By Marianne M. Jennings, a professor of legal and ethical studies at
Arizona State University.
My students know one fundamental principle of business ethics that
Ford and Firestone forgot. That principle was not culled from years of
research or modeled through an Excel spreadsheet. Rather, it is the
most basic of precepts: The truth always gets out.
Such wisdom would have served both companies
well in averting the current public-relations crisis
that will soon ripen into class-action lawsuits
managed by lawyers who have been lying idle since
hogtying the tobacco companies.
There was a moment of truth for every company
that passed through the public spanking lines of the
media, Congress and courts that Ford and
Firestone now face. That moment of truth comes
when those within the company realize something is
awry with their product, practices, earnings statements or culture. The
moment usually comes when things are peachy in sales and earnings
and its truth is ignored in the name of saving face and, perhaps,
Knowing the inevitable outcome -- for truth does percolate -- why do
bright and experienced people ignore it? For even if the truth is known
only within the confines of the company, it will out. Circumstances
beyond even the best manager's control take over once the chance has
passed to act on the moment of truth.
Johns Manville learned of the "crunching" lungs of asbestos workers in
the 1930s, as reflected in the minutes of its board meetings. Instead of
working on product development, warnings or even safety equipment,
the company forged onward with a strategy of trying to keep the
scientific community from disclosing its findings and of limiting the
increasing numbers of plaintiffs by settlements for silence.
Dow Corning didn't deserve its bankruptcy or the multibillion-dollar
settlements for its silicone implants because the science didn't support
the alleged damages. However, there was a moment of truth when
those implants, placed on a blotter, left a stain. The company could
have disclosed the possible leakage, researched the risk, and warned
doctors and patients. Given the congressional testimony on the
implants, many women would have chosen them despite the risk.
Instead, they sued because they were not warned.
Beech-Nut's crisis was a chemical concoction instead of apple juice in
baby food products. Executives there ignored an in-house chemist who
tried to tell them they were selling adulterated products.
Kidder-Peabody fell despite warnings from employees about a glitch in
its accounting system that was reporting bond swaps as sales and
These cases all have several things in common. First, their moments of
truth came and went while the companies took no action. Second,
employees who raised the issue were ignored, or, in some cases, fired.
Third, there were lawyers along for the ride, as they have been with
Ford and Firestone.
Never rely on a lawyer in these moments of truth. Lawyers give
controlling legal authority but are not particularly good at controlling
damage. Lawyers shouldn't make business decisions; moments of truth
require managers. More importantly, moments of truth require
managers with strong ethics who will do more than the law requires and
less than the law allows.
As a now infamous memo reveals, Ford and Firestone did not feel
obligated to reveal to the U.S. Transportation Department that certain
tires were being recalled in overseas markets. The companies should
have realized that it was not a question of whether the recall would be
reported, but by whom.
Do businesses ever face the moment of truth wisely? One great
example is James Burke, CEO of Johnson & Johnson at the time of the
1982 Tylenol capsule scare. The minute Tylenol was linked to the
cyanide poisonings, Johnson & Johnson recalled and destroyed 31
million bottles of the product, at a cost of $100 million, and Mr. Burke
bent over backward to deal openly and forthrightly with the media and
public. The result was one of the best crisis-management performances
in history; the company won back nearly all its customers.
Perhaps the best example of an industry willing to use the truth to set
itself free was the electric utility sector. During the 1980s, the media
went hysterical over electromagnetic fields. These EMF, located in areas
near electrical power lines, spawned litigation for cancer among those
living nearby and produced claims of reduced property values.
In response to these unfounded fears, utilities went to their customers
with monthly bill inserts discussing EMF. They funded studies, disclosed
studies and encouraged all to study the issue. They took steps of
"prudent avoidance," placing power lines sufficient distances away from
The result? The EMF scare, which might have been the utility industry's
asbestos, disappeared. Even sympathetic cases involving child plaintiffs
did not sway juries; the causal connection was simply not there. EMF
was managed with ethics and an attitude: If EMF is a problem, we
manage it early and make it right. If it's a false alarm, we have the
credibility and trust earned with voluntary action and disclosure at the
moment of truth.
Unfortunately, Ford CEO Jacques Nasser and Bridgestone/Firestone
CEO Masatoshi Ono did not heed their own moment of truth early
enough. They are now paying the price.