How bad corporate culture fuels scandal-making behavior

Washington Post

04-07-2025

When I was a student at the University of Michigan in the early 2000s, I attended a talk by legendary General Electric CEO Jack Welch soon after he retired. He was lauded by many as the best CEO of the 20th century, and professors treated him like a visiting head of state.
My fellow students, however, were less deferential. One asked why GE refused to clean up the hundreds of tons of toxic PCBs it had dumped for decades into the Hudson River. Welch bristled, dismissed the scientific consensus of PCBs causing cancer, and scolded the audience to appreciate GE's partial restoration of the damaged ecosystem.
What stood out to me wasn't just Welch's evasiveness or arrogance — it was that he presented this as common business sense: Corporations are in business for their shareholders — responsibility to the communities they pollute is a secondary consideration, no matter how serious the offense.
In 'The Dark Pattern: The Hidden Dynamics of Corporate Scandals,' Guido Palazzo and Ulrich Hoffrage show how such ideas get entrenched and reinforced within corporations, blinding them to their ethical failings.
Scandals, the authors argue, aren't rooted in bad people, but result from corporate processes that make unethical behavior feel normal, even necessary. The downfalls of companies like Enron, Theranos and Purdue Pharma were not primarily due to the manipulations of Jeffrey Skilling, Elizabeth Holmes or Richard Sackler, but a function of the systems they oversaw.
The authors, professors at the University of Lausanne, in Switzerland, point out that blaming corporate malfeasance on individual 'bad apples' is a comforting lie to distract from deeper problems that cannot be easily addressed by a few firings. They write that at Wells Fargo, one of the companies they use as a case study, more than 100,000 employees engaged in fraudulent activity. In the case of GE, one assumes that hundreds, maybe even thousands, of employees knew about the company polluting the Hudson but said nothing. Palazzo and Hoffrage argue that scandals usually start with the slow, invisible accumulation of unethical decisions until the entire system eventually collapses under its own weight.
The book's opening three chapters unpack the key factors that lead to 'the dark pattern' — which the authors define as a corporate culture of ethical blindness and moral disengagement. Among those problems they count rigid ideology, toxic leadership, manipulative language, unrealistic goals and destructive incentives. The book is scientifically grounded, drawing from research on moral disengagement, groupthink and cognitive framing.
While the first part of the book equips readers with a new way of thinking about scandals, chapters four through 10 are the real payoff. Each reexamines a well-known scandal, including Theranos (fraudulent blood testing), Uber (predatory market entry), Wells Fargo (widespread fake accounts), France Télécom (employee suicides), Boeing (737 Max crashes), Volkswagen (diesel emissions fraud) and Foxconn (factory worker suicides). Through these examples, Palazzo and Hoffrage show how the cultures that had developed at these companies rendered moral reflection not just difficult but also, in many cases, irrelevant. In their telling, the banality of corporate evil plays out in optimized KPIs, spreadsheets, dashboards and memos. Unethical actions often result not from malice but self-deception and broadly diffused responsibility. It's the everyday workplace routines. It's social pressure from above and below. It's the refrain that 'everyone around me is doing it, too.'
Palazzo and Hoffrage's storytelling is brisk and often harrowing. Following privatization, the management of France Télécom (now Orange) wanted to reduce staff by 22,000. But French law made layoffs difficult, so the company relied on forced geographic transfers, unwanted job reassignments and de-skilling to pressure employees to leave 'voluntarily.' These abusive practices contributed to dozens of employee suicides. Workers faced unbearable psychological stress, and cited humiliation and purposelessness in their suicide notes.
While I found Palazzo and Hoffrage's perspective on scandals compelling, they focus on corporate culture in a way that tends to obscure the influence of today's economic realities. In almost all of their examples, there is a common engine behind the dark pattern: neoliberal-style capitalism that prioritizes market efficiency, deregulation and shareholder primacy above all else.
When the purpose of business is to maximize profit regardless of social cost, ethical shortcuts become market advantages. Palazzo and Hoffrage do acknowledge this, and even end the book with a condemnation of a 'rigid shareholder value ideology.' But in service of creating a generalizable model of scandal, they leave our current economic system largely unexamined. This is a missed opportunity to consider solutions to the public policy and investment practices that enable the dark pattern to continually emerge.
Further, while the authors' perspective is a necessary correction to our overemphasis on 'bad apples,' admittedly in some cases individuals behind scandals may warrant closer study. Toxic leadership is, in fact, one of the key factors they identify as leading to ethical blindness.
Early in the book, one entertaining passage reexamines Hans Christian Andersen's fable 'The Emperor's New Clothes.' Famously, everyone sees that the emperor is naked, yet no one dares speak up for fear of appearing incompetent or disloyal. The illusion only cracks when a small child, bewildered by the adults around him calls attention to it. But the tailors who initiated the scheme succeed in bamboozling the king and his court because they know which vulnerabilities to exploit: vanity, authoritarian rule, social pressures for conformity.
Thus, it's worth considering how con artists can successfully pull the strings of the dark pattern. For instance, McKinsey's involvement in advising Purdue Pharma on 'turbocharging' OxyContin sales seems to follow a similar pattern where the consultants were able to strategically deploy manipulative language as well as unrealistic goals and incentives to propel unethical sales practices.
In spite of their penetrating critique, the authors end with cautious optimism. But their prescriptions for avoiding ethical blindness feel modest compared to the scale of the diagnosis. Ultimately, though, the power of the book lies in its insistence that wrongdoing is rarely monstrous. It is mundane, routine, unfolding every day inside cubicles and offices that are recognizable to many of us. Palazzo and Hoffrage have presented a deep understanding of the systems that inevitably lead to misconduct. In doing so, they reframe our most urgent corporate scandals not as outliers, but as warnings from the future we are already living in.
Christopher Marquis is the Sinyi Professor at the University of Cambridge and author of 'The Profiteers: How Business Privatizes Profits and Socializes Costs.'
The Hidden Dynamics of Corporate Scandals
By Guido Palazzo and Ulrich Hoffrage
Venture. 323 pp. $30