6 Lessons in Corporate Ethics From the GM Recall

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.

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.

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. 

More business ethics tips

In addition to the lessons outlined above, these best practices can help you solidify your ethical corporate culture:

• Get employee buy-in on your code of ethics. Employees who are actively involved in establishing their company’s ethical code are more likely to act ethically. When ethical dictates are delivered in a top-down manner, employees tend to regard executives as out of touch with the issues employees face daily — largely because they usually are. Top management can’t know all the issues employees face, making employee input crucial.
• Continually revisit the ethics code. If you have an established ethics policy, don’t assume your work is done. You must present it to new hires during employee onboarding, as well as to vendors and partners. Ask employees to reexamine your code at least yearly, ask for their input, and ensure everything is relevant. Even if there are no changes, revisiting your code reminds everyone of their commitment to act as responsible employees and partners.
• Promote community involvement. Organizations should empower their communities via local activities and work to make a positive impact in the world. Raise money for local causes, and establish volunteer programs for employees. Supporting a charity and donating to worthy causes can go a long way in building relationships with the local community. If your business makes a mistake and owns up to it, the goodwill you’ve established will help the community continue to trust you.