It’s Not Just GM

In its September 18 issue, Fortune magazine published a Geoff Colvin column under the title, “Mary Barra’s (unexpected) Opportunity.” In it Colvin laid out the GM faulty ignition case, then suggested that this was likely a big enough disaster that Barra could use it to accomplish what no GM CEO before her ever had — rehabilitate the corporate culture of America’s largest car company.

Mr. Colvin is a business journalist, but here he missed a major point: Large corporations are in fact bureaucracies; and to succeed in those entities one has to be a team player. Corporations always consider whistleblowers, insiders whose integrity compels them to do the right thing, a huge and immediate threat. Outside critics of any given corporation, on the other hand, often find themselves subjected to ridicule and worse.

This business situation is not new to GM. Sadly for us, it is also not new to many of America’s corporations.

GroupThink at Work

Not many readers will remember that, after Ralph Nader exposed legitimate automobile safety concerns back in the mid-60s, General Motors hired private investigators to dig up some dirt it could use to silence him.

But even fewer will remember that Nader didn’t target just the Chevy Corvair’s rear swing axle; he also alerted the driving public and the media to many automobile manufacturers’ mediocre to poor product safety engineering. Further, just as their predecessors knew that Nader was right 50 years ago, insiders at GM have known that they needed to improve the ignition switch in 2.6 million vehicles — and simply “committee’d” a decision to do nothing — for far too long.

But it’s not only GM, and it’s also not just manufacturers. Just last week, while the media focused on NFL’s scandal of the month, spousal and child abuse, PBS’s Frontline re-aired a documentary of the league’s concussion scandal — which had been going on for decades. The documentary spotlighted the NFL’s denial and its junk science rebuttal of scientific standards: Decrying the published and peer-reviewed studies’ findings that professional football players are often crippled for life, the NFL first created a faux medical team to dismiss the accusations. Then it went after the Pittsburgh coroner who had reported this serious medical pattern.

Greed and Government

Is the GM ignition problem more damaging than the new millennium’s Wall Street scandals? Those were so bad that BusinessWeek magazine headlined its May 12, 2002, cover story, “How Corrupt is Wall Street?” Corporate scandals from that period included those of WorldCom, Global Crossing, Adelphia Communications, Arthur Andersen, Tyco Ltd. and Enron — to name but a few. And yet that same kind of financial malfeasance completely collapsed our financial system just six years later.

Today’s GM case echoes what happened with that 2008 Wall Street meltdown. Reams of internal documents show that many critical Wall Street players knew full well that a major debt-equity problem was developing, and often they duly informed their superiors. And yet all of this was a widely kept secret from the public and regulators until disaster hit. No less an authority than Ben Bernanke, then head of the Federal Reserve, publicly stated that everything was great and there was no reason for public concern … just before the entire financial system imploded.

Certain oil companies wouldn’t stop advertising that their product protected one’s automobile engine from premature wear better than all others until the courts ordered them to. Government agencies had to order cereal manufacturers to quit overstating their products’ health benefits for children.

And we haven’t even touched on those inside the NSA long before Edward Snowden, such as NSA lifers William Binney and Thomas Drake, who exposed the questionable Constitutionality of spying on all Americans. But that’s the exact same problem our intelligence agencies were exposed for in the 70s — and the Congressional hearings back then led Congress to create such entities as our FISA court.

Built In: Human Nature

Even federal agencies aren’t blameless. When airbags finally made it into many vehicles back in the early 90s, it was discovered that their operation could be fatal for many individuals, including small children and short drivers, in the most minor of accidents. For the National Highway Transportation Safety Administration — the government watchdog for automotive safety that for decades had been promoting airbags as the ultimate safety device — this discovery wasn’t welcome news. So NHTSA quietly commissioned a study on airbags’ dangers in some circumstances from the University of North Carolina.

The results weren’t pretty. But did NHTSA ever publicly admit knowing that the first generation of the airbags it had demanded might be dangerous? No — but the media found out anyway. NHTSA was content to quietly let technology catch up to airbags, which then became what they should have been to start with.

The point is that NHTSA knew of serious issues with the first airbags and tried to keep it a secret.

Today you can pull down your car’s visor and see the mandatory warning that children should never be allowed to ride in the front seat. That’s NHTSA’s response to the fact that they blew it on the first generation of airbags.

The point is that it’s not just GM who has a “corporate culture” problem. And Mary Barra, no matter how capable a CEO she is, cannot hope to change the underlying problem.

On the Other Hand

The flip side of all of this is that American corporations accomplish much that’s good for all of us; and, dare I say it, so does our government. General Motors, for example, is building arguably the best vehicles in its corporate history. GM was the first American car company to put anti-lock brakes on all of its cars back in the 90s. Those devices have saved uncountable lives; but Chrysler, Ford and any other car company in the world can legitimately make a similar claim.

As for Wall Street? Whether it’s right, wrong or moot, investment banks fund the expansion of American corporations. Similarly, the NSA, NHTSA and other government entities do their best to ensure the safety of all Americans. But all of these entities and bureaucracies employ people, and sometimes people disappoint.

Someone makes a small mistake that wouldn’t take much to correct, then out of fear of being labeled a non-team player, lets it fester instead of fixing the problem. And the next thing you know, that hiccup becomes a major scandal, if not a disaster. Inevitably, the public focuses on that entity’s latest problem they tired to keep hidden from view; and all the incredible good that it has done is forgotten.

So What?

It’s both good and bad news that, apparently, nobody really cares about any of this anymore. Toyota’s sales were downright fantastic during the overblown exposé of their cars’ “unintended acceleration” problem — which turned out not to exist. Likewise, Ford experienced record volume sales for the Explorer during the Ford-Firestone media event over a decade ago. And GM’s sales have been just fine during its most recent problem.

The public doesn’t care about Edward Snowden or the NSA, either, as long as they get their new iPhone 6 quickly. Further, apparently, the majority of Americans are against the Dodd-Frank bill’s attempt to re-regulate Wall Street, despite the fact that $34.4 trillion of the world’s wealth disappeared just in the collapse’s first five months.

You see, a new CEO isn’t what can change corporate culture; even government regulations don’t seem to affect it much. No, only when the public reacts poorly to the issues are these entities terrified into doing the right thing.

As long as we don’t seem to care, they won’t either.