Marianne Jennings, author of “The Seven Signs of Ethical Collapse,” has spoken at the Markkula Center about corporate scandals and how organizations that got in trouble displayed the symptoms she outlines in her book. She has kept a list of companies that have succumbed to ethical collapse, such as General Electric, Merrill Lynch, and AT&T. The common causes of ethical breaches include pressure to maintain numbers, fear and silence among employees, inexperienced leaders and a strong CEO, weak boards of directors, cultures of conflicts of interest, beliefs in being above the rules due to innovation, and the belief that goodness in some areas outweighs evil in others. Jennings emphasizes the importance of long-term thinking, open dialogue, anonymous reporting systems, and strong ethics programs to prevent moral meltdowns. Effective leadership and a strong ethical culture are crucial in avoiding corporate corruption.
| Signal | Change | 10y horizon | Driving force |
|---|---|---|---|
| Increase in corporate scandals | Increase in ethical collapses | More companies taking preventive measures | Pressure to maintain numbers, fear and silence, unethical culture |
| Pressure to maintain numbers | Emphasis on long-term sustainability | Companies focus on realistic expectations | Desire for high rates of return, short-term gain |
| Fear and silence | Encouragement of open dialogue | Companies reward whistleblowers and take swift action | Fear of repercussions, lack of trust in reporting systems |
| Young ‘uns and a bigger-than-life CEO | Increased questioning of CEOs | Inexperienced employees question iconic bosses | Lack of confidence, fear of challenging authority |
| Weak board of directors | Stronger, more experienced boards | Boards focus on conflicts and perks, manage by walking around | Inexperienced members, ethical conflicts of interest |
| Culture of conflicts | Transparency and disclosure of conflicts | Companies disclose conflicts or avoid them entirely | Human nature, desire to benefit self |
| Innovation like no other | Dependence on basics of business | Companies focus on low costs, high quality, and customer service | Arrogance, belief in immunity from economic cycles |
| Goodness in some areas atones for evil in others | Emphasis on simplicity and virtue ethics | Companies prioritize truth, honesty, fairness, and egalitarianism | Focus on social responsibility, balancing acts |
| Leadership and example matter | Emphasis on individual character and actions | Culture depends on individuals making ethical decisions | Individual actions, collective response, moral courage |