Thursday, September 24, 2015

A premediated fraud

There's a major corporate scandal erupting in Europe at the moment of Volkswagen's use of specialised "defeat" software to fiddle its environmental tests. Basicly, they programmed their cars - because cars are computers nowdays - to detect when they were being subjected to an emissions test and lower engine emissions accordingly. The software wasn't in action in normal use, so the emissions and fuel efficiency numbers reported for these vehicles were grossly misleading.

The discovery has already led to a mass product recall in the US and the prospect of a US$18 billion fine, the collapse of Volkswagen's share price, and the resignation of its Chief Executive. And with European regulators looking into whether the same software was used to fiddle tests in Europe, and the software potentially installed on 11 million vehicles worldwide, it will get worse. And it damn well should. This is a fraud by Volkswagen on its customers and on the public to evade regulations and lie to them about the product they're buying. It cost lives - the air pollution they were fiddling kills 5,800 people a year in the UK alone, and people undoubtedly died because of the extra emissions their toxic cars were spewing. And it is unquestionably pre-meditated and signed off at a very high level; software doesn't just get written and installed without that. The company, and the shareholders who profited from this fraud, need to be held to account for that. And that means massive fines, to bankruptcy if necessary, and prosecutions for everybody responsible, from the executives who made the decision to the code-monkeys who wrote what was clearly illegal code.

Volkswagen's board is claiming "I know Nufink", but even if you believe that, there's clearly been a lapse of oversight that equates to gross negligence. The law of war includes the concept of command responsibility - basicly, officers who ought to have known about abuses can't get off the hook by claiming to be muppets, but are responsible for the actions of the soldiers under their command. And with so many corporate scandals "overseen" by boards who claim to be ignorant (while pocketing huge bonuses for the profits of fraud), it seems about time to extend that principle to corporate governance.