VEA Vice Chair Nell Minow on the Volkswagen Scandal

From VEA Vice Chair Nell Minow on The Huffington Post: Volkswagen’s Real Victims — And Who’s Really Responsible

Maybe now was not the right time for the television commercial for Volkswagen I saw over the weekend. The tagline was: “Isn’t it time for German engineering?”

It’s German engineering that created software specifically designed to provide false information in emission inspections. The magnitude of the fraud is monumental. Since 2009, the largest car company in the world by sales has been operating a scheme worthy of a Bond villain. The software in as many as eleven million “clean diesel” vehicles sold worldwide operated only when the cars’ pollution controls were being tested for emissions. The rest of the time, they poured toxic chemicals into the atmosphere.

Early news reports focused on this massive deception as consumer fraud. Nearly half a million U.S. car buyers who specifically chose Volkswagen’s diesel vehicles for their advertised combination of high performance and environmental superiority have found that the promised benefits were a fraud.

There has also been some focus on Volkswagen shareholders. The company could face fines as much as $18 billion, or 50 percent more than last year’s profits. The stock price has dropped by a third already. The CEO resigned.

But the real damage here is environmental. There is not a person on the planet who will not be affected by this diabolical decision to steal profits by externalizing the costs of environmental destruction onto everyone. Current estimates are as high as a million tons of toxic emissions per year being added to the air we breathe. The very standards and technology we relied on to monitor emissions have been undermined.

It is cruel that consumers who were trying to minimize the environmental impact of their cars now find that they have been innocent accomplices in this fraud. It is a shame that investors put their trust in a company they thought of as trustworthy are losing money because the executives were greedy and crooked. But it is tragic that the consequence of this outrageously sociopathic fraudulent and destructive activity will be imposed on all of us.

Mean VW 2015-09-27 at 2.04.14 PM

News reports have compared this to corporate frauds like Enron. But the environmental damage vastly exceeds the damage to consumers and shareholders. A more apt comparison is to BP’s Deepwater Horizon devastating oil spill. But that lasted 87 days and involved less than four million tons of pollution. There are no iconic images of oil-covered birds this time, but Volkswagen’s fraud went on over six years and spewed more poison. More important, BP’s oil spill was an accident. At Volkswagen, the deception was deliberate.

That means it was the result of a toxic culture, and that cannot be corrected by the resignation of the CEO. The company is a corporate governance nightmare with a dysfunctional board. The New York Times quoted Charles Elson, director of the corporate governance program at the University of Delaware: “The governance of Volkswagen was a breeding ground for scandal. It was an accident waiting to happen.” One of the indicators of insularity and conflicts of interest in the Times story:

Until a forced resignation this spring, the company was dominated by Ferdinand Piëch, 78, the grandson of Ferdinand Porsche and the father of 12 children. He reigned over Volkswagen’s supervisory board and directed a successful turnaround at the luxury brand Audi before taking the reins at its parent, Volkswagen, in 1993. Mr. Piëch set the goal of Volkswagen’s becoming the world’s largest automaker by sales, a goal the company achieved this past year. He stepped down as chairman in April after unsuccessfully trying to oust the company’s chief executive, Martin Winterkorn, who himself was forced out this week.
One measure of Mr. Piëch’s influence: In 2012, shareholders elected his fourth wife, Ursula, a former kindergarten teacher who had been the Piëch family’s governess before her marriage to Ferdinand, to the company’s supervisory board.
The “shareholders” who elected the former nanny to the board were dominated by the Porsche and Piëch family, which controls half of the voting stock. The insularity and family control is itself a kind of engineering failure, as toxic to good governance as the noxious emissions are to the environment.

Volkswagen literally means “the people’s car.” The revolutionary “think small” advertising campaign at the dawn of the modern environmental movement was followed by its starring role in Disney’s “Love Bug” movies and modern diesel ads touting the cars as “eco-conscious” and “Efficiency. Now available without compromise,” the company has branded itself as relatable, innovative, reliable, and consumer-friendly. The brand will now be associated with virulent, meretricious fraud, with arrogance and greed, with utter contempt for shareholders, government, customers, and the planet.

They can pay the fines and settle the inevitable litigation. They can change their name, the way Philip Morris did to the less-cigarette-y Altria. They can even improve their corporate governance. But what are they going to do to fix what they have done to the air we breathe?

The Volkswagen board of directors:
Berthold Huber
Deputy Chairman
IG Metall
Dr. Hussain Ali Al-Abdulla
Vice Chairman of Qatar Holding LLC
Akbar Al Bakar
Minister of State, Qatar
Group Chief Executive of Qatar Airways
Annika Falkengren
President and Group Chief Executive of Skandinaviska Enskilda Banken AB
Dr. Hans-Peter Fischer
Chairman of the Board of Management of Volkswagen Management Association (VMA)
Uwe Fritsch
Chairman of the Works Council at the Volkswagen AG Braunschweig plant
Babette Fröhlich
IG Metall,
Department head for coordination of Executive Board duties and planning
Uwe Hück
Chairman of the General and Group Works Council of Porsche AG
Dr. Louise Kiesling
Entrepreneur
Mag. Julia Kuhn-Piëch
Self-employed real estate manager
Member of the Supervisory Board of MAN Truck & Bus AG
Olaf Lies
Minister of Economic Affairs, Labor and Transport for the Federal State of Lower Saxony
Hartmut Meine
Director of the Lower Saxony and Saxony-Anhalt Regional Office of IG Metall
Peter Mosch
Chairman of the General Works Council of AUDI AG
Bernd Osterloh
Chairman of the General and Group Works Councils of Volkswagen AG
Dr. jur. Hans Michel Piëch
Lawyer in private practice
Dr. jur. Ferdinand Oliver Porsche
Member of the Board of Management of Familie Porsche AG Beteiligungsgesellschaft
Dr. rer. comm. Wolfgang Porsche
Chairman of the Supervisory Board of Porsche Automobil Holding SE
Chairman of the Supervisory Board of Dr. Ing. h. c. F. Porsche AG
Stephan Weil
Minister-President of the Federal State of Lower Saxony
Stephan Wolf
Deputy Chairman of the General and Group Works Councils of Volkswagen AG
Thomas Zwiebler
Chairman of the Works Council of Volkswagen Commercial Vehicles

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