Learn from McDonald's: A blurry moral compass leads to years of costly issues

When the CEO's moral compass is blurry, you can bet the ethical one is too.

McDonald's, who has access to all the resources in the world, has been dealing with a serious culture breach caused by the failed moral compass of its former CEO for more than four years.

Two days ago, McDonald’s plight was in the news again because the SEC charged the former CEO with misleading investigators about reasons for his firing in 2019.

Let's consider the impact of the issues McDonald's has been facing, so you can be prepared just in case:

⚫ If someone breaks the rules in one area, you can bet they break or bend rules in other areas too. For example, if it's okay to bend the rule about one relationship, like the former CEO did, they are likely to bend the rules about other relationships too.

Beyond that rule, however, you better keep a keen eye on other rules because the relationship rule might not be the only one broken.

⚫ Others look up to the CEO and will follow along breaking rules too. If it's okay for the CEO, others will think it is okay for them to break rules related to relationships, exaggerate expense reports, lie on client project hours, skip recording PTO usage, and more.

⚫ Lies are expensive. McDonald's spent millions of dollars and countless hours because of the former's CEO's behavior. And, they still are! Does your company have either of those to spare?

On a personal note, how humiliating it must be for one’s ongoing moral failures to put grown adults in the situation of having to call the law firm and insurance company to explain the situation.

⚫ The reputation damage to the brand is embarrassing and costly in other ways too. Top talent does not want to work for a company that allowed that kind of behavior. When poor behavior is accepted, people lose trust in the decision makers. They will not bring their A game when trust dissipates.

The message sent to other top employees (and all employees) is that leadership is weak, values don’t matter, and money over purpose. No one brings their best in those circumstances.

In some cases, customers will lose trust and take their business elsewhere too. Now, McDonald's probably did not lose many consumers over the former CEO. Their great french fries far outweigh the impact of the former CEO to consumers. Most companies’ products and services don’t have that luxury.

There are companies out there with very similar issues right now. Here are a few indicators of culture issues.
◼ No women on the SLT. Or, the one or two top women keep leaving, to be replaced by men.
◼ The company's attorney or other leaders lie in meetings about culture. Obviously, there is more cover-up happening.
◼ When asked about a company, and heads turn, eyes bulge and people whisper, "Oh, you don't want to know about that place." In that case, pray for people who work there and move on because the person whispering is probably right.

Company culture goes way beyond people being nice to each other.

We are able to dig deeper and help leaders face the bigger issues that can damage their companies, reputations, and legacies.

We work with leaders to help them avoid the pain of McDonald's. McDonald's has all the resources in the world, and a costly culture breach happened there.

What resources does your company have? Reach out privately if you need one.

In the meantime, be on the lookout for blurry compasses. Don't let someone else's blurry moral compass blur your own.

If it could happen to EY, could it happen to you?

If it happens in a company like Ernst & Young LLP (EY), do you think it could happen in your company?

EY admits a "significant number" of its audit professionals cheated over many years on the ethics part of the licensing exams required for work in their industry. This breach of trust became public two weeks ago.

The irony is spectacular, as the SEC pointed out.

“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our Nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division.

“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct," said Mr. Grewal

Yes, that's right: EY cheated on the ethics exam and covered it up. They had internal reports about the cheating but did not stop it, did not report it, and did not respond clearly about it when the SEC investigated it.

The SEC imposed the largest penalty in its history on EY: $100 million. EY agreed to pay the $100 million penalty and agreed to "undertake extensive remedial measures to fix the firm’s ethical issues."

EY has all the resources in the world available to it. Yet, they had a "significant number" of their people cheating on the ethics exam requirements and covering it up.

The exact count of people involved was not reported, but think about it. It went on for years. The number must be hundreds. Thousands maybe?

Cheating on the ethics exam and covering it up became part of the culture for years.

Is it possible to cheat only on one thing? Or, if you're a cheater in one area, isn't it likely you're a cheater in others too? It is such a slippery slope, isn't it?

An EY spokesman said in various media releases about the cheating and penalty, "At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do."

Really? No, not really. It was widespread and went on for years.

EY has all of the trainings, Global Code of Conduct (talks about integrity), management oversight, systems, legal support. Yet, it did not live up to its own standards for years.

That failure happened at EY, with all their resources...could it happen in your company?

Reflect on it and be sure before it's too late. A gigantic fine would ruin a lot of companies. So would the damage to the reputation. If you need help ensuring your company does a better job living up to its values than EY does, give me a call.

Sources:
SEC press release
NPR article