4 September 2017

We are all familiar with the phenomenon of tunnel vision by watching thrillers on TV. A team of police officers believe that they know the person who committed a gruesome murder. All the evidence that is found suggests that this is their guy. Any clues that don’t point directly to this suspect are ignored. Everybody agrees. It’s him and we must force him to confess as soon as possible. Even if we have to torture him. ‘Groupthink’ or ‘tunnel vision’ this is called.

Managers can also suffer from it. And so can supervisory board members. This can result in very serious damage. The example of the Ford Pinto has become famous. The then management of car manufacturer Ford had set itself the goal of designing and producing a car that cost less than $2,000 within a limited number of months. They more or less succeeded in doing that. In order to achieve their goal, however, everything had to make way. Because of the time pressure and limited resources, they also made compromises to the safety of the car. Then news stories came out that, due to a construction fault, the Pinto’s gas tank could readily explode when the car was hit from behind. The car also had other safety issues. Although it was argued later that the number of deaths caused by explosions of the gas tank was not significantly higher for the Ford Pinto than for other cars (incidentally, in the case of the Pinto we’re talking about no less than 56 deaths caused by an exploding gas tank!), the car’s fate was sealed. Sales dropped to almost zero and production of the car was stopped. The car was the product of tunnel vision: the management had an idea (actually a pretty good idea!) and that idea had to be realized, no matter what. Everything else was of secondary importance. The latter was the problem.

“In the Curaçao business sector, the management and supervisors sometimes seem to suffer from tunnel vision as well. ”

In the Curaçao business sector, the management and supervisors sometimes seem to suffer from tunnel vision as well. The actual purpose of the company or foundation is made secondary to another goal as a result of collective blindness. That blindness may concern a person or another company. That other company is then located on the other side of the tunnel. The tunnel vision can also have to do with the state of the company itself. People can’t see that which is crystal clear to others. For example, the company no longer adheres to generally accepted principles of good governance or generally accepted principles of sound financial accountability or normal requirements for maintaining sound financial reserves. If the management and supervisory board members don’t see this anymore and can’t, won’t or aren’t allowed to look outside of the tunnel, then the company keeps on going full steam ahead until the groupthink is harshly put to a halt. By an external supervisor (regulator), for instance, by the government or by the press.

In most cases it’s already too late by then. The management has failed. But the supervisory board hasn’t done its job properly either. The whole reason for existence of the supervisory board is precisely to prevent tunnel vision by constantly asking constructive but critical questions about the reasons and context of the management’s actions, but also about its own actions. If you don’t do that, you’ll get the Pinto effect. Even if the tank doesn’t explode, you have become unsellable.

This blogpost is also available in Papiamentu. Click here to download a pdf version.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.