February 27, 2021


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Study of auto recalls shows carmakers delay announcements until they ‘hide in the herd’


'"The implication is that auto firms are either consciously or unconsciously
delaying recall announcements until they are able to hide in the herd," said
George Ball, assistant professor of operations and decision technologies and
Weimer Faculty Fellow at the Indiana University Kelley School of
Business. "By doing this, they experience a significantly reduced stock
penalty from their recall."'

The auto industry's product defect disclosure practice illustrates a callous
disregard for public safety, an exemplary model of "Profit Without Honor"

History teaches that commercial product defect discovery and disclosure
depend on profit-driven organizational behavior. Foreknowledge of brand
killing defects often fails to motivate governance actions to mitigate them
when profits are risked. Boeing's MCAS, Volkswagen's defeat device,
Morton-Thiokol's (https://en.wikipedia.org/wiki/Thiokol) SRB O-ring, and
Takada's airbag inflator serve as significant examples.

Should product defect disclosure processes, purposely delayed to protect
profits, be penalized? The threat of a stiff fine, and civil or criminal
prosecution, may restore product safety disclosure fidelity and reaffirm
responsible corporate citizenship.

Risk: Product defect disclosure latency