July 13, 2024

Advancing Corporate Yields

Pioneering Business Success

Corporate Ethics Lessons From the 2014 GM Recall

The 2014 General Motors recall is a tragic example of ethical misconduct. GM allegedly knew about faulty ignition switches linked to 27 deaths and 25 serious injuries (with over 1,000 pending injury claims) for more than a decade. Yet it took a wrongful death suit forcing the release of internal documents to initiate a vehicle recall in February 2014. Understandably, the company suffered a public relations nightmare that cost more than $1 billion and seriously tarnished its brand.

Although your business may not have faced ethical dilemmas, you and your team can learn from the missteps of others. When you understand how you’d do things differently, you can create and implement your own code of ethics and code of conduct. 

Lessons in corporate ethics from the GM recall

GM’s misconduct isn’t the only instance of a corporate ethics breach, but it’s a prominent example. Why didn’t GM act responsibly or with basic common sense? Analysts point to a corporate culture afraid to pass along bad news. 

Learn from GM’s mistakes and take these steps to avoid the devastating human costs, reputational damage and financial repercussions of ethics failures at your business. 

1. Create and publish a corporate code of ethics.

What GM did wrong

GM’s corporate code of ethics went sideways. Initially, the company’s code of conduct was broken into several booklets addressing different aspects of the organization. In 2005, the newly hired global ethics and compliance director consolidated them into one 120-page document, which practically guaranteed that no one would read it, let alone use it as a behavior guide. 

How you can do better

To build an ethical business culture for your company, it’s important to create and publish a corporate code of ethics. There are two types of codes, usually combined into one document: 

  • Code of ethics: A code of ethics contains organizational values, statements of general guidelines, aspirations, and ideals.
  • Code of conduct: A code of conduct contains specific guidelines with a clear perspective for actions in specific circumstances.

For your code of ethics to truly become part of the fiber of your business, take these steps: 

  • Ensure everyone in the organization genuinely knows and follows the code. 
  • Require all employees to read and sign it. 
  • Where possible, break it down into small tasks.

A code of ethics and code of conduct shape your company culture, guide employee behavior, and protect your brand reputation from the consequences of dubious decisions.

2. Disclose problems immediately.

What GM did wrong

In the GM case, the ignition switch problem was discovered during a test drive of the Saturn Ion. The company later found that several other models had the same problem. 

At that point, the company should have halted production and told dealers and the public that it had identified a safety issue and was in the process of correcting the problem. Instead, it continued to produce the flawed ignition systems, leading to multiple deaths and serious injuries. It also incurred the expenses of recalling 800,000 vehicles and suffered a public relations black eye that would cause damage years into the future. 

How you can do better

If you or your team find a problem, such as a product liability issue or a problem with product quality, immediately tell your company and customers what happened and how you intend to fix it. Don’t wait for someone else to do it for you. 

Remember, if you found a problem, someone else has likely also encountered it or will soon discover it. The public will appreciate it if you openly address a problem instead of hiding it.

3. Address perceived unethical behavior right away.

What GM did wrong

When the problem at GM was discovered, executives decided to continue producing the vehicles to avoid higher production costs and a reduced profit margin. No one confronted these executives or examined their actions. Instead, production continued until accidents occurred and GM did an internal investigation. 

Even then, when it was clear what happened — and GM engineers recommended redesigning the keys — executives did nothing because they didn’t want to spend the money on the redesign.

How you can do better

If you believe something unethical is occurring, the next step is to hold a private meeting with all parties involved. Bring in your internal HR department or an objective third party to assess all viewpoints, consider what happened, and determine what should happen next. 

Forthcoming actions could range from correcting what was simply a mistake or oversight to firing an employee. It’s crucial to treat employees fairly, even if they’ve made a mistake or committed an ethics violation.

Your code of conduct should include regulatory and legal requirements, along with your company’s professional standards regarding punctuality, dress code, absenteeism and attendance policies.

4. Practice what you preach.

What GM did wrong

GM executives should have been the arbiters of ethics in the company. Instead, they disregarded the organization’s code of ethics and acted reprehensibly. There’s little point in having a code of ethics if you exempt yourself from the rules. 

How you can do better

Hold everyone to the same ethical standards. Everyone in your company must act ethically, regardless of their tenure, past contributions, performance reviews or position — even if they’re a family member. To run an ethical business, the entire company must promote ethics and act ethically, with no exceptions.

5. Enforce policies.

What GM did wrong

GM had quality and safety policies in place, but no one enforced them among the high-ranking executives involved. With no oversight, they continued making unethical decisions that led to devastating consequences for people and the business as a whole.

How you can do better

Not all employees will be keen to follow your policies. Do not tolerate unacceptable behavior. Ensure you have a disciplinary action policy that holds employees accountable. This will prevent the perpetuation of unsavory behaviors, nipping them in the bud.

Here are some tips for ensuring policy compliance:

  • Hire a compliance officer.
  • Avoid unnecessary rules.
  • Stay vigilant.
  • Use the appropriate communication channels.

6. Praise positive behavior.

What GM did wrong

At GM, the engineers recommended the correct course of action: redesigning the ignition key. However, these employees were ignored, and their ethical behavior went unrewarded. 

How you can do better

It’s essential to praise your employees for what they do right. Acknowledge the small tasks done correctly. This serves as positive reinforcement for those who may be tempted to go against the code of ethics. Positive employees are more productive, take great pride in their work, and accomplish more. 

Positive reinforcement is an excellent way to motivate employees. Other ways to keep employees excited and motivated include asking for their input, empowering them to make decisions, and actively listening to their concerns.