Wake-Up Call

An ethical crisis should be seen as an opportunity for introspection—to look deep into the flaws in the organisation’s culture—and setting it on the right path.

- José Hernandez

Why do good companies go bad? Why do corporate scandals happen so often? Is misconduct in business inevitable? And what can business leaders do about it? What can they do to save their companies when scandal strikes or, better yet, how can they spot the warning signs and avoid scandal in the first place?

With each passing year, it seems we are barraged with more and more stories of corporate ethical scandals. Recent examples include a global carmaker rigging their vehicles to cheat on emissions tests, a major bank illegally foisting accounts and credit cards on millions of customers without their knowledge or consent, and innumerable stories about sexual misconduct by powerful, entitled executives. And these are just a few high-profile cases—the tip of the iceberg for anyone who reads the business pages.

Companies faced with an ethical crisis— whether it has hit the headlines or not—often take a reactive approach focused more on PR and legal considerations than addressing the underlying cultural, structural, and strategic issues at play. While the desire to put a crisis behind you as quickly as possible is understandable, if you fail to address these underlying issues, then you leave the door open to the recurrence of serious misconduct and the reputational damage it inevitably brings. Instead, you should view a crisis as an opportunity—a catalyst to transform the way you do business and rebuild the trust and confidence of your stakeholders for the long term.