One misleading report, one hidden liability, or one shortcut taken in pursuit of profit can trigger a cascade of consequences. Corporate scandals have a way of toppling empires, shaking investor confidence, and transforming whole industries. The scandals of Enron, Volkswagen, and other major companies show that business ethics failures affect not only the boardroom, but markets and people worldwide.
Here, we look at some of the most notorious corporate scandals in recent history.
Enron: The Fall Of A Corporate Giant
The Enron scandal stands as one of the most infamous examples of corporate wrongdoing. In early 2001, analysts began scrutinising US energy company Enron’s complex financial statements, which the company had designed to hide its true financial health. Investigators discovered that Enron had used special-purpose entities to conceal billions in liabilities, creating a false appearance of profitability while bleeding cash.
As news of the scandal spread, investors drove Enron’s stock down from $90.56 to under $1, forcing the company to file what was then the largest bankruptcy in US history. The fallout led regulators to implement major reforms in accounting and corporate governance, including the Sarbanes-Oxley Act.
Volkswagen: Dieselgate
In September 2015, the US Environmental Protection Agency (EPA) accused Volkswagen of cheating emissions tests. VW had installed software in diesel cars that lowered emissions only during testing, while actual emissions were up to 40 times the legal limit. Around 11 million vehicles were affected worldwide. VW shares dropped more than a third within days.
WorldCom: Accounting Fraud In Telecom
WorldCom, once the United States’ second-largest telecommunications company, collapsed in 2002 due to massive accounting fraud. Executives inflated assets by over $11 billion by recording regular expenses, such as line costs, as capital investments. When the scandal surfaced, WorldCom filed for bankruptcy, the largest in US history at the time.
Satyam Computers: India’s Enron
Satyam Computers, once a leading IT company in India, admitted to overstating revenues and profits by over $1 billion in January 2009. Chairman Ramalinga Raju confessed to manipulating accounts over several years.
Lehman Brothers: The Financial Collapse
Global investment bank Lehman Brothers filed for bankruptcy in September 2008 after failing under the subprime mortgage crisis. The bank borrowed heavily to fund mortgages and used complex accounting to hide risk. When defaults rose, its value dropped by more than 70 per cent in six months. Lehman’s collapse triggered a global financial crisis and led to reforms such as the Dodd-Frank Act in the US.
Facebook: Cambridge Analytica
Facebook’s privacy scandal broke in March 2018 when reports revealed that Cambridge Analytica had harvested data from 87 million users without consent. The information was used to target political advertising during the 2016 US election and Brexit referendum. The revelation led to congressional hearings and a sharp decline in Facebook’s stock.
Valeant Pharmaceuticals: Price-Gouging Practices
Valeant Pharmaceuticals drew scrutiny in 2015 for raising drug prices excessively after acquiring smaller companies, rather than investing in research and development. The company was also found to have manipulated its pharmacy network, Philidor, to inflate profits. The scandal led to a two-thirds drop in its share price. Valeant later rebranded as Bausch Health Companies Inc.
BP: Deepwater Horizon Oil Spill
On 20 April 2010, BP’s Deepwater Horizon rig exploded in the Gulf of Mexico, spilling nearly 5 million barrels of oil. The spill devastated wildlife, local communities, and BP’s reputation. Shares fell sharply until the well was capped on 15 July 2010. The disaster led to stronger environmental oversight and safety rules for offshore drilling.
Uber: ‘Bro Culture’
Uber faced multiple scandals over sexual harassment and a workplace culture known as “bro culture.” In June 2017, CEO Travis Kalanick resigned amid allegations of sexism, harassment, and inappropriate behaviour by senior staff. Dara Khosrowshahi became CEO ahead of its 2019 IPO.
Equifax: Massive Data Breach
Equifax, one of the largest credit reporting agencies, disclosed a massive data breach in September 2017 affecting 145 million US consumers. Personal data including social security numbers, birth dates, and addresses were stolen, leaving millions vulnerable to identity theft. The breach caused Equifax shares to drop by a third in just eight days.
Kobe Steel: Quality Falsification
In 2017, Japan’s Kobe Steel revealed it had falsified quality data for its aluminum, steel, and copper products. The affected materials were used by major manufacturers, including Toyota and Mitsubishi. The scandal caused a significant dip in Kobe Steel’s share price and resulted in CEO Hiroya Kawasaki’s resignation.
Toshiba: Profit Inflation
Japanese conglomerate Toshiba admitted in 2015 that it had overstated profits by around $1.2 billion over seven years. Executives delayed reporting losses and manipulated accounts to appear more profitable.
Saradha Group: Ponzi Scheme In India
The Saradha Group ran a large-scale Ponzi scheme through over 200 companies, mainly in West Bengal. Between 2008 and 2013, it collected Rs 200-300 billion from nearly 1.7 million depositors before collapsing.