Business Ethics and Corporate Accountability

This assignment delves into the critical topic of business ethics. It encourages students to analyze various ethical issues faced by businesses, drawing upon a range of academic sources including books and journal articles. The focus extends to understanding the challenges and responsibilities associated with corporate accountability, examining how organizations can navigate ethical dilemmas effectively. Students will be required to critically evaluate different perspectives on business ethics and demonstrate their comprehension through informed analysis.

Volkswagen, Australia
Essay: Ethics Leadership and Decision Making

Various ethical variants are attached to the business decisions undertaken by major
companies. This is due to the sole reason that the impacts and outcomes of those decisions
are likely to affect the stakeholders in various ways and will articulate different ethical values
of the company (Ford & Richardson, 2013). Volkswagen is facing several issues regarding
its unethical behaviours. Volkswagen developed a software named defeat device was
installed in 11 million vehicles under the brand of the company, and were sold globally.
Consequently it leads to immense vehicle recall and thus company accepted their mistake and
held guilty of conduct which astonished several stakeholders.
ETHICAL DILEMMA FACED BY VOLKSWAGEN
EMISSION-CHEATING OF VOLKSWAGEN
Issue
During September 2015, Volkswagen was held to be making use of fraud software in order to
mislead American regulator, EPA (Environmental Protection Agency) on the release test of
diesel cars. Further, the software enables the cars to execute well on those test comparatively
they usually perform on the road. Later than, the company accepted that the installation of the
software was done in about 11 million vehicles globally.
THEORETICAL CONCEPTS FROM MANAGERIAL ETHICS
FOR ASSESSING THE DILEMMA CRITICALLY
Tucker’s five-question model
This model is conceptually different from other models of ethical decision making;
however, it is a powerful tool for determination of the outcome that is most ethical in a given
situation (Frederickson & Ghere, 2013). It might be possible that not all of criteria prescribed
by the model seem relevant to every ethical decision of an organization. If the scenario is
assessed using another model like the AAA model, the indications and outcomes may differ.
As per the views of Ferrell & Fraedrich, (2015) in addition, this model is more constructive to
examine situations which are corporate instead of professional or individual situations. It
requires a little more thought to apply the Tucker’s model s compared to other such models
like the AAA models. This is because the majority of the questions associated with the model
require considering other related things as well (Crane & Matten, 2016). The questions

related to profitability, reasonability, and comparison often require considering other options
as well. The application of same on the present case of VW has been explained below:
Will it result in profitability
Is it legally approved
Is it fair
Right or wrong
Does it sounds sustainable and
environmentally friendly
Yes, it will increase sales and revenue in
terms of the vehicles sold by the company,
the software will reduce research spending
and activity development while driving the
diesel vehicle markets of United States.
No, because it a breach towards Clean Air
Act of United States
No, as it will provide false information to
the owners in their transactions, along with
parody. The production team claimed that
cars were developed with eco-friendly
engines but actual emission was excessive
in comparison to the claim made by the
company
It is wrong, as they are cheating on
production tests and parody to the owners
of vehicles.
No, actual emission was excessive in
comparison to the claim made by the
company.
The above evaluation of the company’s decision through the Tucker’s Model does not
reflect ethical behaviour. The company chose a fraud software regarding the environment;
this decision although increased their revenue but at the same time violated all other rules and
expectations (Thompson, 2015). The company breached the laws on one side and on the other
put the environment at stake by causing pollution. The company also in a way cheated on
their customers. This decision may bring some short-run benefit, however, in the long run,
may be detrimental to the image of the company.

Dr Simon Longstaff stated that considerable losses take places when technical mastery is
separated from ethical control. Human Resource has a significant role to play in filling up the
gaps in an organization which operate on the basis of standard norms and regulations and
organizations run by practical implementation of principles and values. This gap can be
massive for the organization to fall through (Franklin, 2015). What is right and what is wrong
decisions can be complex, but a clear ethical statement of ethical theory can assist the leaders
of the organization to make better decisions. It is significant to realize theories, their use and
their applicability. An example would be taken into account if or if not leader of Volkswagen
used a similar structure to justify. Rules and codes are considered as hardware in authority;
however, software’s quality is crucial (Herlihy & Corey, 2014). The key is to consider the
applicability of rules in order to create a healthy environment where individuals can face the
systems without any threat and compromise. Just the rules will keep the organization or
individual’s safe (Herlihy & Corey, 2014).
Weiner’s attribution theory
This theoretical framework was developed to ascertain the reason behind the behaviour of
people or to ascertain the cause of an event or behaviour. Presently, it is very influential in
social psychology (Bonnefon, Shariff & Rahwan, 2016). The three main variant which is
assessed as attribution is:
 Observance of behaviour.
 It must be ascertained that behaviour is intentional.
 Behaviour attributed as internal or external causes.
In the present case of VW, the theory will assist in understanding the crisis management
strategies applied by the manager of VW for reducing the impact of emission relating to the
scandal regarding customer response and legal liability. Volkswagen has a clear and
descriptive policy of business ethics but in the recent years company had faced significant
scandals regarding contradiction of ethical behaviour, irrespective of a clear statement of
ethical behaviour in their management literature, in accordance with the industry standards
complied by all companies operating in the sector, Volkswagen went through a really bad
situation. In spite of having clear public clear codes, why there is need to contravene personal
codes and conducts by the leaders. Attributed theory assisted in understanding the reason
behind the happening of an event in the company (Johnson, 2017 ). It was assessed that as

distinctiveness was low and consistency was high; the same resulted into internal disposition.
However, the theory does not assess the implication of casual attribution (Iphofen, 2016 ).
Internal and external attribution along with action plan
Mainly, two kinds of attribution have been established i.e. external attribution and internal
attribution (Mikesell, Bromley & Khodyakov, 2013). External attribution assesses the
behaviour is interpreted in accordance with situational factors. In accordance with Pollock
(2014), on the contrary, internal attribution where behaviour is assessed in accordance with
internal characteristics. Through the application of this theory in VW case; it has been
assessed that manager should pay more attention to understand the cause of behaviour of
employees. As after assessing the reason they will be attained more appropriate information
relating to the manner in which business works and manner of taking a future decision.
Managers will be also able to resolve the arsing future contradictions as well as existing issue
through emphasizing on internal and external attributes of organization (Parrott, (2014 ). The
theories can also be applied in information management for assessing the manner in which
organization operate (Pardo & Siemens, 2014). Thus, manager of VW will be able to
ascertain the areas which require being a focus for resolving the existing issues. Firstly the
behaviour should be assessed; then the person should be made believe that he behaved
intentionally and eventually the person requires to whether the behaviour was due to coercion
(Shapiro & Stefkovich, 2016). Preventive and punishment measures are available for
preventing the reoccurrence of the event (Shapiro & Gross, 2013). Thus, it is necessary to
ascertain which should be applied. In corporative case, due to punitive actions; an individual
might behave with regression and boycott the policies and principals of organization (Morris
& McDonald, 2013). It can be concluded that this action plan will provide assistance in
creating a positive environment and resolving existing issues in more appropriate manner.
Consequence of misconduct
The share price of the company collapsed by 1/3rd ever since from September 2015 and
management have to pay billions of fines and penalties to United States regulators regarding
claims made by car owners. Further; company declared a US$7.3bn terms to cover costs of
the dishonour, however, analyst tends to believe that actual amount can be much better and
lacked loyalty. At last; on 23 September 2015, Martin Winterkorn (Chief executive) resigned

Figure 1: Weiner's Attribution Theory
(Source: Slade & Prinsloo, 2013).)
The response of media on the issue and its impact on the image of the company:
IEEE Spectrum announced the following:
Yotam Lurie, an old business ethics lecturer at Ben-Gurion University said that this is
scandalous, as the Volkswagen’s engineers of software ignored and overlooked their
responsibility regarding fiduciary being as professionals. Professionals have a responsibility
to guarantee safety and security to their stakeholders, but in this event safety towards the
environment is non-effective.
The recent issues paper by Lurie on Professional Ethics meant for Software Engineers was
heartwarming in this case. Lurie says that the company selected software is not shocking as
the software provide itself to exceptional implementations and is more complex to explore
after it the hardware was altered. He further makes a comparison of the engineers to the
Enron case’s accountants who worked together with the company in order to b8uild an
accounting ambiguity but failed to the safe public by not offering systematic auditing.
BBC News reported that-

What began in the United States has started spreading in all over the countries. The United
Kingdom, Canada, Italy Germany and South Korea are implementing investigations. ‘It is
situation monitoring’ says Australia. All around the world, policy-makers, regulators and
groups are putting queries regarding the legitimacy of Volkswagen test of emissions (Shaw &
Barry, 2015 ). Finance minister of France Michel Sapin says that, the requirement of Europe-
wide is there to assure the public again.
Not only Volkswagen has faced these serious claims in regards to their choices but also
Toyota, Ford had a competitive advantage while talking about their choices in regards to their
automobiles.
Figure 2: Types of Unethical Behaviours in Workplace
(Source: Wachs, 2017)
CRITICAL ANALYSIS OF THE MANNER IN WHICH IT
INFLUENCE MANAGERIAL PRACTICES OF THE COMPANY
Ethical values are the standards of our environment and society that have been
accepted by the society on the whole. As per the views of Zadek, Evans & Pruzan, (2013),
ethical standards generally referred to as mores, which refers to what the society accepts as
good and how a company behaves without imposed rules and regulations. Within our social
structure, rules are often imposed on those who do not follow the accepted ethical standards.
The laws dictate penalty for those are found guilty of unethical behaviours. Ethical thinking
on the part of the management involves a complicated process to be considered for evaluating

the impact of the company’s actions on the individuals or any group which the company
serves (Weiss, 2014). ). While most of the decisions of the management are routine, they can
face an ethical dilemma all of a sudden when abnormal situations occur, which require an
immediate response. A choice and balance are required for forming the groundwork of ethical
decision-making; it is a steer to abandon unethical choice in favour of ethical ones.
Figure 3: Major Reasons for Unethical Behaviours displayed by the company
(Source: Vidya, 2013)
VGA (Volkswagen Group of Australia) published a statement showing potential
towards the up gradation of critical software for 77,000 vehicles. The company also
mentioned that they will contact to customers when their vehicles need to get updated, but
that car owners need not a concern for safety, effectiveness or performance of their vehicles
in the meantime. As per views of Christine (2014), this process will not create any
materialistic effect on the performance of the vehicle, its characteristics, fuel saving and
operated in accordance with the emissions standards. Customers have to consider this
significant thing that now vehicles are safe and sound and will stay like this only after their
updating. At present, the company released that will recall Amarok ute’ owners to contact
suppliers, so as updating can be performed. The existing action plan of the company says that
VW will not put any comment regarding owner’s compensation; however, Bartsch stated that

Australia’s situation must not be compared to the United States. The prominent variation of
US with Australian regulations went considerably unreported. United States regulation is
different in its own way and is very considerably low that the standards of Europe on the
basis of NOx levels.
Figure 4: the legal and Ethical perspective of the Volkswagen Scandal
(Source: Chris, 2015)
CRITICAL ANALYSIS OF JUSTIFICATION OF ETHICS
EVALUATION OF VOLKSWAGEN
The action of Volkswagen in the whole case is combatively low than justifiable. The
entire scandal can be prevented if the company would have spent more efforts, money and
time on developing an environmental and cleaner diesel engine; however, the priorities of the
company were based on the sales instead providing quality diesel engines. Volkswagen
compromised its integrity and reputation for something that can be effortlessly addressed.
Not only they sacrificed their customer but also lost the trust from investors and government.
From the start, VW and its regulators must be moral enough to step into high paths, even
though the same was against their personal beliefs. Ultimately, the company must have
ambitions and behaviour similarity in itself, employees, regulators and board members.
Company Action Plan
The management and the owners have to look at their decision through a perspective
that considers a growing understanding of how ethical decision making is distorted through

cognitive biases. The scandals of Volkswagen gone public since May 2014, and from that
period they started taking actions so as to correct the situation as best as possible. $15 billion
has been kept aside by Volkswagen in order to resolve claims in the US. In addition to, the
company has several action sources for the customer base, brand name and year of concerned
car, also the ownership type. One choice is the $10 billion (strategies related to buyback)
been accepted by the District Court Judge of United States. This can conceal approx 475,000
vehicles that contain 2liter inbuilt engine and buyers can obtain among $12,500 and $44,000,
and leasers can obtain about $4,900. The second choice is to just keep their vehicles if
customers choose to comply with this approach; they will get up to $5,000 and $10,000 so as
to compensate for the reduced current value of the depreciated vehicle. Further, they can also
take their vehicles to Volkswagen dealers to obtain emanations and that too without any
payments. Further, a multifaceted system that will provide payment to the owners of 2-liter
and 3-liter diesel engines. consumers owning a 2-liter vehicle can get $500 on the (prepaid
VISA card), and a cash card of $500 legitimate at dealerships of Volkswagen, also a free of
charge 24-hour roadside help for 3 years.
For the purpose of earning the trust of investors, stakeholders, government and
customers, Volkswagen is required to get more truthful and clear regarding the details of their
existing and future vehicles. This can include issuing of thorough reports in regards to their
emission test of cars and their party information so as to ensure data legitimacy. Yearly
Check-ins by the government can also work as justifiable. It is very complicated to earn the
trust of stakeholders once it gets affected by unethical behaviour. However, if the company
adopts the strategy of commitment and dedication towards the stakeholders as well as the
environment it may be able to fix the unethical behaviours it followed in the past.
Volkswagen can take a step ahead in the positive way of wiping out the majority of the top
level executives. This will enable the organization to get a new start with a clear management
face. At present, the goal of Volkswagen is to provide eye-catching, harmless and
environmentally friendly vehicles with a great competitive edge and set of class standards.
Thus, the company has given its full and has done a good job regarding their creation of
various customer programs and if they maintain this in the same way then as they are now,
then they can move on from their past scandal to start a great future.

Figure 5: Decreased Share Price of Volkswagen due to unethical behaviour
( Source:
Unethical behaviours by a company can be a curse for any workplace (Allen
Fitzhugh, 2015). Such behaviours displayed by a company can damage the credibility of the
company in the long term, which may ultimately lead to losing customers and may result in
shut down of the company. However, the owners and the management teams can work
together with other employees for the purpose of rectifying and preventing unethical
behaviours. Defining what encompasses of ethics is a matter that creates significant
differences in thought and debate. Business ethics are not only defined by any law or religion
and its not even about a person's beliefs. The concept of business ethics is all about how a
person who behaves ethically follows the standard of right and wrong when the matter is
concerning the society’s fairness and rights.
Thus, it can be concluded that VW has displayed unjustified behaviours in the past
which is needed to be rectified through various actions which take the company on high paths
and also improve the brand image. This can be achieved by winning the trust of consumers
and taking steps to minimize the impact of their activities on the environment. To deliver real
services for the purpose of reflecting ethical behaviour the company and its management
must add something like sincerity and integrity which cannot be bought or measured with
money. Ethical behaviour stands far above the financial benefits. The company has to face
the consequences of unethical behaviour which they have to deal with all the aspects.

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