The Washington Post

In Renault case, a serious rush to judgment

The Renault corporate espionage case reads like the script for a Hollywood spy drama—or an episode of the Keystone Kops, depending on what you read. Company officials were tipped off by an anonymous whistleblower that a respected French automobile executive and his deputies had accepted a bribe and were funneling money into private bank accounts in Switzerland and Liechtenstein. The French Industry Minister said the actions could be described as “economic warfare” and that the government would be preparing legislation against industrial secrets. The executives in question were fired, and criminal complaints were filed.

But then it gets much weirder. In February, Renault CEO Carlos Ghosn said the company acted without concrete evidence, but still said the dismissals were correct. By early March, another Renault executive admitted the company may have been tricked, and can’t be certain it was a spy target. And then on Monday, Renault fully exonerated the three men, publicly apologized to them, offered to compensate them and offer them jobs at Renault again, and said its CEO and chief operating officer would give up bonuses and stock options for their handling of L’Affaire Renault.

Quelle embarrassment. If ever there was a case study in a rush to judgment, the Renault case is it.

Ghosn and his staff were right, of course, to take the anonymous tip seriously. In the post-Sarbanes-Oxley era, whistleblowers are finally getting their due. The Dodd-Frank law passed last year even provides financial rewards for employees who blow the whistle on securities fraud. As a result, companies may be reacting too swiftly to any sign of wrongdoing, switching on panic mode whenever such information arises. “Corporate whistle-blowing has gone from seeming inappropriate and unseemly to heroic and possibly very lucrative," one corporate lawyer told the Wall Street Journal.

So how should leaders find the right balance? React too slowly, and they may be seen as not taking the matter seriously enough, either by employees or regulators—especially if the anonymous tip is accurate about major fraud. Pull the trigger too fast, however, and leaders set up a public relations nightmare that could make them the laughingstock of the corporate world.

But bad headlines are nothing compared to the damage that leaders could inflict on their credibility or, worse, on the trust they’ve built with employees.  Dolling out penalties without slowing down to wait for incontrovertible evidence isn’t just embarrassing. It’s likely to lead to rifts between management and employees who fear they work in a trigger-happy culture where they could be punished for nothing.

Going slow isn’t the only lesson other leaders can take from L’Affaire Renault, however.  In such a controversy, always look to outside legal help. Renault relied on an investigation by its internal security department and the private investigators it hired. Outside law firms who have never worked for the board or management before, legal experts say, are a much better way to go. That would have been true in this case especially. In a dramatic twist one might think only a Hollywood screenwriter could dream up, French prosecutors are now investigating whether members of Renault’s own security department were involved in setting up the entire case in order to defraud the company.

Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.


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