Leadership ethics examples: six cases and what each one reveals

What to take away

These six leadership ethics examples span four decades and three countries. Each one shows a leader facing a choice between the easy option and the right one. The details differ, but the pattern repeats across all six.

Case one: Volkswagen and the emissions cheating

In 2015, the US Environmental Protection Agency found that Volkswagen had installed software in 11 million diesel cars. The software cheated on emissions tests. The cars emitted up to 40 times the legal limit of nitrogen oxides.

The EPA discovered the cheating after a study by West Virginia University. Volkswagen initially denied the allegations. The company later admitted to using a defeat device.

CEO Martin Winterkorn resigned in September 2015. He said he was "not aware of any wrongdoing on my part." In 2018, the US charged him with fraud.

Volkswagen pleaded guilty to fraud and paid over $30 billion in fines and settlements. The company also had to buy back hundreds of thousands of cars.

The scandal accelerated Volkswagen's shift to electric vehicles. It also led to the arrest of several executives. The company created a new compliance department.

What it cost: over $30 billion, Winterkorn's career, and trust in German engineering.

What it reveals: a culture that prized engineering success over compliance led to systemic cheating. The settlement required a compliance program, and the Department of Justice's compliance program guidance outlines what that involves.

Case two: Wells Fargo and the fake accounts

From 2002 to 2016, Wells Fargo employees opened millions of fake bank and credit card accounts. They did this to meet aggressive sales targets, known as "cross-selling" quotas.

The bank's sales targets were unrealistic. Employees faced firing if they missed quotas. The pressure led to widespread fraud. The scandal damaged the bank's reputation for years.

CEO John Stumpf initially blamed 5,300 low-level employees. He called them "bad apples" in a 2016 Senate hearing. Regulators fined the bank $185 million that year. A later settlement reached $3 billion.

Stumpf resigned in October 2016. He forfeited $41 million in compensation.

The Federal Reserve capped Wells Fargo's asset growth until it improved its governance. The bank has since changed its incentive structure.

What it cost: billions in fines, Stumpf's job, and the bank's reputation.

What it reveals: Wells Fargo had a code of conduct, but it did not prevent the fake accounts. Incentive structures drive behavior. Leaders must own the culture, not blame the bottom.

Case three: Johnson & Johnson and the Tylenol recall

In September 1982, seven people in the Chicago area died after taking Tylenol capsules laced with cyanide. The deaths were not Johnson & Johnson's fault. But the company's flagship product was now a murder weapon.

CEO James Burke faced a choice. He could recall Tylenol from just the Chicago market, or nationwide. He chose nationwide, pulling 31 million bottles. The recall cost $100 million.

Burke consulted with his team and the FDA. He decided that even one more death would be unacceptable. The company set up a hotline and offered refunds.

Burke also introduced tamper-resistant packaging and a new cap. Within a year, Tylenol was back to its previous market share.

The recall changed how companies handled product tampering. Tamper-resistant packaging became standard for over-the-counter medicines. Burke's decision is still taught in business schools.

What it cost: $100 million and a temporary loss of the product's market dominance.

What it reveals: Burke put customer safety ahead of short-term profit. That decision protected the brand. The case is a staple in discussions of customer ethics.

Case four: Boeing and the 737 MAX crashes

In October 2018 and March 2019, two Boeing 737 MAX planes crashed. Lion Air Flight 610 and Ethiopian Airlines Flight 302 killed 346 people. Both crashes involved the Maneuvering Characteristics Augmentation System (MCAS).

MCAS was designed to make the 737 MAX handle like the older 737. It activated based on a single sensor. If the sensor failed, the system could push the nose down repeatedly.

MCAS was not adequately described in pilot manuals. CEO Dennis Muilenburg initially downplayed the issue. He later resigned in December 2019.

Boeing paid $2.5 billion in fines and compensation. The fleet was grounded worldwide for 20 months.

Boeing fired Muilenburg and replaced him with David Calhoun. The FAA changed its certification process. Families of the victims criticized the settlement.

What it cost: 346 lives, $2.5 billion, and Muilenburg's job.

What it reveals: the case is a study in leadership ethics. A culture that prioritizes production over safety can be deadly. A code of conduct is not enough.

Case five: Mid Staffordshire NHS Trust and patient safety

Between 2005 and 2009, Mid Staffordshire NHS Foundation Trust in England had higher than expected mortality rates. Patients were neglected. Some died from dehydration or untreated pain.

Nurses raised concerns about staffing levels and patient care. Managers dismissed them.

The trust's leadership focused on financial targets and foundation trust status. They ignored warnings from nurses and patients. Local campaigner Julie Bailey helped expose the scandal.

The Francis Inquiry (2010-2013) found a culture of bullying and secrecy. It led to changes in the UK's whistleblowing framework.

The inquiry led to a new duty of candour for NHS staff. It also strengthened whistleblowing protections. The trust was dissolved in 2017.

What it cost: hundreds of unnecessary deaths, the trust's reputation, and the closure of its emergency department.

What it reveals: leaders must listen to frontline staff and patients. Ignoring warnings can be fatal. Financial targets cannot come before safety.

Case six: Theranos and the blood-testing fraud

Elizabeth Holmes founded Theranos in 2003. She claimed its technology could run hundreds of medical tests on a single drop of blood. Investors put in nearly $1 billion.

Theranos's board included former Secretary of State George Shultz and other prominent figures. They failed to ask hard questions about the technology. The board had no medical experts.

The technology did not work. The company ran tests on commercial machines, not its own device. Whistleblowers Tyler Shultz and Erika Cheung raised concerns internally. They later spoke to regulators and journalists.

Holmes was convicted of fraud in 2022. She was sentenced to 11 years in prison.

The SEC charged Holmes and Theranos's president with fraud in 2018. Holmes settled without admitting guilt. The company dissolved in 2018.

What it cost: investors lost millions, patients received false diagnoses, and Holmes lost her freedom.

What it reveals: visionary leadership without integrity causes harm. The whistleblowers' decision to speak up is a study in employee ethics. Boards must ask hard questions.

What the cases have in common

In every row, the easy option would have been defended at the time as pragmatic. What decided each row was a fact that could not be ignored: deaths, fines, or whistleblowers.

Leaders who make good decisions in these situations have mostly trained themselves to ask who is not in the room.

Common questions

What if Tylenol's recall had failed?

Then Burke's decision would still have been right. The point of case three is that ethics can be expensive. But Johnson & Johnson's market share recovered within a year. The recall protected the brand and set a standard for product safety.

Was Wells Fargo's Stumpf too slow to act?

Yes. He initially blamed 5,300 employees. The board should have acted sooner. The scandal showed that a toxic sales culture can lead to widespread fraud. Leaders must own the culture, not deflect. The Federal Reserve later capped the bank's growth.

How much should leaders share with their teams?

The decision and the reason, in a sentence or two. Not confidential details. The team needs to know what was decided and why. They do not need, and should not have, individual names. This is especially true in cases involving whistleblowers or personnel matters.

Each case shows that ethical leadership is a series of choices, not a single moment.