Ethical Dilemma: Volkswagen Case Study and Comparison of Mondragon Cooperative Corporation with Wesfarmers

This report analyzes the ethical dilemma of Volkswagen and recommends suitable normative theory. It also compares Mondragon Cooperative Corporation with Wesfarmers for the similarities and differences for determining how the treatment of stakeholders impacts the ethical outcomes.

RUNNING HEAD: ETHICAL DILEMMA 1
LETTER OF TRANSMITTAL
Date
Mr. XYZ
Chief Executive Officer
Volkswagen
Dear Mr. XYZ,
Enclosed is the report on ethical dilemma along with the relevant recommendations. The
problem is deeply analyzed along with the application of suitable normative theory. All the
requirements and instructions have been followed in the preparation of this report.
Sincerely,

Ethical Dilemma 2
Ethical Dilemma
Submitted by:

Ethical Dilemma 3
EXECUTIVE SUMMARY
Ethical dilemma is a situation where an individual is unable to make a choice in between the two
given options. This report focuses on the ethical dilemma of Volkswagen by deeply analyzing
the problem and choosing the appropriate normative theory. Some recommendations have also
been made with the help of which ethical dilemmas can be managed and the effectiveness of the
organization can be maintained.

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CONTENTS
Introduction....................................................................................................................................5
The Problem...................................................................................................................................5
Choosing appropriate normative theory.....................................................................................5
Application of that theory.............................................................................................................6
Recommendations..........................................................................................................................7
Part 2...............................................................................................................................................7
References......................................................................................................................................12

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INTRODUCTION
Ethical dilemma is a situation where an individual is unable to make a choice in between the two
given options. In such a case it is evident to resolve the situation and look for the best alternate
issue. Ethical dilemma is assumed as a situation therein it is not possible for an individual to
deal with the situation in a better way. Throughout the history of ethical cases there has been
number of cases relating to ethical dilemma. In recent years Volkswagen has been facing the
ethical issues. Volkswagen installed software in the cars which allowed them to falsely pass the
emission tests. It was later on admitted by Volkswagen that the tests were deliberately cheated
and approximately 11 million cars across the globe were fitted with such defeat devices
(Yakowicz, 2015.
THE PROBLEM
The ethical dilemma found in this situation is regarding the problem where one is unable to
tackle the situation. All the cars are tested against Environmental Protection Agency (EPA)
standards where the cars are placed on rollers for performing a number of specific maneuvers
prescribed by federal regulations. Such tests provide emission data to the testers. Volkswagen
had to pass such tests in any way. The dilemma here was regarding passing the tests by
complying with the standards to achieve the organizational goals. However, unethical behavior
was adopted by Volkswagen. The knowledge regarding such tests was utilized by Volkswagen
by teaching its cars when to behave more cleanly. Therefore, defeat devices were fitted in the
cars which had the capability of understanding that they were being tested. The engine
performance was automatically adjusted for passing the test as per EPA standards. The defeat
devices get active by way of measuring the speed of vehicle, duration of running the engine and
esoteric factors including the steering wheel’s position and barometric pressure (Peterson &
Fung, 2015).
CHOOSING APPROPRIATE NORMATIVE THEORY

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The ethical theory significant in this situation is the Utilitarianism Theory. According to this
theory every action has a reaction. This means that the company should carefully implement an
action. This will certainly allow in focusing the better results and arranging the significant in
order to manage the effectiveness in an organization. The purpose is to sustain the challenges and
manage an appropriate way to gain better results (SUNG, et al 2017). The overall purpose is to
attain effective role and managing progressive nature. It is important to implement an effective
way to understand the effective way and managing the policies in order to arrange goals. This
decision of Volkswagen was not in the best interest of its shareholders and its customers. The
changes in the policies have a better role and gaining effective focus. This is important to
manage the effectiveness of ethical dilemma. It is important to manage the focus in order to
maintain the focus in order to gain adequacy (Eagle, 2015). It is certainly necessary to gain
better role and responsibility. The purpose is to attain the focus and managing the sustainable
objectives. It is important enough for deriving the better focus and governing the ethical policies.
The major concern is to understand the policies and maintaining the requisite goals. It is
therefore important to attain significant goals and managing the productivity. It is certain that the
organization has to derive effectiveness in order to measure the outcome (Crane and Matten,
2016).
APPLICATION OF THAT THEORY
The delivered objectives are important enough to gain effective results. This is important to point
out better roles and duties which will certainly help in gaining effective roles. It is therefore
important to sustain the challenges and managing the report in order to attain significant factors.
The necessary focus is to maintain the organizational role and putting forward an example which
will allow in maintaining the organizational pace. It is certain for the company to focus on
delivering the result and attaining the role in order to maintain the results. The ethical goals and
dilemma has to be regarded as a significant parameter in order to retain organizational results. It
is therefore significant to gain adequate results and managing the information in a way that allow
in attaining results. The issues are relatively important to be managed in order to gain adequate
results. For the reason, it is important to engage in a better process and growth.

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RECOMMENDATIONS
The larger problem with the scandal was the unethical behavior. These types of situations
directly create a problem in the mind of the people and cause a widespread issue. The validity of
the situation has a direct impact on the growth and sustainability. Such incidences has affected
the large sized organizations and created wide-gaps. It is therefore important to manage the
effectiveness of a company by securing the rights and implementing the better roles and striving
for deriving a tool which will allow in reducing such cases. These situations have a direct impact
on gaining the effectiveness(Gogoll and Müller, 2017). The overall purpose is to manage the
goals. The ethical dilemma has an impact on the development of innovation and arranging the
significant role. The purpose is to manage the effectiveness and arranging the functions in order
to attain the definite goal. It is necessary for managing the productivity and attaining the best
possible results. The ethical dilemma has a direct impact on the development and sustainable
issues. It is important to manage the effectiveness and attaining the best possible way. The
changes are evident to maintain the organizational affair and managing the situation in a way that
allow in maintain a balance. It is important to understand the ethical dilemma and to implement a
theory that will allow in managing the organizational results. The evident focus is to manage the
results and manage the better results. This is important from the point of view of gaining
adequate results and progressing in a way that allow in maintaining a balance.
PART 2
The existing corporate world is very intense and impacts the national economies and their social
relations. Be that as it may, shape the exercises of the enterprises themselves. Adherence to
social responsibility by the corporates has become a challenge for the competitive business
environment. The issues that concern employees and shareholders are not taken into
consideration and preference is given only to profit maximization. This essay focuses on the
comparison of Mondragon Cooperative Corporation with Wesfarmers for the similarities and
differences for determining how the treatment of stakeholders impacts the ethical outcomes.
Wesfarmers is the conglomerate organization working in ethical way by keeping people
interests. Wesfarmers belief in openly listening to their shareholders as it is important for

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understanding their changing expectations. The interests of the customers are taken into
consideration at group level by Wesfarmers. Up- to- date information is provided to the
shareholders along with the ability to make active participation in the shareholder decisions of
Wesfarmers. Communication is also encouraged between shareholders, board, group’s
management, media, debt investors and the broader investment community. Wesfarmers belief
that the company can function flawlessly only when due importance is paid to the issues that
concern employees and shareholders. Shareholder feedback is responded with the help of
dedicated resources in their corporate office. Communication is maintained with the shareholders
through their annual general meeting and email. They listen to their institutional investors at
operations and strategy briefing days, ad hoc meetings and periodic site tour to their operations.
A number of briefings are held every year which are related to the half- year and full- year
results of Wesfarmers along with their first and third quarter sales results. Such briefings are
made available to the shareholders for listening live or through a public webcast which enable
investment analysts to ask relative questions from Divisional Managing Directors or Finance
Director. Moreover, briefings are held by Managing Director and Finance Director, both offshore
and domestically, with representatives from major broking groups and investors of Wesfarmers.
The feedback and the areas of interest to shareholders and investors are utilized as a guide for the
purpose of making future market communications (Wesfarmers, 2015).
Wesfarmers make every possible effort for promoting an open culture through which direct
feedback from employees is encouraged and values are empowered. Employees are provided
with a number of channels for the purpose of receiving their feedback including personal contact,
divisional employee surveys, email, website and their whistleblower process. The feedback
obtained through employee surveys along with the individual concerns are duly investigated and
addressed.
On the other hand, Mondragon Cooperative Corporation is an excellent example of an effective
organization through cooperative principles. Democratic and participatory decision making is
encouraged within the entity of Mondragon Cooperative Corporation (Mondragon Corporation,
2018). Each worker is provided with one vote irrespective of their share of capital. The most
important characteristic of this organization is its concern for its employees who are the
shareholders of the organization and get to receive a part of the profits in addition to their regular

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salaries. This leads to the prevention of capital- labor conflicts as the employees are treated as
the joint owners. Such capital- labor conflict arises in cases where interest conflicts arise
between employees and shareholders. The corporate culture of Mondragon Corporation
promotes values such as fair distribution of wealth, social responsibility, commitment to
management and cooperation (Amaeshi, Nnodim & Osuji, 2013). This leads to commitment by
the employees to perform their work in the best possible manner in order to increase the profits
of the corporation which will significantly provide benefits to them. Moreover, the members are
provided with the absolute authority over the assets of the cooperative. For the effective
coordination in the operations, an agreement is made among the members for sharing the
respective areas of management so that the interests of the stakeholders can be taken into
consideration (O’ Riordon, 2017).
There are a number of significant differences between Mondragon Cooperative Corporation and
Wesfarmers. Mondragon Cooperative Corporation provides equal voting rights to all the
members irrespective of shares held. However, this is not the case in Wesfarmers. Wesfarmers
makes the distribution of voting rights in accordance with the capital held. This leads to greater
distribution of power to the founding members who have invested substantial amount of capital
(Phillips, 2011). Wesfarmers provides an opportunity to provide feedback regarding their
individual concerns but still it is not so effective like in case of Mondragon Corporation. This is
due to the fact that there is non- existence of equal treatment in the organization. Moreover,
Mondragon Corporation is engaged in the creation of employment rather than its elimination. On
the other hand, Wesfarmers has adopted cost cutting approaches by outsourcing its operations to
low wage countries which is resulting in loss of jobs (Blanpain, Bromwich, Rymkevich &
Senatori, 2011).
Despite such differences, there are some similarities between Wesfarmers and Mondragon
Cooperative Corporation. Both the organizations are involved in giving due importance to its
employees and shareholders. Moreover, both the entities have equal involvement in the programs
related to social responsibility within the communities in which their business is conducted
(Jutterstr”m & Norberg, 2013.). Wesfarmers has entered into community partnership programs
that promote education facilities for indigenous groups. Similarly, Mondragon Corporation is

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also engaged in the education promotion activities which are resulting in the betterment of labor
supply in the areas where its business is conducted.
The adoption of cooperative approach to business allows the balancing of the interests of
different stakeholders for the purpose of achieving sustainable growth. The ethical outcomes of
the treatment provided to the stakeholders in Mondragon Corporation are different for different
stakeholders. As far as the employees are concerned, their active involvement in the decision
making process of the corporation and participation in the distribution of profit inspires them to
commit to the culture and values of the entity thereby avoiding cases of imprudent practices.
Moreover, in respect to shareholders, equal opportunities for engaging in the management of
entity and fair distribution of profits between the members facilitates the avoidance of
establishment of major shareholder group that controls the operations of the entity. Good quality
products are ensured by the commitment of the corporation to social responsibility (Das, A
2014).
On the other hand, the capitalistic approach adopted by Wesfarmers resulted in negative
outcomes. Wesfarmers continued maintaining profits by outsourcing its operations to low- cost
countries which led to relocation of jobs and have dented its repute. The ethical outcomes to
employees are visible in two aspects. Firstly, the lack of adequate representation in the
organization’s ownership, there is no commitment on the part of employees towards the business
practices thereby enhancing the susceptibility of entity ethical pitfalls. Lacking commitment to
the values of the corporate may result in imprudent practices that damage the reputation of the
entity (Crane & Matten, 2016). Secondly, the focus of Mondragon Corporation on profit
maximization by adopting cost cutting measures is adversely affecting the economic wellbeing
of people whose jobs are being outsourced. The interests of the investors are aimed to be met by
ignoring other stakeholders which is subsequently leading towards the social inequality in
society. The lapses in social aspects may result in failing of Wesfarmers to attract the
shareholders which might influence its profitability in future (Fernando, 2012). The
establishment of balance between conflicting stakeholder interests is a major challenge due to the
fact that profit maximization is pursued by the investors in a capitalist economy.

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Therefore, it can be concluded that an important role is played by the stakeholders in the growth
of an entity. This in turn creates a requirement for the entity to establish an effective balance
between the interests of different stakeholders. Capitalistic entities have the capability of
achieving such balance with the help of programs relating to corporate social responsibility. The
differences and similarities between Mondragon Cooperative Corporation and Wesfarmers
provide that there are significant ethical outcomes of the type of treatment given by the entities to
their shareholders and employees. The reputation of both the entities depends to a great extent on
how they manage the interest of their stakeholders. Moreover, the commitment of the employees
towards the values of corporate automatically enhances when their interest is taken into
consideration. Therefore, in order to manage the effective functioning of an organization, issues
concerning employees and shareholders are of critical importance.

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REFERENCES
Amaeshi, K., Nnodim, P. and Osuji, O. 2013. Corporate Social Responsibility,
Entrepreneurship, and Innovation. Routledge.
Blanpain, R., Bromwich, W., Rymkevich, O. and Senatori, L. 2011. Rethinking Corporate
Governance: From Shareholder Value to Stakeholder Value. Kluwer Law International.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press
Das, A. B. 2014. Ethical Consequences: Treatment of Stakeholders in Capitalistic Approach and
Cooperative Approach to Business. European Journal of Business and Management. vol 6(23).
pp. 64-67.
Eagle, L., 2015. Introduction to Marketing Ethics. Marketing Ethics & Society, p.1.
Fernando, A. C. 2012. Corporate Governance: Principles, Polices and Practices, 2/e. Pearson
Education India.
Gogoll, J. and Müller, J.F., 2017. Autonomous cars: in favor of a mandatory ethics
setting. Science and engineering ethics, 23(3), pp.681-700.
Jutterstr”m, M. and Norberg, P. 2013. CSR as a Management Idea: Ethics in Action . Edward
Elgar Publishing.
Lester, P.M., 2018. Ethical Issues and Analytical Procedures. In Visual Ethics (pp. 15-31). Focal
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Mondragon Corporation. 2018. Commitments, [Online]. Available at: https://www.mondragon-
corporation.com/en/corporate-responsibility/commitments/ [Accessed on: 16 April 2018].
O’ Riordon, L. 2017. Managing Sustainable Stakeholder Relationships: Corporate Approaches
to Responsible Management. Springer.

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Peterson, A. and Fung, B. 2015. The tech behind how Volkswagen tricked emissions tests,
[Online]. Available at: https://www.washingtonpost.com/news/the-switch/wp/2015/09/22/the-
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Phillips, R. A. 2011. Stakeholder Theory. Edward Elgar Publishing.
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