When is an apology really an apology? When is contrition a reflection of true regret? When is a pledge for transparency more than just a hollow promise? These questions ran through my mind after learning of new Volkswagen CEO Matthias Mueller’s media interview at the North American International Auto Show in Detroit.
Mueller, who took over the troubled automaker shortly after VWs “dieselgate” scandal broke in September, has promised transparency and to “leave no stone unturned” in getting to the bottom of the scheme. Yet, there he was telling National Public Radio’s Sonari Glinton that the scandal was a “technical” issue, despite earlier admissions that the automaker created sophisticated software designed to make its diesel vehicles appear to run cleaner in emissions tests than they do on the road.
I expressed my hope in an earlier blog that the newly appointed head of VW would stick to his commitment to win back the public trust. But his equivocating in the NPR interview concerns me. Mueller went further when he described the issues as a misinterpretation of American laws. Then he claimed VW did not lie when EPA regulators questioned the automaker before the issue went public.
“We didn’t lie. We didn’t understand the question first,” Mueller told Glinton, according to a transcript of the interview posted on the NPR website.
Mueller’s comments were criticized last week by the head of the European Investment Bank (EIB), who questioned the message they send. Mueller’s remarks were less than ideal, EIB President Werner Hoyer said, for “promoting understanding and sympathy and in terms of promoting credibility for the readiness of the company to clear up and resolve issues in full.”
According to a Wall Street Journal article, the EIB is investigating loans it has made to the automaker since 1990, including a €400 million loan the article said may be linked to the software under investigation in the United States and in Europe.
Mueller, who was previously chief executive of Porsche, clearly must consider many factors when publicly commenting on a huge scandal like the one facing VW. But it would seem that Mueller is using those other factors to reverse course on his stated commitment to transparency.
Admittedly, VW’s candor at the outset of the scandal was surprising. It’s not often when officials of a global company admit to potentially illegal and plainly unethical behavior. But once committed to transparency, Mueller and VW took on an obligation to find and share the truth about the scandal.
I believe this latest twist in the VW saga is an example of an organization’s survival instincts kicking in. It is not easy to be transparent when details of investigations uncover behavior that may damage an organization’s reputation or expose it to lawsuits or criminal sanctions. Indeed, from the perspective of some investors, such transparency hurts shareholders and conflicts with a board’s fiduciary responsibilities.
Proponents of expanding transparency through non-financial reporting, sustainability reporting, and integrated reporting must recognize there is an instinctive resistance to airing an organization’s dirty laundry. The end goal of these emerging and evolving reporting models is to promote good governance throughout the organization, which in turn leads to greater efficiency and fewer missteps — less dirty laundry.
But until an organization can achieve a high level of operational efficiency and governance maturity, the organization’s leadership must understand that a real commitment to transparency means there will be times when bad news, along with the good, will have to be reported.
Ultimately, the responsibility for ensuring transparency and good governance falls on the shoulders of the board and senior management. However, chief audit executives should not only be champions for ethical behavior before transgressions occur, but they should also speak up and encourage transparency as a function of corporate responsibility once transgressions become public. In my opinion, that is part of being the conscience of the organization.