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Address to the European Movement International: Integrity and transparency

Available languages: en

Brussels, Belgium, 08 March 2018

Thank you chair, and thank you for the invitation to speak here today. It’s an important issue, and when a respected and influential organisation such as the European Movement provides a platform for a discussion on corporate culture and integrity it is important to be clear about what is relevant in that context and what is not.

It is of course relevant that companies that have damaged the public trust continue to be made aware of public concern. In the case of Volkswagen, that concern relates to its deception over the levels of dangerous pollution that some of its car models were emitting and that we and our families were breathing.

It is also relevant that the public continues to be apprised of what Volkswagen is doing to make accountable those directly - and indirectly - responsible for those decisions and actions, and how the company intends to reflect on, examine, and match its corporate culture to the ideals it publicly presents. It is also relevant fully to understand its rationale vis a vis compensating, or otherwise, its customers in Europe.

It is not however relevant that this forum should be characterised as a ‘debate’. In the light of clear admissions of guilt – at least in the U.S. courts – of criminal corporate behaviour, there can be nothing to debate.

Neither should this forum such be seen as a counselling session where Volkswagen people are instructed on how to behave themselves. That would be patronising to the Volkswagen representatives, and quite frankly, a waste of our time.

I doubt that Volkswagen, or any company operating in an advanced society such as that of the European Union, needs lessons on ethical behaviour and social responsibility. ‘Do no harm’ and ‘don’t lie’ are lessons that most of us learned as children and the lessons don’t change when we grow up no matter how imperfectly we learn and implement them.

In 2013 Volkswagen in fact received an award from the World Forum for Ethics on Business for its work in, I quote, ‘integrating universal Human Values into its own corporate value set – through the execution of environmental projects, health projects and global initiatives.” So it clearly knows what is appropriate, as one would expect from a company with the history and pedigree of VW.

The company’s involvement in this event today is obviously part of its bid to regain public trust and that is of course welcome. Yet while we talk about its apparent need to regain public trust - and despite the $25 billion fine and penalties imposed on it in the United States - Volkswagen Group’s overall business does not appear to be suffering from the assumed loss of that public trust.

It has, apparently, – in commercial terms at least – rebounded from the scandal, presumably due to the trust the company had banked over many decades and the wide acceptance of its brands as exemplary ones.

Many people have fond memories of owning a Volkswagen beetle as their first car and it’s possible that others have been unable to match the Volkswagen revealed through the emissions affair with the Volkswagen of their youth, of their imagination or of its highly effective global marketing.

And of course, Volkswagen sells its cars under multiple brands including big sellers such as Audi and Skoda and one can assume that many purchasers of those brands don’t necessarily link them with the parent company.

And so, ironically, given the scale of the rebound from the scandal –although this affair still has a long way to go – the challenge for the company might well be to continue its drive to create an ethical and compliant corporate culture in the face of some apparent consumer indifference to what it did – as judged by the high volumes of cars it continues to sell.

There is a hint of this in a letter sent to its shareholders by its CEO last year, the opening paragraph of which read:

“Dear Shareholders,

“Life sometimes has its ironic side. For years, Volkswagen seemed to be pursuing one overriding goal: to become the world’s biggest carmaker. Then the diesel scandal broke in September 2015, marking a profound turning point. And now – in spring 2017, when we are still coping with the consequences of the crisis and have long since defined new priorities for the future – the headlines read: “Volkswagen becomes the world’s best-selling automaker.”

There may be an understandable temptation, despite the creation of a post to oversee integrity and ethics in the company - and despite the first holder of the post having detailed her plans to do that before she left following a reported disagreement over her role - not to do what is actually needed in the face of good results and what some might interpret as public forgiveness.

So what is relevant for today therefore is simply to ask whether Volkswagen has identified or can identify the elements in its culture that caused otherwise exemplary employees to break the law and therefore deliberately risk people’s health.

It is not enough to say that those who developed the cheat device and those who covered it up were not directly asked to do so, or to assert that the trail does not go to the top.

At this point, in the absence of hard facts - such as those contained for example in the unpublished Jones Day law firm report commissioned by Volkswagen - we cannot know the detail of who said what to whom. But, in a sense, that is the easy bit. The hard bit is finding out what may have been in the atmosphere of the company that enabled the deceptions to occur.

Culture is an intangible thing. It’s what employees learn and apply or misapply - from their observation of their bosses’ behaviour, from the indirect messages about what is expected from them and what will be corporately tolerated in the pursuit of – in VW’s case - global beating targets.

And if employees believe – rightly or wrongly – that the culture is one that will tolerate a lot because the drive to be the best and the biggest overwhelms everything else – including ethics and integrity - then that is when bad things start to happen.

Last year, Volkswagen Group admitted committing three ‘felonies’ in the United States and charges were brought against seven Volkswagen executives. Five are still in Germany and unlikely to be extradited. One, who left Germany briefly for a holiday in Florida, was arrested there, tried, and is now serving seven years in a U.S. jail, a devastating sentence for himself and for his family. The other man, who was already in the United States, received a lighter sentence of less than two years.

The man now jailed for seven years was reportedly a model company employee, a man who loved Volkswagen. He was also a man so liked and so personally impressive that the sentencing Judge said he had never received so many letters attesting to someone’s good character.

His hobby was restoring old Volkswagen Beetle cars. He and his wife were married in a friend’s Volkswagen dealership in Miami. The Judge who sentenced him had obvious sympathy for the man, essentially seeing him as the ‘fall guy’ the person taking the blame for others. The Judge also said that he had committed the crime ‘to impress senior management and the board’. He further explained that the length of the sentence was to act as a deterrent to others.

So if there is anything to debate this afternoon, it is probably contained in that short paragraph. What can the company learn from the case of that exemplary employee? I’ve no idea whether it’s still in touch with him, or if, when he comes out, or even while he’s still in jail, those concerned to root out a poor corporate culture will explore with him why he acted as he did. Perhaps the other men still in Germany could be asked the same questions.

Citizens expecting that the company in Europe would face the same robust and summary treatment it received in the U.S. have also been disappointed. That is not altogether the fault of Volkswagen, but because of different legal cultures, and the EU’s patchy regulatory framework which has enabled the company to date to avoid the processes and penalties of the US system.

Legal actions are of course being attempted or are underway in Germany and other member states but the issues are not as legally clear cut as they were in the U.S. and this is an obvious source of frustration for many people.

As one commentator put it: “European policymakers may be angry. They’re also largely impotent. The Continent’s fractured regulatory system and fractious legal environment leaves them powerless to do much more than appeal to the carmaker’s better nature — so far, with little effect. “

One could of course ask how and why the regulatory framework is such as to frustrate those who want to hold the company to account and to make it pay. Is it member state politics, the slowness of EU integration in some areas, or decades of corporate lobbying that have led to this unhappy impasse? Certainly a lot to discuss there.

But, ironically as well, just as the U.S. Justice System was the one robustly and speedily to deal with the company’s deception, so too might the U.S. – and not Germany and not the EU – be the one that first elicits the answers at least to some of these questions.

As part of the U.S court settlement Volkswagen Group now has, on site, a US appointed supervisor. He and his team are charged with forensically examining why the fraud and conspiracy went undiscovered for so long. The supervisor, Mr Larry Thompson, has claimed that Volkswagen had a ‘corrupt, corporate culture’ and that it will be a marathon and not a sprint to bring Volkswagen to a point where an emissions scandal could not happen, Mr Thompson will be on site for three years so perhaps the European Movement might consider inviting him to its next event on corporate culture.

To conclude, as European Ombudsman I deal not with private companies but with those who put into place and implement the laws and the regulations that guide them. Cases that come to my desk involve lobbying, transparency, conflicts of interests, regulatory compliance and enforcement.

Sometimes those issues are characterised as abstract, as somehow distant from the daily lives of ordinary people. But when this company did what it did, the emissions were not abstract and the polluted air that resulted was not abstract. That is why it is within all of our interests – including those of Volkswagen – fully to understand why what happened happened, and why it is important to be reassured that it cannot happen again.

Many people will continue to buy its cars irrespective of what it has done, while others may suffer from the additional pollution Volkswagen added to the atmosphere. And it is the latter, and not the former group, that the company should keep in its sights.

But there is another reason why it’s important for the Volkswagen Group to emerge from this affair with its credibility and culture rehabilitated. The Volkswagen brand is an iconic one and has been seen globally – and has presented itself – as one that represented high European values when it came to corporate behaviour and ethical standards.

In the U.S. the Trump administration is very deliberately lowering and weakening regulatory demands on business. In Europe we continue to be proud of our high safety, environmental, and labour standards. Quality work and quality products are a European brand and Volkswagen is part of, and has benefited from, that positive global perception.

We need therefore to recognise that European multinationals are not only exporting European products but also European values and at a point when so many of those values are under attack, companies such as the Volkswagen Group have an obligation to support them in a way that goes way beyond the commercial bottom line.