Analysis of Volkswagen's Unethical Conduct: A Case Study
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Added on  2023/06/13
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This case study analyzes Volkswagen's unethical conduct in violating environmental laws set by the EPA. The impact of the scandal on the financial aspects and overall reputation of the company is discussed.
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Running head: ACCOUNTING Accounting Name of the Student: Name of the University: Author’s Note:
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1 ACCOUNTING Table of Contents Introduction......................................................................................................................................2 Discussion........................................................................................................................................2 Conclusion.......................................................................................................................................4 Reference.........................................................................................................................................5
2 ACCOUNTING Introduction The main purpose of this assignment is to analysis of the case which is related to principle of ethics in business. The case which is to be analyzed is related to Volkswagen. VolkswagenisanautomobilecompanywhichisaGermanbasedcompanywhichwas established in 1937. The company has its headquarters in Wolfsburg, Germany. The company was considered to be the largest automobile company in 2016. As per the case, the management of the company was involved in an unethical activity which clearly defied the rules and regulations which were set by the Environmental Protection Agency of USA (EPA). As per the rules the automobiles need to have control over the emissions of nitrogen oxides or NOx which affects the environment. As per the rule the automobiles need to conduct population tests to have an idea of the level of emissions which the automobile is responsible for. Volkswagen company violated this law and found a loophole in the regulation which the company utilized. Discussion The company had systematically introduced a software which would turn on the emission controls when the pollution test was being conducted and turned it off when the automobile was driving normally in the roads. This was a case of violation of law which was set by EPA. In addition to this the company had been doing this from the year 2008. Some of the popular cars such as the four-cylinder Volkswagen and the Audi Diesel cars were using such a device. This was a case of unethical values towards the laws which are set for protection of the environment. The company had already sold off around 482,000 cars which were using such a device. The scandal was discovered in 2015 and the EPA charged a suit in the federal court against the policies of the company. The main points which were raised by EPA was that the company not only defied the environment protection law but also invented a software which can be used to avoid the laws completely(Park, Kim and Kwon 2017). In addition to this the number of cars which were sold by the company and the emission from such cars will be affecting the air quality of US. As per the rules the maximum amount of fine which was to be paid was $ 37,500 for each car. Therefore, considering the number of cars which were sold the company had to bear a lumpsum amount of fine of around $ 18 billion. The management of the company wanted to avoid the costs which were associated with pollution controls and therefore was using such a software. The involved parties in this ethical
3 ACCOUNTING violation of laws were the technicians and the management of the company. However, as per the CEO of the company, he was unaware of the fact that such a device was installed in the automobiles of the company. The company also attracted legal cases in other countries as well for the emission of nitrogen oxide in the atmosphere. The impact of the legal suits in US affected the reputation of the company and the business environment of the company. The stakeholders of the company were affected by the ethical case of the company. Stakeholders are individuals who are affected by the activities of the company and the company is also responsible to the stakeholders of the company(Lawrence and Weber 2014). Stakeholders of the company comprises of shareholders, creditors, debtors, banks and others similar stakeholders of the company. The impact of the scandal will be reflected in the shares value of the company. The share price of the company is also expected to fall. The shareholders of the company will also not want to stay or invest in such a company which has been involved in a scandal(Fernandez-Feijoo, Romero and Ruiz 2014). The case which is filed against the company will only add more to the negative publicity and potential investors might not be willing to invest in the company due to the bad reputation which the company faces due to the ethical scandal. In addition to this, the company had to bear a fine of $ 18 billion which reduced the profits of the company considerably and impact the statement of profit and loss of the company. Moreover, the company can expect more of such costs arising as other countries will also be charging fines which will be costs to the company. As per the concept of business ethics, it deals with the right approach which is adopted by an employee in a business environment. The concept states that an individual should follow the principles which are morally right or generally accepted by the society (Crane and Matten 2016). Sometimes in a business environment the code of ethics which is to be followed by every individual is specially stated by the management of the company. The general view is that ethics is related to what is right or wrong and the just approach which determines right and wrong in the eyes of the society or which are generally accepted principles(Weiss 2014). However, this is not completely true, ethics is a bit complex to understand. The thing which is ethically right for an individual can be ethically wrong for another individual. In the case of business ethics however, the behavior of the employee will be based on the acceptable behavior which an employee should have in a business. Ethical behavior of employees is guided by principles which are self-established for an individual.
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4 ACCOUNTING Conclusion As per the analysis of the case study of Volkswagen, the management of the company has engaged in unethical conduct by not following the environmental laws which were established by EPA of US. The case analysis shows the impact of unethical behavior on the financial aspects and overall reputation of the company. The case analysis of Volkswagen show that the stakeholders of the company are also affected by such unethical scandals and moreover, the share prices of the company also falls due to negative publicity. Thus, the analysis show the importance of following ethical standards in the business.
5 ACCOUNTING Reference Crane,A.andMatten,D.,2016.Businessethics:Managingcorporatecitizenshipand sustainability in the age of globalization. Oxford University Press. Fernandez-Feijoo, B., Romero, S. and Ruiz, S., 2014. Effect of stakeholders’ pressure on transparencyofsustainabilityreportswithintheGRIframework.Journalofbusiness ethics,122(1), pp.53-63. Lawrence, A.T. and Weber, J., 2014.Business and society: Stakeholders, ethics, public policy. Tata McGraw-Hill Education. Park, E., Kim, K.J. and Kwon, S.J., 2017. Corporate social responsibility as a determinant of consumer loyalty: An examination of ethical standard, satisfaction, and trust.Journal of Business Research,76, pp.8-13. Weiss, J.W., 2014.Business ethics: A stakeholder and issues management approach. Berrett- Koehler Publishers.