Why We’re Seeing So Many Corporate Scandals

Virtually every 21st century business scandal is reducible to a morality tale of a technology that allows us to do things we couldn’t before, coupled with major institutional failures that were enabled by failures of omission and commission of corporate leaders.

Consider the major, self-inflicted crises at Wells Fargo, where two million accounts were opened without customers’ knowledge, or at Volkswagen, where emissions data was falsified, or News Corp, where editors illegally hacked cell phones to publish private information.

These are different from the kind of product-safety scandals we grew accustomed to in the 20th century. And yet most business schools and leadership development programs still focus on those. Consider the Columbia and Challenger space shuttle disasters.  These are still two of the most popular case studies taught in business schools, and because of them, we believe we know why organizations self-inflict crises. Countless executives and MBAs have studied the key lessons, learning about individual and institutional biases that warp our world views. They learn that the absence of psychological safety keeps team members from disagreeing with dominant opinions. They learn that organizational failures result from rigid reporting lines, “one right way” problem-solving, cultures that shoot – or specify unreasonable standards for – the messenger, and restrictive communications protocols. These lessons are valuable, but incomplete for today’s world.

Digital technologies today enable individual employees to do much more than they could before. Mid-tier executives, who have serious decision-making power devolved to them (compared to 25 years ago) drive this workflow. The reasons behind this vary by organization, but they are often rooted in the cultures that the ease and openness of information sharing have spawned. These executives lead teams in which globally dispersed people from multiple organizations collaborate on critical tasks.