International Corporate Governance: Issues and Solutions at Volkswagen

International Corporate Governance 1
INTERNATIONAL CORPORATE GOVERNANCE
By (Student’s Name)
Professor’s Name
College
Course
Date

International Corporate Governance 2
1. The Supervisory Board is ultimately accountable for the strategy and activities of
the company; hence they are ultimately responsible for the scandal. The CEO has resigned,
but it should have been the Supervisory Board members.
In most circumstances, all companies are managed by a board of directors who acts as an
advisory body. They are appointed by the shareholder to regulate everyday activities in the
company. The agency is responsible for the proceeds as well as the losses incurred by the
company. It is the role of the directors to define the purpose and aim of the company with its
values on daily duties. Corporate governance in a company is the regulatory framework for
supervision and management of companies which is determined by the owners and the relevant
legislators (Barrett et al. 2015).
Since it’s the role of the directors to manage all the activities in the company, they ought
to have known the risks their products were exposed to the public. Volkswagen Company had
caused long-lasting damage to the society as well as the environment. Therefore, the company is
facing criminal charges and lawsuits which threatens the future of the company. Resigning of the
CEO of the company only, could not bring any change since the damage had already caused the
future of the company future to look grim.
The supervisory members were responsible for the scandal. This is because, for an
international company to commit fraud for a long time can only be viewed as a problem of
regulatory capture which entails information asymmetry, aspects with oversight and private
governance by the supervisory members.
It is the role of these members to ensure the implementation of the strategies put in place
to achieve their promises and act by the legislation governing them. Volkswagen had been
promoting their diesel cars as the most environmentally friendly as well as fuel efficient in the

International Corporate Governance 3
market which led to more sales. Dramatically, the results were different on low emissions. The
results against their claim and putting the environment and society to threats was enough
evidence for all the supervisory member to resign. If a company cannot serve the interest of the
public and with goodwill, the company should not operate or change in its managerial aspect
should be considered.
The International Council on Clean Transportation (ICCT) claimed for Volkswagen to
have installed defeat device. The device allows changes in emissions control system. The agency
believed that somebody in the company introduced these devices with deliberate intentions.
The biggest tragedy supporting the resigning of all the board members is the adverse
effects caused by their products to the environment. The scandal was responsible for the release
of toxic nitrogen oxide into the atmosphere. The gases cause acid rain which depletes the ozone
layer causing inflammation of the respiratory perils. With these arguments, the supervisory board
of members was supposed to resign for their incompetence and for threatening the lives of the
society (Masulis, Wang and Xie 2012).
2. Investors and activist groups are increasingly exerting pressure on companies
regarding their activities especially in managing their environmental risks. What could
these investors have done to help resolve the crisis?
There is a growing investor pressure whose primary area of concern is the protection and
conservation of the environment. The activists and the investors are changing the manner in
which they assess the performance of the company and making decisions based on business
ethics (Werther, W.B and Chandler 2010).
The investors and the activists of Volkswagen could have assessed the performance of
the company and its effects on the environment. With a thorough assessment, the emissions of