Corporate Governance and Ethics

Corporate Governance and Ethics
1

Contents
Introduction................................................................................................................ 3
Description of the Organization & the Key Issues...................................................3
Part 1: Critical Analysis of Ethical Issues Involved in Carbon Emission Scandal of
Volkswagen by the Application of Conventional and Islamic Ethical perspective.......4
Utilitarianism Ethical Theory................................................................................... 4
Deontological Ethical Theory...................................................................................5
Virtue Theory........................................................................................................... 5
Part 2: Analysis of the Effectiveness of Corporate Governance Structure of
Volkswagen................................................................................................................ 6
a) Efficiency of Corporate Governance Structure of Volkswagen in comparison to
other similar corporations....................................................................................... 6
b) Governance structure suggested to Volkswagen to improve its corporate
governance............................................................................................................. 7
Conclusion.................................................................................................................. 8
References................................................................................................................. 9
2

Introduction
This report is undertaken for conducting an analysis of the corporate governance issues
involved in the case study of ethical scandal of Volkswagen. The case study relates to the
emission scandal that has occurred within the Volkswagen in the year 2015. The main cause of
the occurrence of the scandal is the lack of adequate corporate governance structure and ethics
within the Volkswagen Company. The analysis of the case study is carried out by analyzing the
ethical issues that are involved in the carbon emission scandal of Volkswagen through the
application of adequate conventional and Islamic perspective of ethics. In addition to this, the
corporate governance structure of the company is also evaluated to determine its effectiveness
and comparing it with other similar corporation. Lastly, it also provides suggestions to the
company for the adoption of the best governance structure for the company Volkswagen.
Description of the Organization & the Key Issues
Volkswagen is an internationally recognized German company that is known as ‘People’s
Car’ and has been established in the year 1937 and is operating within automotive industry. The
brand is known to be one of the most successful carmaker at a global level and is involved in
producing vehicles in about 150 countries across the world. The company has achieved a
distinctive position across its customers at a global level owing to its mass production of low
priced people’s car. It comprises of about twelve brands for selling its passengers cars that
includes Audi, Lamborghini, Porsche, Skoda and others (Mansouri, 2012).
As analyzed from the case study of Volkswagen, the company’s brand image has been
negatively impacted to a large extent owing to the occurrence of emission scandal in which it is
alleged to cheat on its carbon emissions as identified by the EPA (Environment Protection
Agency) (Emissions Scandal, 2016). The tests conducted by the International Council on Clean
Transportation (ICCT) who has carried out independent tests in relation to the carbon emissions
of the vehicles of the company. The results have indicated that about 482,000 Volkswagen diesel
cars in the USA are exceeding 40 times lethal nitrogen oxide fumes as compared to permissible
limits. The company has accepted that it adopted the use of a physical device known as cheat
device for escaping from its emission test. It adopts the use of computer software for identifying
when the test is being carried out and send the signal for reducing the carbon emission. As such,
3