Toyota and Ethical Culture

 Check out this article from the LA Times on 24 May:
http://articles.latimes.com/2011/may/24/business/la-fi-toyota-safety-20110523

The article describes a 60 page report from Toyota's North American Quality Advisory Panel, which found that the company responded slowly and inefficiently to the sudden acceleration "crisis" involving its automobiles because it was hampered by a top-down management style that gave "short shrift" to customer complaints.  The report also found that the company had come to regard federal safety regulators as "adversaries", and had developed an institutional arrogance as an unintended consequence of of its drive to become the world's largest automaker.

While neither the report nor the newspaper article mention "ethics" even once, both conclude that Toyota's culture was "at the root of its woes".  In my view, Toyota's woes were all about corrosion of its corporate ethical culture.  One can tell a lot about a company by how it responds to a crisis.  The lack of transparency; the arrogance for regulators; and the company's refusal to own up to the safety problems that had killed and injured many of its customers reveal that Toyota had strayed from its core values as a company, focusing on the short-term cost of recalls (and impact on stock prices) rather than its longer-term commitment to quality and safety. 

It's amazing how much time and effort it takes for a company to develop "reputational capital", and how quickly it can be lost by straying from the corporate "ethical compass" in the heat of a crisis.  What do you think of when you hear the name Toyota?  How about BP? Goldman Sachs? Lehman Brothers? The answer would have been different just a few years ago.  This is why Ethics and Compliance programs, (emphasis on the ETHICS part) are so important.  Bad behavior of employees is uncontrollable; disasters are unforseeable; but how prepared a company is to respond appropriately is a product of leadership and employee commitment; an incentive structure  that rewards integrity; a meaningful code of conduct; substantive training; appropriate rewards and sanctions ; and an  involved Board of Directors - - all of the ingredients for a sound, sustainable ethical culture.