Volkswagen Emission Scandal: An Ethical Analysis of Business Practices

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Table of Contents
INTRODUCTION............................................................................................................................. 2
ANALYSIS........................................................................................................................................3
CONCLUSION................................................................................................................................. 7
RECOMMENDATIONS.................................................................................................................... 8
REFERENCES...................................................................................................................................9
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INTRODUCTION
Ethics are an important part of any business as they help the organization to take decisions
which could either benefit them or prove to be disastrous to them. The business ethics are
essential for both the employees as well as management as it is a moral one and should be
strictly adhered to them. Business ethics provides significant benefit to a given business such
as:
 Boosting profits and sales by attracting customers
 Reduction of labour turnover so as to increase the productivity of the given organization
 Attracting investors to enhance the share price of the company
 Helps in getting more talented employees Castille and Fultz (2018)
On the other hand, companies following unethical behaviour may result in a decrease in the
reputation of their organization which in turn would have a negative impact on their
stakeholders. Moreover, the company could also see a decrease in the sales of its products as
well as a decrease in their profits.
There are various examples of unethical behaviour showcased by various organisations which
has resulted in the tarnishing of their image and Volkswagen is one of them. From the given
case study, it could be said that the management of Volkswagen admitted in the public in
September 2015 that they have sold their 600,000 cars in USA market which have been fitted
with “defeat devices”. Furthermore, they have also sold another 11 million cars with the same
device worldwide. The head of the US Department of the given German automobile has
claimed that this defect was due to the work of some miscreant software engineers. However,
this claim found to be false and the company later admitted that they proposed a mechanism
which reduced emission while testing but increased while driving (Aurand et al., 2018). So, the
given study has been based on such default system of the Volkswagen.
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ANALYSIS
According to the report of Irwin (2018), Volkswagen is one of the leading automobile sand
commercial manufacturing companies all over the world and has provided employment to
more than 600,000 employees across its factories which are present worldwide. The group
proudly claims to have a design, develop, manufacture and market over 12 brands of trucks and
cars which include Audi, Porsche, Lamborghini, and Volkswagen Passenger Cars and so on. It
has already surpassed Toyota in 2016 to become the largest automobile manufacturer across
the world and has been able to maintain the largest market share whole over Europe. Besides
this, Roddy and Wang (2018) have illustrated that it is also the leading seller of diesel-powered
vehicles with 10.8 million sold worldwide in 2015.
As per the studies of Moonesirust and Brown (2018), the darkest period of German automobile
company arrived when emission control board of the USA announced that Volkswagen has
installed a defeat device software code in all its diesel vehicles since 2008. The motive of
designing such software was to detect the emission during car testing and tweak the emission
control system to get better compliance. Furthermore while driving, this emission control was
relaxed by this software and due to this, the emission jumped to 35 to 40 times the given
regulatory levels during testing. The study of Irwin (2018) also replied that the defeat device
was installed in thousands of vehicles which had resulted in coming to the fines and penalties
around $18 billion over the company.
Castille and Fultz (2018) have stated in their studies that the crisis had forced the resignation of
the CEO and compelled the company to stop selling its diesel-powered vehicles for an uncertain
time period. Due to all such issues, there has been a significant decrease in the revenue of the
company and also resulted in tarnish of its image to a significant manner. The study conducted
by Aurand et al. (2018), it was found that there were various factors which drive the
Volkswagen towards the emission scandal. First was the ambition to enhance the revenue of
the given industry which compelled it to rig the carbon testing and earn more profit. This was
evident with the generation of $246 billion of the revenue and thus allowed to expand in the
global market.
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The second aspect was as stated by Roddy and Wang (2018) that of high labour and
manufacturing cost which has compelled the given automobile industry to forge the cheating
scandal due to difficulty in developing a diesel-powered engine which would have been
effective enough to deliver both on MPG (miles per gallon) and carbon emissions. Thus the
given studies have proved that the German automobile industry has been able to tweak the
laws due to such pressure and increased its revenue and share price for shorter duration and
compromising with longer duration.
The business ethics plays a significant role in shaping the business of the given organization and
in the case of Volkswagen, there has been a decreasing in its business due to its following of
unethical approach. There are various ethical approaches which would explain the treatment
meted to the company by its management, customers and shareholders. First is a theory of
justice which is a business ethics theory which has been proposed by John Rawls. According to
it, it signifies that the ethical demand and justice must be given paramount importance and
more priority must be provided to the social justice given to the people of the society Eger and
Schäfer (2018). In the case study of Volkswagen as shown by Andersen, et al. (2018) it has
played with the sentiments of the people by not displaying the actual information about the
emission and thus keeping them in dark even after they have purchased its vehicles. Due to
this, it has lost its popularity among its customers and resulted in its presentation of the
tarnished image across the world.
Another theory of ethics is the consequentialism that action taken by any organization could
only be justified when it is based on its impact on the whole world and how people associated
with them are in a happy mood or not. As per the given case study of Volkswagen as displayed
by Moonesirust and Brown (2018), the management of the given organization has violated the
ethical code by tweaking with the laws related to the emission control which was implemented
to protect the environment. Although in terms of the company, it was beneficial at that
moment as it helped it to increase its share and profit, but for longer duration; it not only
tarnished its image but also affected its relationship with its customers. Thus, there has been a
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significant reduction in the sales of the automobiles of Volkswagen which could be attributed to
the given scandal as stated by Eger and Schäfer (2018).
The next theory of ethics which has been identified by Brinkley (2013) is utilitarianism according
to which, the need of action could be defined by pain and pleasure faced by both the
management and the customers. This theory states that any action which results in one party
achieving happiness would certainly do not mean that other parties related to the given case
would also remain happy. When the case of Volkswagen is taken into consideration, it has been
found that the management of the given organization has deliberately tried to hide the fact of
high carbon emission. Their managers have compelled the engineers to device a defeat
software code which would show low emission during testing and high emission when actual
driving. This has displayed that the management of the given organization has conducted such
unethical behaviour so as to increase the profitability of the given organization but
compromised with the laws of the organization in a severe manner as shown by Pyper and
McGuiness (2013).
There are various industries which have followed unethical behaviour and faced backlash across
the world. One such example as stated by Chikudate (2019) is the case of Toyota. In 2010, it
was found in the government report that Toyota has committed a grave crime of compromising
with the safety and security concerns for the people. The probe found that Toyota completely
ignored the safety issues just for saving a little amount of money and thus betrayed the promise
made by the company to its customers. From the studies of Dow and Ellis (2019), it was found
that the company was unable to handle this unethical behaviour by installing faulty brakes and
sticking pedals and phasing outside airbags which saved them around $124 million of the
amount.
However, Toyota does not learn from its mistakes as stated by Chikudate (2019) and found that
even after many deaths and accidents, it is in denial mode of accepting its mistakes. On the
other hand, the Volkswagen saved its image by accepting its blunders and called back millions
of its diesel-powered vehicles and thus faced itself from further decreasing its profit and brand
image. These case studies have shown that business ethics are an important part of an
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organization to sustain in the given environment and follow the rules would help them to
improve their image in a significant manner.
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CONCLUSION
On a conclusive remark, it can be said that business ethics is the most important part of the
business but this can’t be realised sincerely until the management see the business
corporations as a single entity. Since the main objectives of a business are always to convert
raw things into valuables and earn profit from them, they'll always try to justify their actions in
that framework. We must see a business organisation as a group of people who are integral
parts of society and who share the same environment as other people. So, it is the
responsibility of the customers, shareholders and government to compel the companies to
follow business ethics in an effective manner and should be made to pay a heavy fine if they try
to violate the rules and regulation just like Volkswagen has done in emission scandal.
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RECOMMENDATIONS
There are various recommendations which must be followed by the Volkswagen Company and
management as per the ethical laws and ethical behaviour. Some of these are explained as
follows:
 First is that the company should strictly follow the ethical code of conduct. It signifies
that the company should keep in mind that they are multinational organisations and
have many brands under their wing. So, any violation of the business ethics would not
only affect its parent company but also affect the brand images of other vehicles
associated with it.
 Second, there should be the formation of an autonomous institution which would work
without any bias and would hear complaints from the lower level of employees in an
appropriate manner. This is evident from the case study, where the software engineers
knew about the flaws in the given software but were pressurized by the management to
give node to it. This would help them to convey the unethical practices followed by the
management illegally and thus help in providing welfare to the people (Wu, et al. 2018).
 Third, the company should develop a corporate social responsibility towards the people,
environment and society so that this would help them to keep in mind to not violate any
laws and work as per business ethics so that they would be able to work towards the
welfare of the society
 The fourth recommendation is that the company should implement theories of business
ethics strictly and find out ways to enhance their efficiency and productivity in an
appropriate manner (Li, et al. 2018)
Thus it could be said that if the given organization would have followed the business ethics in
an appropriate manner, it would not have faced such a severe issue. Moreover, the company
should realize that if it follow the above recommendations in an appropriate manner; it would
be able to enhance its brand image and would increase its credibility and loyalty among its
customers in a significant and appropriate manner.
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REFERENCES
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Castille, C. and Fultz, A., 2018. How does collaborative cheating emerge? a case study of the
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Innovation and Sustainability Vol, 13(1), p.53.
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Li, L., McMurray, A., Xue, J., Liu, Z. and Sy, M., 2018. Industry-wide corporate fraud: The truth
behind the Volkswagen scandal. Journal of cleaner production, 172, pp.3167-3175.
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Moonesirust, E. and Brown, A.D., 2018. Company Towns and Desired Identities: A Case Study of
Volkswagen/Wolfsburg. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 14126).
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Wu, Y., Wang, X. and Shen, D., 2018. Business Ethics in Price Discrimination in the Automotive
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