and environmental.
What goes on when corporations do bad things? Corporations, ironically, are people, according to the U.S. Supreme Court’s rulings, and Citizens United shows how egregiously foolish that decision was. With that, Vallejo, and McCutcheon, the Court opened the floodgates to allow massive sums of money to influence Congress. Over $3,000,000,000 passed from corporations and wealthy individuals (and a couple more innocuous PACs) through lobbyists into the campaign coffers of American government officials in 2017. Sociologist Robert N. Bellah and his colleagues write this in Habits of the Heart:
“The courts in turn ruled in favor of treating the corporation as a private economic actor which could then for all intents and purposes compete as freely as individuals, but with the advantage of much greater economic resources and, as critics noted, with much less responsibility than that required of individuals.”
This is not a matter of small importance. What corporations do, as we know from watching Walmart, Amazon.com, and Facebook, the rest of the country necessarily responds to. We are intextricably tied to business in this, one of the most materialistic and greedy of nations. Rhodes Scholar and former Clinton Administration Secretary of Labor, Robert Reich speaks to this outsised effect on the American landscape:
“Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35.00 an hour in today’s dollars. By 2014, America’s largest employer was Walmart, and the average hourly wage of Walmart workers was $11.22.”
The VW incident is interesting because it appeared to have nothing to do with bribing American government officials. It was German, through and through, with apparently no complicity between the corporation and American regulators or Congressional representatives. Wow, that’s refreshing! As the equally-disturbing documentary Inside Job shows, dark-hearted special interests are much more influential on the U.S. government when it comes to the financial services industry (e.g., “banksters”).
“What makes the United States special in the history of nations is our commitment to the rule of law and our carefully constructed system of checks and balances. Our national distrust of concentrated power and our devotion to openness and democracy are what have led us as a people to consistently choose good over evil in our collective aspirations.”
One thing that goes on is that corporations have no legal requirement that they put any other interest above making money for shareholders. That is what they are designed to do. Robert C. Hinkley says: “Corporations are set up to make money. The corporate system has no conscience, no obligations of citizenship. In fact, it is encouraged to take advantage of the public interest.”
Mr. Hinkley is the originator of the Code for Corporate Citizenship, a 28-word proposal to amend the corporate law that will balance the duty of directors to pursue profits with a duty to protect five elements of the public interest: the environment, human rights, the public health and safety, the dignity of employees and the welfare of the communities in which the company operates. He has over 30 years of corporate experience. His code is, simply, as follows:
“A Director shall discharge the duties of the position of Director in good faith…but not at the expense of the environment, human rights, the public health or safety, the communities in which the corporation operates, or the dignity of its employees.”
He also said that “[t]he founding fathers were right with the legal system. It was our mistake to originate the corporate system without obligation to the public interest.” He’s got that right.
Have American corporations always been so unscrupulous, greedy, and irresponsible? Has the political system always been so weak and corruptible? How bad has it gotten, stateside? I am literally wondering, because I am only 43. I wasn’t even alive when Nixon was in office, let alone Teddy Roosevelt. David Callahan, Ph.D., founder of the public interest group DEMOS, puts it succinctly: “Money is a great way to incentivize people, but it can also lead to greed.” Ain’t that the truth.
I have some additional quotations you might be interested in reading, which helped me understand the nature and scope of the problem. I also interviewed Richard L. Grossman, of the Program on Law, Corporations, and Democracy HERE. On that page, you will also find a podcast about corporate citizenship.
Frankly, the quotations I have found read like an indictment of the American capitalistic system that ranks only slightly higher than institutionalized slavery, our #1 most egregious sin. It’s really rank. Here is what David Callahan says. It’s hard to believe it. “Enron broadcast its ethics code – Respect, Integrity, Community, Excellence (or RICE) – on everything from coffee mugs to T-shirts and workplace banners, while Kenneth Lay gave speeches at conferences on corporate ethics.”
If Rome was this corrupt, I can see why it fell. We are experiencing hard times, America. Philosopher Michael J. Sandel explains it thusly:
“When corporations use their power to extract tax reductions, zoning changes and environmental concessions from cities and states desperate for jobs, they disempower communities more profoundly than any federal mandate ever did. When the growing gap between rich and poor leads the affluent to flee public schools, public parks and public transportation for privileged enclaves, civic virtue becomes difficult to sustain, and the common good fades from view.”
“Both major parties have displayed a crude affinity for the interest of corporate power while deserting the majority of the people, especially the most vulnerable.”
“The reality is that the men and women who control corporations dominate the nation’s elections, law-making, jurisprudence, and education.”
“During the post-World War II era fifty-three years ago, a pro-business Congress passed the Taft-Hartley Act in an effort to slow, if not stop, the growth of the American labor movement. The fondest dreams of its corporate sponsors are being realized today.”
“Certainly, many of the reforms needed to curb cheating will be harder to enact as long as the United States remains so deeply in the grips of laissez-faire ideology and market values continue to reign with such influence on our culture and our economy.”
“As you move up the class latter, you are more likely to violate the rules of the road, to lie, cheat, to take candy from kids, to shoplift, and to be tightfisted in giving to others. Straightforward economic analyses have trouble making sense of this pattern of results.”
“We live at a time when the dominant institutions of corporate capitalism have come under question, one in which a democratic socialist candidate came very close to becoming the nominee of the Democratic Party, and a time when millions of Americans sense that something is fundamentally wrong with the way the current system operates.”
“One reason there’s so much talk about global trade is that big corporations would like you to stop pushing so hard for things like higher wages, workplace safety, and a healthier environment. They want you to lower your sights and become more like a worker in the non-industrialized countries. The more they succeed at this, the more globally competitive they become. You, unfortunately, just become poorer, less healthy, and not even domestically competitive.”
“By the 1970s, large corporations like General Electric could make more profit playing games with money than they could by producing in the United States. You have to remember that General Electric is primarily a financial institution today; it makes half it profits just by moving money around in complicated ways, and it’s very unclear that they’re doing anything that’s of value to the economy.”
“The biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.”
“In order to achieve true sustainability for all life forms, we must put our primary needs of fresh air, clean water, and biological and cultural diversity above corporate profit.”
“Democracy must believe in freedom, but that freedom in my terminology is something different from what “freedom” has come to mean in this country in the age of Ronald Reagan and George Bush, Clarence Thomas, and David Duke. Freedom now means, unfortunately, the freedom of corporations to raise prices, the wealthy to evade taxes, or the freedom of the unemployed to dwell at the edge of starvation and desperation.”
“Corporations have 35,000 lobbyists in Washington and thousands more in state capitals that dole out corporate money to shape and write legislation.”
“Just as our founders understood the need for separation of church and state, we need to institutionalize the separation of corporations and the state.”
“You have corporations dumping all sorts of waste into our air and our water and our soil, and they’re getting away with it. From the standpoint of that particular company, doing so is efficient because it’s cheaper to do that than if they were to clean it up themselves. They are socializing their expenses while privatizing their profit. That’s efficient for them just like it might be efficient for me to steal your wallet, but neither is good for the whole.”
“They [the corporations] are counting on your patriotism to distract you from their plunder. They’re counting on you to stand at attention with your hand over your heart, pledging allegiance to the flag while they pick your pocket.”
“The roles of giant, transnational corporations and government have slowly reversed. Government is now more an instrument of such corporations than the corporations are instruments of government.”
“JC Penny, Victoria’s Secret, IBM, Toys R Us, and TWA are among the U.S. corporations that have profited by employing prisoners. Put together for long mandatory sentences for minor drug offenses, a strong racial bias, prisons run by corporations for profit, the sale of convict labor to corporations, and a charge for prison room and board and you have a modern system of bonded labor – a social condition otherwise known as slavery.”
“Financial reform? Forget it. Real healthcare reform? Not even close. According to a recent Bill Moyers report, JP Morgan’s CEO is on record saying that his ‘biggest initiative’ right now is lobbying Washington. $3.59 billion buys a lot of influence. The sad truth is this: the government we created to work for the common good – and the media we created to keep that government honest – have been bought and paid for by mega-corporations.”
“To appreciative American audiences, Mobil Corporation was for years better known as the sponsor of Masterpiece Theater than as the heartless exploiter of oil workers in the Middle East and elsewhere. Cornell, Johns Hopkins, Clark, Duke, Vanderbilt, Tulane, and Stanford are no longer ruthless tycoons but prestigious universities. And Carnegie is remembered not for the workers he starved and attacked, but for his Hall, his Institute, and his Endowment. The primary goal of capitalist cultural dominance is not to provide us with nice concerts and museums but to give capitalism’s exploitative reality a benign gloss and providential appearance so that people learn to accept and admire the “stewardship” of the owning class.”
“Today, children everywhere are deprived of exposure to nature in the same way; they grow up with their eyes, ears, tastes, and other senses trained on a corporate world of sensual virtual reality—removed, as no other generation in human history, from the daily flow and rhythm of nature.”
Give Volkswagen a big, black mark for this corporate malfeasance, and check out this blog if you want to read more criticism of capitalism.