Company Culture and Leadership

A fish rots from the head

In 2015, Volkswagen’s carefully crafted image as a leader in green technology unraveled in one of the biggest corporate scandals of the decade. The company had been secretly installing software in its diesel cars to cheat emissions tests, allowing vehicles to pass environmental standards while spewing harmful pollutants at levels up to 40 times the legal limit. While engineers were initially blamed, investigations revealed that the culture of deception had been fueled by leadership’s relentless pressure to deliver results, no matter the cost. The Volkswagen scandal is a stark reminder that when leadership turns a blind eye to ethics, it can lead to catastrophic consequences for both the company and the world around it. This story is not just about software manipulation; it’s about how a toxic culture at the top can poison the entire organization​

In the world of business, company culture is like an ecosystem – dynamic, interconnected, and profoundly influenced by its leaders. A phrase that’s been used throughout history, “the fish rots from the head,” perfectly encapsulates a truth many leaders are hesitant to confront. Company culture, for better or worse, is a reflection of its leadership. Even when those at the top aren’t directly involved in toxic behaviors, the culture they foster can allow such behaviors to thrive unchecked.

Let’s look at another powerful and disturbing case study – the eBay stalking scandal. In 2020, a group of eBay executives were charged with masterminding an aggressive and deeply unsettling harassment campaign against a Massachusetts couple who ran a small e-commerce blog critical of the company. This wasn’t a case of mere online trolling or corporate sniping, it was a carefully orchestrated effort to terrorize the couple in their own home. Led by eBay’s head of security, the campaign involved sending grotesque and disturbing packages to the couple: live cockroaches, a bloody pig mask, funeral wreaths, and even a book on surviving the loss of a spouse. The harassment escalated beyond unsettling deliveries. The executives sent anonymous threatening messages, and hired private investigators to stalk and surveil the couple, going so far as attempting to install a GPS tracker on their car. In July 2024, the final defendant in the eBay cyberstalking case, Brian Gilbert, was sentenced for his role in a harassment campaign targeting a Massachusetts couple critical of eBay. Gilbert and six other former eBay employees were convicted for their roles in sending disturbing items, threatening messages, and conducting surveillance on the couple. The case revealed a culture of intimidation within eBay’s security team. eBay itself was fined $3 million and placed under a compliance monitor as part of a deferred prosecution agreement.

What made this even more shocking was the coordination behind the attacks, it was not the work of rogue employees acting independently, but rather a concerted effort led by senior figures within the company’s security team. Yet, this raises the larger question: where was the CEO, and how did eBay’s leadership allow such a toxic and hostile culture to take root? While top executives weren’t directly implicated in the harassment, the scandal underscores how a permissive corporate culture can enable unethical, and even criminal, behavior. Leadership sets the tone, and in this case, a culture of aggressive tactics and unchecked power spiraled into a full-blown criminal enterprise right under their noses. This case demonstrates how leadership’s attitude toward competition, dissent, or criticism trickles down, and without active intervention to foster integrity and accountability, can lead to gross misconduct.

Let’s unpack how leadership allowed this culture to take root and how other companies can avoid a similar fate. Culture in any company is an unspoken contract – behaviors are not only shaped by what leaders say but more importantly, by what they tolerate. A permissive attitude toward unethical behavior sends a message louder than any corporate value statement. In some organizations, the emphasis is on transparency and trust, creating a psychologically safe environment where employees feel empowered to speak up. In others, an unspoken culture of intimidation or the suppression of dissent can take hold.

In the case of eBay, it appears that a leadership focus on "winning at all costs" created an environment where aggressive, unethical tactics were tacitly accepted. Employees don’t need explicit instructions to cross ethical lines; they look to their leaders’ behaviors and attitudes. At eBay, the culture seemed to prioritize silencing critics rather than engaging with them constructively. This eventually led to criminal behavior.

What Leaders Can Learn

• Accountability from the Top: Leaders must recognize that their actions (or inactions) set the stage for the entire company. A failure to explicitly condemn unethical behavior or take action against even minor infractions can lead to larger, systemic issues. Just as I emphasized to my team at Etsy, leaders need to actively create a safe space for open discussion, without fear of retaliation.

• Proactive Engagement: A culture of fear often grows when leaders are disconnected from the ground level. Ensuring that all employees feel heard can prevent small grievances from snowballing into major scandals. At Etsy, we placed a premium on feedback loops, ensuring that employees at all levels could voice concerns and feel confident they would be addressed.

• Blameless Postmortems: When an incident occurs, like the eBay scandal, the company must evaluate how and why it happened. Instead of assigning blame to a few bad actors, leadership should take responsibility and examine the cultural factors that allowed it to fester. At Etsy, we adopted the concept of blameless postmortems to learn from mistakes without fear, focusing on fixing the underlying causes, not just punishing individuals.

• Empower Ethical Decision-Making: It’s not enough to set ethical guidelines; leaders must empower employees to make the right decisions, even in high-pressure situations. For example, at Etsy, we trusted engineers and product teams to prioritize ethical considerations in their projects. By doing so, we ensured that the decisions were aligned with both business goals and the company’s mission of keeping commerce human.

• The Ripple Effect: The consequences of leadership failing to set a positive tone can be far-reaching. In eBay’s case, not only were several employees criminally charged, but the company’s reputation was severely damaged. Shareholders, customers, and employees lost faith in the company, leading to a loss of trust that took years to rebuild.

Contrast this with companies that have demonstrated strong leadership during times of crisis. A prime example is Johnson & Johnson during the infamous Tylenol poisonings in 1982. When seven people tragically died after ingesting cyanide-laced Tylenol capsules, Johnson & Johnson's leadership, under CEO James Burke, responded swiftly and transparently. Instead of deflecting blame or minimizing the situation, the company immediately recalled 31 million bottles of Tylenol, costing them over $100 million. They prioritized public safety by advising customers to stop using the product and developing tamper-proof packaging to prevent future incidents. Burke’s ethical and decisive response not only saved the company’s reputation but set a new standard for corporate crisis management. Within a year, Tylenol had regained its position as the top-selling pain reliever, proving that strong leadership can turn a potential disaster into a story of resilience and integrity.

The phrase "the fish rots from the head" is a stark reminder that leadership’s actions – and inactions – have consequences. The eBay scandal should serve as a cautionary tale for all leaders. It’s not enough to merely distance oneself from scandals or wrongdoing. Leaders must actively shape the culture they want to see in their companies. This requires vigilance, engagement, and above all, a commitment to ethics over profits.

Warren Buffett, famously said, “In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you.” Leaders must walk the walk, and not just talk the talk, when it comes to ethics. Only by fostering a culture of integrity from the top can companies ensure that their employees, and their company as a whole, remain on the right path.