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Coming Clean in 2018

LONDON – It has been a bumper year for making the invisible visible. The last 12 months have overflowed with leaks, allegations, and other disclosures, not just of misconduct by individuals, business leaders, and politicians, but also of proactive schemes to prevent that misconduct from ever coming to light.

Last month, it came out that a 20-year-old hacker breached Uber’s system in 2016 and accessed the information of about 57 million people, including some 600,000 of its drivers in the United States. Rather than admit to the security flaw, Uber quietly paid the culprit $100,000 to destroy the data, in the hope that the victims – and, perhaps more important to Uber, the company’s investors – would never find out.

The Equifax data breach – in which hackers gained access to sensitive personal information, from birth dates to Social Security numbers, for about 143 million US customers – was not covered up to quite the same degree. But there was still a six-week period between discovery of the breach and disclosure to the public, during which three executives sold a small share of their stock, though they insist they had no knowledge of the breach at the time.

A security breach is frustrating, even infuriating, for customers and investors. But willful denial of such a breach decimates trust. If a company discloses a breach, at least customers know they can expect to be told what is happening with their information (and can keep watch for fraudulent activity on their accounts), and investors can assess business risk accurately.

If the truth comes out much later – as in the case of Uber, in particular – a story about a technical problem quickly becomes a story about corporate integrity. Consumers’ fears about sharing personal information with companies – difficult to avoid in modern life – deepen, and business becomes an object of heightened skepticism.

But businesses have not just been covering up mistakes; they have also been hiding major crimes by senior figures. Nowhere is this more apparent than in the long-term patterns of sexual harassment and cover-ups that have been exposed in recent months.

At Fox News, leading personalities – from commentator Bill O’Reilly to the company’s chair, Roger Ailes – were long protected by the network’s parent company, 21st Century Fox, in the face of allegations of sexual harassment. Not only did 21st Century Fox help to keep quiet a $32 million settlement reached in January between O’Reilly and a frequent guest on his show (at least the fifth such settlement over O’Reilly’s behavior); the company offered its star a highly lucrative new contract soon after.

O’Reilly was eventually pushed out, but only after the truth about the allegations and settlements were revealed to the public. The company followed essentially the same script with regard to Ailes during his 20-year tenure.

A similar machine protected the Hollywood heavyweight Harvey Weinstein during his decades of using his position of power to harass and assault women. As The New York Times recently documented, Weinstein received help from all sides. His brother and partner, Robert Weinstein, participated in the payoffs. His business associates were incentivized to look the other way. Reporters were tasked with discrediting accusers. Even the victims’ own agents and managers were pressured or paid to advise their clients to stay quiet.

The good news is that when more powerful figures are held to account for their abusive behavior, more victims may gain the confidence to come forward. As power dynamics shift, victims overcome the belief that they must suffer in silence, and come to trust that enough people will actually listen to them.

In this sense, the acceleration in revelations of the last year is a culmination of a longer-term trend, in which larger-than-life power players and seemingly unshakable institutions have been brought down by their own misdeeds. In the aftermath of the global financial crisis, financial-sector executives may not have been held fully to account for their actions, but the outcry surely contributed to the “shareholder spring” that began in 2012, with investors rejecting executive pay packages and paying more attention to corporate governance issues.

In sport, numerous FIFA officials, including the international soccer organization’s president Sepp Blatter, were brought down, after decades of match fixing, bribery, and other corrupt practices. And Russia has been banned from the coming Winter Olympic Games for using a complex system to circumvent the drug-testing regime at the 2014 Olympics in Sochi.

One area where the other shoe has yet to drop is in the big cover-up in US politics: the connection between members of Donald Trump’s presidential campaign, including his son Donald Trump, Jr., and official Russian circles. The facts, which are gradually emerging, are damning enough. But the ham-fisted attempts to hide the truth are making the situation much worse for the Trump administration, and for US politics more broadly, not to mention the country’s international standing.

If nothing else, recent revelations should drive home the maxim that the cover-up makes the original mistake ten times worse. President Richard Nixon and many of his aides learned that lesson during the Watergate scandal. In 2018, the Trump administration – and companies like Uber and 21st Century Fox – will ignore it at their peril.

Lucy P. Marcus is CEO of Marcus Venture Consulting.

By Lucy P. Marcus

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