This assignment delves into the Volkswagen Diesel emissions scandal. It requires students to analyze the ethical breaches committed by the company, examining the concept of corporate social responsibility and its failure in this case. Additionally, it asks for an evaluation of how the media framed the scandal and its impact on public perception.
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ETHICS
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Table of Contents INTRODUCTION...........................................................................................................................3 TASK 1............................................................................................................................................3 A. Explanation of ethical concern and identification of key stakeholder...................................3 B. Ethical Theories......................................................................................................................6 TASK 2............................................................................................................................................8 Qualities for ethical leadership and creation of ethical organisation..........................................8 CONCLUSION..............................................................................................................................10 REFERENCES..............................................................................................................................11
INTRODUCTION Ethics refers to the moral principles which directs the behaviour of people for conducting the activities in right manner. Ethics in business are the norms, standards and procedures which must be followed by the business firms while performing their business operations in proper manner (Barry,2016). Following ethics in business is very important for the organisations in order to sustain in the market as well as to maintain the brand image. Chosen company for this assignment report is Volkswagen which is a auto-mobile firm having headquarter in Germany. The company is employing more than 302,554 employees in their 100 production facilities across 27 countries. This report willoutline the ethical dimensions of the issues along with the explanation of various factors associated with the ethical issues. Further two ethical theories will be discussed which can be applied to the given case. In the end, this report willdiscuss what makes an ethical leader andhow ethical managers manage their business to a high ethical standardalongwiththepersonalethics,unethicalorganisationsandpractices,about organisational values and methods of compliance etc. TASK 1 A. Explanation of ethical concern and identification of key stakeholder It is very essential for the Volkswagen to manufacture the cars based on the needs and expectation of the people as well as to adhere to the laws and standards set by the government or industry. This is essential for the Volkswagen in order to maintain their market position. The emission scandal of the company in the year 2015 was a major unethical act for the company which negatively impacted the organisation (Clemente and Gabbioneta,2017) . The company was using the cheat software in the manufacturing of their cars in order to avoid the pollution test. The firm was heavily criticised for using unethical practices in developing their cars by the public. The software which was used in the production of 11million diesel vehicles was against the standard set by the industry. This issues results in the bad brand image of the firm at global level (Everything You Need to Know About Volkswagen Diesel Emission Scandal,2018). Due to the defected cars, company has to withdraw these from the market and as a result, company has to face the loss of around 1.6 billion euros. An organisation needs to perform their operations in such a way that the society will get positive impact from the operations as community is also a major stakeholder of the firm. By using the cheat software in the cars, Volkswagen cars are
releasing high pollution which is harmful for the environment as well as living beings such as humans and animals. Impact on Key Stakeholders A large number of people are associated with the business of Volkswagen which are impacted by the decisions and acts of the company. These stakeholders plays a major part in the success of the firm in the marketplace. These stakeholders are also impacted by the scandal done by the Volkswagen as discussed below: ď‚·Employees:Volkswagen is operating their business operations in various countries and a large number of employees are working for the company in these countries. But, these employees are also engaged in the scandal of installing cheat software or devices in the cars with the permission of board (Fracarolli Nunes and Lee Park, 2016). After criticised by the public, these individuals or employees also lost their trust in the company as this will negatively impact their personal as well as professional growth. ď‚·Shareholders:Volkswagenisabigauto-mobilefirmhavingahugenumberof shareholders. These shareholders invested their money in the company in hope of earning good amount of money in return. However, the scandal leads to negative impact upon these shareholders. The firm faced a heavy loss due to these defected cars which also impacted the shareholders too. The shareholders did not get the favourable return upon their investment which leads to suing of company from these shareholders. ď‚·Customers:These are the stakeholders of the Volkswagen which also gets negatively impacted by the scandal done by the company. This is because the company dose not manufacturethecarbasedontheirneedsandrequirementswhichresultsin inconvenience of customers in riding these defected cars. Also the relationship of the company with the customers will also becomes negatively impacted due to not taking careofneedsofcustomerswhileprovidingthemcars.Thecompanydidnot manufactured the cars based on the expectations of the customers and provided the customers with defective cars which are impacting the environment also (Hibbert and Cunliffe, 2015). Ethical Thinking Companies such as Volkswagen needs to think ethically in order to determine the suitable procedure for accomplishing an ethical framework for performing the business operations. There
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are various examples of successful companies who followed the ethical standards whereas there are other examples also of failed companies who could not able to implement the ethical practices andstandards. The ongoing issues of environment is the major concern which is forcing companies to act ethically. It is essential for the vehicle manufacturing organisations to protect the environment from their business operations in a proper manner. One example of such thinking is of Hyundai, which introduced their Elentra LPI hybrid car. This car is the first car which is developed based on the internal combustion engine built to run on liquefied petroleum gas(Idowu, S. O. and et. al., 2013). This leads to the improved sales and profit of the Hyundai as the customers feels satisfied from the working of car and inclined towards the firm. Also companies such as Tesla, Toyota, Honda are the key players in hybrid car market which allowed them to fulfil the needs of their customers. However, there are few cases in which ethical thinking was completely absent and leads to the negative outcomes. For example: Honda has faced criticism from the people due to the malfunctioning of its airbags which even hurts several people. Ethical thinking is essential for the companies in order to check their operations while manufacturing the products. If such thing is not done by the Volkswagen then the trust of the customers will be reduced. Recommendations BY analysing the scenario of Volkswagen, several recommendation are provided to the company for developing the ethical thinking and systematic framework. These recommendation will help the Volkswagen in getting beck to the track so that company can sustain for a long period of time in future. These recommendation are given below: ď‚·It is very important for the Volkswagen to interact with their external and internal stakeholders for conveying the development of cultural ethics. This is essential for company in gaining their trust again (Lane,2016). The management also needs to communicate with their employees and must consider their views for maintaining effective and sustaining culture which can encourage the use of ethics in their working. ď‚·The company i.e. Volkswagen also needs to conduct regular audits. Through these audits, company can ensure that the ethics are being used at the workplace for eliminating the errors by meeting the ethical dimensions. Also company can hire external auditors who can determine the shortcoming and limitations of the company in meeting the ethical dimensions.
ď‚·Company also needs to develop new policies which must be followed by the functions and employees in order to meet the ethical and legal requirements of the stakeholders in order to ensure their satisfaction. B. Ethical Theories Ethical theories are necessary for the business as these provides the base to take the decisions for the competitive business environment. The ethical theories provides the base to the business firms in order to select their proper process, techniques and policies. These theories of ethics differs from each other in terms of the providing the rules for making judgements as well as to predict the results when ethical decisions are taken by the individuals. There are various theories of ethics which can be used by the individuals or business firms. The two theories which will be discussed in this report is Utilitarian and Kantianism theory. In the given case of Volkswagen, the management already has the idea or know that the engine they are putting in the cars will release a lot of pollution on the road which is comparatively more than the ethical standards set for the cars manufacturers in various countries. For following the Clean Air Act emission standards, it is very important for the diesel car manufacturer to install a software in the cars which can be used for cleaning the diesel exhaust. Volkswagen is engaged in the unethical practices as they launched the cars with the software and enabled it during the testing phase whereas when the car is delivered to customers, company disabled the software(Mansouri,2016). This things was done by the company in order to improve the fuel efficiency and performance of their vehicles. The result of this unethical practice was that the cars manufactured by the company released 40 times more nitrogen oxide into the atmosphere which is dangerous for both the environment and for health of people and animals (The Volkswagen Scandal is Not an Ethical Issue,2018).When this issued of the company was spread in the market, people criticised the company for using the unethical practices and this leads to the negative brand image of the company throughout the world. Utilitarian and Kantianism theory are being used in this work and also has been applied to the case of Volkswagen for getting the insight into the ethics which are involved in the unethical practices of the company in the given case. These theories are used for determining the extent upto which the decisions made by the company in installing the cheat software was justified and ethical. Utilitarianism
This theory states that the business organisations needs to perform the ethical practices through which they can provide the good quality products to the people for ensuring their satisfaction and goodness. This theory is focused on the results in order to differentiate the right from wrong(Pearson, 2017). This theory is belong to the consequentialist form of ethics which states that the major goal of the business firms is to determine whether the provided products and services are good for the people or not based on the results. This theory is based on the perception of the people for determining whether the performed act is beneficial or not for the business. Applying this theory to the given case of Volkswagen, it has been observed that the practices performed by the company is opposite of the utilitarianism theory. The company was engaged in the unethical practices or dishonest arrangement of using the defeat devices in the vehicles for avoiding the consequences of failure from the emissions test. This practice which is done by the company became public in the market. This is termed as a scandal for the company in which nothing good is in the interest of the customers. These actions which were performed by the company does not benefited anyone i.e. neither in the company nor outside of the organisation. Rather the customers who purchased these vehicles faced a lot of problem and issues as they did not know what to do with the defected cars. When this scandal becomes public, it results in the bad brand image of the company among the customers throughout the world which also impacted the market position of the company. For resolving this problem, the only option company has is to withdraw its defected cars from the market. The result of this was that the company spent a large amount of money for eliminating this defect in cars. These improvements or rectifications in the cars leads to loss of jobs for a large number of employees as the company was not capable of affording the billions of dollars on modifying the withdrawn vehicles. The results of unethical practice adopted by the company was that no positive results are obtained except one. This positive consequence is that the company modified its existing policies,procedures,methodsandprocessesaccordingtothecompliancesandlawsof mechanism, audit and risk management. Kantianism This theory states that the organisations and individuals needs to consider the ethical principles for taking the decisions. This theory also refers as the ethical act for treating the
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people with respect and must be equally capable of living an independent life. This theory is based on the principle that the individuals are not the source for developing the products rather they are the end for using the end products and processes (Rhodes, 2016). The aim of this theory is to determine the basic rights of people as well as to create a proper structured process for resolving the conflicts and prioritization of rights. Volkswagen was engaged in the unethical practice of installing the defeat devices in the manufactured cars of the company. The management of the Volkswagen took the decision for lying to the various stakeholders such as employees, management, shareholders, consumers, dealers and business associates. According to this theory, this act of the company was unethical in term of ethics. Company did not disclose the information regarding these operations to anyone inside and outside of the organisation. The organisation stated that such acts or practices were not performed in the business operations while manufacturing the cars and rather it is a technical issue which was not identified in the initial period of time. Due to the not getting the information of such acts of the company, the selling of the defected cars continued by the stakeholders. The customers and employees are not aware of such practices in the operations of company. The workers or engineers who was involved in the production of these cars were blinded by the unethical principles or practices for manufacturing the faulty cars. Also the dealers of the company who sold the cars doe not aware of such practices by the company (Siano and et. al., 2017). So it can be said that the company was lying to the people regarding the new cars and did not provided the information regarding the defect in the cars. The company used these practices for earning the maximum profit and income for the company. TASK 2 Qualities for ethical leadership and creation of ethical organisation The major concern of each business or individuals is to make ethical work environment at the workplace. This ethical environment is necessary for the growth and success of the organisation in future time period. As a manager, it is my responsibility to perform the ethical workfordeliveringtheexpectedlevelofperformancefromtheteam.AlsoIneedto acknowledge the importance of ethical leadership. The ethical leadership is associated with the
beliefs and moral values for protecting the basic right of the people as well as to develop a environment full of trust, honesty, transparency and fairness at the workplace. There are various qualities in the ethical leaders which must be available in the managers so that they can perform their work in an ethical manner in the company. The main quality of ethical leader is justice. The ethical leaders are fair and equal in their decisions for every individual of company(Trevino and Nelson, 2016). They treat the employees equal for ensuring the collective growth in the company. Second important quality of ethical leader is of honesty. Various issues can arise in the company which must be conveyed to the employees and management with the honesty so that the ethical practices can be followed at the workplace. Honesty is also beneficial for the mangers in maintaining a good and healthy relationship with the stakeholders outside of the organisation.Also ethical leaders must be motivated so as to motivate other people while doing their job. Through this motivation, innovative and new ideas can be generated from the employees for taking the better decisions. These above discussed qualities are necessary for me as a manager for ensuring the prosperity and ethical building of the company. I possess these qualities but there is a dire needs to polish these qualities. For example: While taking the decision for resolving the conflicts, sometime, I feels that I am a little biased in the taken decision. Also my team building skills lacks sometimes due to which I find it difficult to motivate the subordinates. In order to become an ethical manager, I needs to lead the employees properly so that they can show their talent and skills for performing the work in ethical manner. For doing this, I needs to shift my focus on developing ethical leadership. Also it is the duty of the ethical managers to develop an ethical environment at the company. Based on the present business case, it is very important for me to develop an ethical environment at the workplace which supports equality, justice and transparency. However, there are several factors or elements such as Unethical leaders, susceptible followers and conductive environment etc. which can acts as barrier for the formation of ethical firm. These can impact the firm in becoming the far from being ethical. IT is my responsibility as a manager to determine such factors so that an ethical organisation can be developed. Also I needs to motivate the employees for building a highly innovative, knowledgeable and ethical environment at the workplace(Wallace and Sheldon,2015). Also communication is necessary for ethical manager to motivate and encourage the employees in order to develop healthy and effective relationships withthestakeholdersofthecompany.Forbuildinganethicalenvironment,itismy
responsibility to consider all these above discussed factors for benefiting the all stakeholders as well as to enhance the effectiveness of my work. If ethical leaders like me follows a proper framework for building ethical organisation, then harmony among the business operations and functions can be maintained. CONCLUSION It has been concluded from the above report that the business organisations needs to follow the ethical practices in their operations which will improve their brand image at global level. Also the firms needs to determine their past issues and their reasons for taking suitable measures in order to avoid such situations in future time period. These business firms can use the ethical theories for applying them into the organisation for determining the ways through which organisation could comply with the required standards. Also the qualities of ethical leaders helps managers to build an ethical organisation which can provides the products and services to the customers in ethical way.
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REFERENCES Books and Journals Barry, N., 2016.Business ethics. Springer. Clemente, M. and Gabbioneta, C., 2017. How does the media frame corporate scandals? The caseofGermannewspapersandtheVolkswagendieselscandal.Journalof Management Inquiry.26(3).pp.287-302. Fracarolli Nunes, M. and Lee Park, C., 2016. Caught red-handed: the cost of the Volkswagen Dieselgate.Journal of Global Responsibility.7(2).pp.288-302. Hibbert, P. and Cunliffe, A., 2015. Responsible management: Engaging moral reflexive practice through threshold concepts.Journal of business ethics.127(1).pp.177-188. Idowu, S. O. and et. al., 2013.Encyclopedia of corporate social responsibility(Vol. 21). New York: Springer. Lane, E. L., 2016. Volkswagen and the High-tech Greenwash.European Journal of Risk Regulation.7(1).pp.32-34. Mansouri, N., 2016. A case study of Volkswagen unethical practice in diesel emission test. International Journal of Science and Engineering Applications.5(4).pp.211-216. Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the idea of dialogue. InPublic relations theory(pp. 111-131). Routledge. Rhodes,C.,2016.Democraticbusinessethics:Volkswagen’semissionsscandalandthe disruption of corporate sovereignty.Organization Studies.37(10). pp.1501-1518. Siano, A. and et. al., 2017. “More than words”: Expanding the taxonomy of greenwashing after the Volkswagen scandal.Journal of Business Research.71.pp.27-37. Trevino, L.K. and Nelson, K.A., 2016.Managing business ethics: Straight talk about how to do it right. John Wiley & Sons. Wallace, M. and Sheldon, N., 2015. Business research ethics: Participant observer perspectives. Journal of Business Ethics.128(2). pp.267-277. ONLINE: TheVolkswagenScandalisNotanEthicalIssue.2018.[Online].AvailableThrough: <https://business.uni.edu/news-views/volkswagen-scandal-not-ethical-issue>. Everything You Need to Know About Volkswagen Diesel Emission Scandal. 2018. [Online] Availablethrough:<https://www.news18.com/news/auto/everything-you-need-to- know-about-volkswagen-diesel-emission-scandal-1784005.html>