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October 05, 2015

What companies can learn from Volkswagen

Emissions scandal shows importance of putting in whistleblower hotline

Volkswagen is facing international condemnation after admitting it purposefully deceived regulators for years regarding the amount of toxic pollutants its so-called "clean diesel" cars emitted.

Why didn't anyone blow the whistle on the German car company's dishonesty, and how can this kind of deception be stopped in the future?

One idea for stopping fraud is for companies to put in an "employee hotline" where lower-level employees can anonymously report misconduct.

"The Volkswagen Dieselgate scandal is a lesson to all boards and CEOs about the importance of tone and culture, as well as providing a hotline for lower level employees to report misconduct within their units of the company," wrote Stanley Silverman, a leadership consultant and vice chairman of the board of Drexel University, in an opinion piece for the Philadelphia Business Journal.

Silverman also said that company boards must play a role in shaping company culture and ensuring that it is honest. In addition, firms need an "internal audit function" where they check to make sure that no one in the company is going against internal procedures.

Making sure that employees have "legal, moral and ethical compass" is vital not just for the company's reputation, but for its survival. Volkswagen now faces the possibility of up to $18 billion in fines.

In comparison, General Motors was fined $900 million last month for an ignition defect that killed 124 people. While it is unlikely that there will ever be a way to definitively link any deaths to Volkswagen's actions, it is known that nitrogen oxides found in unclean diesel emissions cause smog, which in turn is linked to premature death from diseases like asthma.

The New York Times estimated that Volkswagen cars have emitted 46,000 tons of pollution since 2008 and thus caused around 106 deaths in the U.S. However, another scientist quoted by the Times projected that the unclean cars caused 40 deaths. An Associated Press analysis put the death toll at between 16 and 94 deaths over seven years.

Read Silverman's opinion piece here.