We now know VW lied about car emissions.
And not just lied, but knowingly lied. It even built the lie into its engine software design.
This wasn't just lying. This was industrial lying.
Systemic, wholesale, organised, and therefore undoubtedly officially sanctioned deception. And there are victims. The generations to come are the biggest ones. But so are VW's shareholders and customers now.
It's hardly the first such lie, though.
We have had pension mis-selling.
And mortgage insurance mis-selling.
Mortgage mis-selling in the US.
And quite a lot of corporate accounts.
And so much more.
So what is the reaction this time? Shrug and say that's how the market works? Wait to hear that all other diesel engines that somehow met emission standards when VW's could not get near have used something similar? Say we can't punish VW because they are too big to fail?
None of those work, I think.
First, I think criminal sanctions on those at the top of such companies have to be enforced: the idea that massive rewards come without risk despite what looks like systemic fraud in this case cannot be permitted. Bankers got away with this and rightly there is now a political reaction to the failure of the political class to react to that. So penalties for such behaviour have to be enforced.
No one, however, should ever want to see such penalties in use. That is just not what markets need. We want proper behaviour because the alternative has such massive costs: amongst the innocent victims of this fraud are millions of people with funds directly and indirectly held in VW shares. So whilst enforcing penalties on those who have permitted this behaviour is one thing, the need to reform the corporation is also on the agenda.
In the UK it is wrong that section 172 of the Companies Act 2006 does not make the environment as significant in terms of corporate consideration as shareholder interests.
And it is wrong that environmental reporting is not subject to the standard of scrutiny that financial reporting supposedly has.
It's wrong that in both cases fully independent auditors engaged in no other activity that might compromise them are not required to be engaged by leading companies.
And it is wrong that the risks of exposing such scandals are so high.
The failing here is not, after all, individual. It is systemic. And a systemic solution is needed. Given that we know we need the world's largest corporations but that they are so obviously failing us too often then surely the solution is their systemic reform, alongside the systemic reform of the regulatory environment in which they operate?
In the face of so much lying, such loss, and such harm, is that really too much to ask right now?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
The problem will be identifying who was responsible. Of course somebody knew & somebody made the decision to “fix” the cars. But I bet they did not tell the blokes in the boardroom.
A few years back I was doing a report on computer security and was speaking to a UK company that provide emergency support teams. They were called to a major German bank that was suffering a denial of service attack – despite the bank having its own internal “emergency support team”. The computer group within the bank
a) did not tell the bank’s superviosry board about the attack,
b) did not tell the superviory board that they could not handle it & needed outside support. Bet the same in VW.
An interesting story. However, the testing routine in EU is different to the states. The fluid injected into the exhaust is urea. All modern diesels have this injected to lower the NO levels. The quantity varies with engine speed and engine load. Interesting to note that the LEZ in London is an emissions control measure that people can circumvent by giving money to TfL. What price clean air?
i’ve read the testing routine in the EU is even easier to circumvent.
from what i understand, the car detects it’s in for testing (as colision safety system gets turned off) and reacts by turning the Urea injection up to 11, a level that it couldn’t maintain during normal driving as it would need refilling every other week.
“a level that it couldn’t maintain during normal driving as it would need refilling every other week”
Yep. Except most EU testing is not done in a lab, it’s an on-road test.
And owners can refill the urea storage themselves…if they wanted to…it is normally refilled at service (nice little earner).
Funnily enough, older diesels, while emitting more carbon (as carbon, not dioxide) have a lower NO emission…because they run cooler than the later diesel engine)(although higher unburnt emissions) (:-(
It is just interesting for me to watch this unfold. Germans can be so self-righteous, to the point of making me want to gag. And now with one of the largest automobile makers they literally fooled us. While living in America I praised myself for only driving VW or Audi. And while living in Germany we have only bought VW, well I have my eye on a sweet A5 convertible. Not to get side tracked, but we pay a lot of money for our TÃœV and I thought well its ok its for the environment. We even have ‘green’ cities that we get special decals for declaring we are very GREEN. Just a few weeks ago we were driving through France and I thought wow what crappy cars they have in France. But no I was the one in the crappy car. And this is just the beginning. While in America you know that wow VW and Audi ahhh same car. But also here they make Skoda, same crappy car, just a inexpensive version of the VW. Not that VW is expensive compared to Audi or Mercedes but it cost money. And we pay to know that we are driving a car that is good for the environment. And now its all a load of crap.
@Madison Schyler – Umm…well. you should exercise some rights, go back to the dealer and return the car on the basis that it is not up to legal standards in the USA( I assume you are living there) and so is probably illegal to drive around. Customer backlashes are one of the things that will get them to change their act because it costs them money.
Still going by the assumption that you live in the USA, driving a fossil fuel powered car around there, that too a diesel, is simply not green in any manner or form. I’m afraid you are just indulging in naive ‘green consumerism’.
i reckon every manufacturer will have something similar in place, and they will all cry the same thing the tax dodgers cry which is ‘You make the rules, we just play by them’ or words to that effect.
and like you say it is all part and parcel of the same problem which is senior politicians caring more about looking after their potential future employers than the people who elected them. nearly 10,000 people dying every year due to air pollution in London alone and they couldn’t give a toss.
http://www.theguardian.com/environment/2015/jul/15/nearly-9500-people-die-each-year-in-london-because-of-air-pollution-study
I agree with Richard here. This incident adds up to all the other incidents that corporations have been getting away with for the past decade or so. This needs serious examination, partly on the part of experts who examine culture to determine what leads these corporations to commit such crimes. For example, why does a corporation think it can and will sell a safety-wise inferior vehicle in a developing country when the same vehicle is sold with all the basic safety equipment in a developed country.In other words, what is making people in corporation devalue the lives of others. One cant just say that that’s how the markets work. There is something much deeper that is screwed up.
I wonder when there will be a similar systemic regulatory arbitrage investigation on the Big 4 accounting firms. As your blogs have shown Richard there have been many such episodes and little sign of cultural and ethical change. And they provide this advice to all the worlds top multinationals on a wide range of areas not just tax and accounting. They actively legitimise regulatory arbitrage and get away with it.
Atul
That’s subversive thinking
And fairly so
I think there is such a culture: accounting standards that supply us the information we need to hold companies to account are ‘deception technology’
Richard