Business Ethics Analysis: A Case Study of Volkswagen

This report analyzes the business ethics of Volkswagen, focusing on the ethical issues arising from the emissions scandal. It explores various ethical theories, including teleological and deontological approaches, and examines their application to the company's operations. The report details the impact of ethical issues on Volkswagen's activities, including the need for fair communication and stakeholder relationships. It also discusses Volkswagen's role as a moral agent and the development of mechanisms for employee empowerment. The report further delves into the ethical code creation and the strategies Volkswagen can adopt to achieve ethical conduct while meeting its business objectives and fostering positive employee relations. The analysis highlights the importance of values, monitoring, improvement, and transparency in ethical business practices, providing a comprehensive overview of the company's challenges and potential solutions.

BUSINESS ETHICS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Different theoretical ethical approach and their background and development...............1
1.2 Difference and similarities between relative and absolute ethics.....................................3
1.3 Effect on operation by ethical issue.................................................................................4
TASK 2............................................................................................................................................5
2.1 How operational activities of the business can be affected by the ethical issues.............5
2.2 What does problems business and stakeholder face to operate in the ethical way...........7
TASK 3............................................................................................................................................8
3.1 Role of Volkswagen as a moral agent..............................................................................8
3.2 Development of mechanism so that employee empowerment and involvement can be
achieved..................................................................................................................................9
TASK 4............................................................................................................................................9
4.1 What ethical issue does the Volkswagen face..................................................................9
4.2 How Volkswagen can achieve ethics in their business which achieving their objective and
employee/employer relationships...........................................................................................9
4.3 Creation of ethical code for Volkswagen.......................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business ethics is the process of behaving in the right way and that is determined
by experience, judgement and human nature. Recently, many organisations are focusing on
their operation activities to work in the ethical way which help them to enhance their brand
image. Volkswagen have been chosen to continue this report where the company is facing
very big ethical problem related to nitrogen oxide emission by the car more than the
standard. The organisation has not been following the rules and regulation made by the
governance and also, they inbuilt device which turn of nitrogen oxide emission when it
checed. This practice has create negative image and they can able to build their image they
are evolving and empowering their employee which produce quality products for the
customers. The report includes different ethical code of conduct such as to be fair and
honest with the stakeholders, proper relationship with suppliers etc.
TASK 1
1.1 Different theoretical ethical approach and their background and development.
Ethics is the branch of philosophy that helps to understand and determine how
employees can act and judge as right and wrong. The ethics are made on the base of
judgement, experience and human nature. The person who believe in ethics thinks that all
the decision in the organisation are made on the ethical theories, that are classified as under
(Crane and Matten, 2016).
Teleological ethical theory
The key focus of this theory is on consequences and results, which tells that the
organisation should take all the action on the basis of their result. The theory focusses on
the future aspects of the decision, all the decision that are taken by the company should
have good consequences over all the stakeholders. The company should select that
alternative which achieve the needed consequences and that results must be manage in the
proper way.
1

Illustration 1: Teleological Ethical Theories
(Source: Types of Teleological Ethical Theories, 2017)
 Ethical Egolsm: This theory states that action will be considered good when it
produces positive result (Trevino and Nelson, 2016) . This model is based on the
notion that if it provides the good result than only there is morale to implement the
theory. If the individual is self-centred and self-motivated than only they can able to
achieve their self-interest. These types of people will not scarify their interest for
the others.
 Utilitarianism Mill theory: This theory state that the action is achieved when the
result will have maximum satisfaction for numerous people in the organisation
which is going to be affected by the result or decision.
 Eudaimonism: This theory states that the decision is good when the result is able
to fulfil the requirement of individual and gaols and will be welfare of the
employees. In simple words, it can be state that organisation goal is achieved with
the employee's happiness and welfare. Such as company organise different training
and development programs for the employee which will enhance their skills and
knowledge and provide happiness to them.
Deontological Theory
This theory states that the action and decision are important, their result and
consequences are not that much significant (Bowie, 2017). The theory has special
relationships with the morality of employees and duty. The term itself states that Deon is
duty and Logos and science. This holds that some decisions are morally obligation
2

regardless of their consequences for the employee welfare. This theory gives one statement
that is “Duty for duty's sake”.
kant's ethical theory
As per this theory, correctness and wrongness of the decision is nnot considered
and are not dependent on their result but the result must t duty. The author this that the
morality is given the supreme priority and it is state as Categorical imperative, it
determines the organisation and employees moral and duties. Motivation is more
significant than the consequences and This will provide enthusiasm to the employee to
work in more ethical way (Crane and Matten, 2016).
1.2 Difference and similarities between relative and absolute ethics.
There are two approaches for the ethical behaving in the organisation, one approach
is based on character and their relationships and on other hand another approach is based
on principles.
The approach which is based on the ethical principle which is relied on the two-
variable that are Utilitarianism and Kantianism, the theory was developed by the Kant and
also known as Deontological which states duty. This model is based on the morale and
professional ethics and based on the user of service whether they are capable to taking
decision or not? In this organisation need to have some principles such as create confidence
in the employees, gaining the consent of the information, no discrimination between the
different stakeholders and to provide and communicate right information.
Other theory that is absolute which includes Utilitarianism as the teleological which
and that theory is cover under the theory of consequences. This theory basically focusses
on the consequences and result of the action, they need to make decision that provide good
consequences to the company (Trevino and Nelson, 2016). This approach believes in the
better result and they think that there are no problems in telling lie to the stakeholders.
They believe that whether they are doing right and wrong, their result must be positive.
Volkswagen are facing lots of problems, the basic problem they are facing with the
carbon emission. They have put some devices in their car which shows less emission of the
car in the test. This was generally done in the US and Europe and this cause lots of disease
3

to the human being. Later on, they admit that they are doing wrong and was ethically bad
for the company. This problem reduces the brand image of company. This difficulty starts
because they do not communicate accurate information about their products. They need to
adopt the Utilitarianism theory based on the principles that they should focus on the morale
of the stakeholders. They do not continue bad practices and focus on the decision not on
the result (Bowie, 2017).
Absolute ethics: Tt is the ethics that shows that there is one universal morale code which
is final and will apply to the all the people in the universal, if the views of the people
changes than there will be no change in the absolute moral code.
Relative ethics: It states that the change in the view of individual will change in the moral
standard or ethics. There is different situation occur in the environment so the behaviour in
the situation will be correct for one individual will not be correct for the other person.
1.3 Effect on operation by ethical issue
In today's business, social responsibility and ethical factor are major element. In
Volkswagen, there is a core programme in which customer can know all information about
the product and the is fair or not. Ethical trend is an integrated system in operation of
Volkswagen making a market strategy for corporate social responsibility. These objectives
are full fill by commercial staff and specialist in various countries.
There are four major approaches in ethical factors:
 Values- Volkswagen work with those suppliers which believe in Volkswagen's
values.
 Monitoring- Volkswagen gets all information about working conditions for worker
(Al-allak, 2010).Improvement: - it is always support supplier to
improve.Transparency: -work with honesty, open with all supply chain factors.
Values Communicate our values- Volkswagen's values are dividing into two main aspects
first is how they meet customers need and expectation and second value state that
organisation must work in the co-ordinate way with all the workers is who to work
4

well with others. Treating other and work with honesty and openness is
Volkswagen's value programme (Crane and Matten, 2016). Setting strong standards:-setting, applying and enforcing the standards in supply
chain of organisation's ethical programme. In Volkswagen commercial persons are
trained very well for sourcing and how to work. Volkswagen distribute their ethical
programme document to the supplier so they can understand Volkswagen
operations.
 Approve new supplier:-In Volkswagen supplier are evaluated for insuring their
ethical programme so they can appoint in organisation (Aldebert and Longhi,
2011).
Monitoring
Monitoring is the second approach in ethical programme of Volkswagen in which
organisation identifies the issue in supply chain system and supplier focus. Identifies risk level:- Volkswagen has many tools and techniques to measure the
risk level of the organisation supply chain and workforce (Bauer, 2013). There are
some teams which are respectively auditing the sites. Sites are monitored by their
risk level such as yearly, two yearly and six months assessments.
 Audit report:-audits are conducted by the specialist and recognise persons of the
company. They can interview the workers in their language.
Improvement
Improvement of supplier and other parties in the organisation is a very important
task and its main function is to provide better supply and distribution. Ethical aspect in the
Volkswagen's policy is a major aspect to maintain the target market scenario and achieve
organisation goal and objectives.
Transparency
Transparency among the stake holders and customer is important for confidence
and collaboration between supplier, customer, civil society, and retailers of the
5

organisation. Firms is investing in many skills' development programmes to respond and to
create transparency with changing market.
TASK 2
2.1 How operational activities of the business can be affected by the ethical issues
Vision and mission of the Volkswagen
According to the case. They have made vision, that are as follows:
 To expand their research and development for the long rum electrification of drives
with the commitment
 Use of Electric motors in the test drive which help then to regenerate the electricity.
 The batteries which is used should be durable and low cost
The mission statement state that the organisation want to built their long term
strategic partnership with their target market and help them to make the best choice for
their needs for business by reducing their feet cost and serve world class consumer service.
Objective of the Volkswagen
The major problem which they face is carbon emission and they have such some
technology that show carbon emission less than 40% in order to state that their car are fuel
efficient which actually wrong (Bauer, 2013). So their objective is to reduce carbon
emission and make their cars fuel efficient.
Ethical consideration of Volkswagen
 Communicate fair information: There are some information that need to
communicate with the stakeholders because they have some interest in the company
so they have right to know about the organisation. Such as investor need to know
the financial position because he/she always expects for the return on the
investment. ROI is totally depended on the company's performance on the profit.
Customer need to know the information of products and service they use so that
they can able to use and dispose them properly. So, the company need to
communicate fair data create positive image in the market.
 Encourage individual for reporting of illegal behaviour: Volkswagen should
encourage its employees to have conversation with the manager related to all the
6

doubts they have in their minds. They also encourage their workers to follow all
rules and regulation so that ethical environment can be maintain in the organisation.
Ethical pressure: The pressure from the government and customer was very intense. They
pressure them to take back their cars which omit carbon more than 40%. The organisation
train their employees to follow all ethical rules. The company's reputation was at stake and
they have to take back their unethical products.
Public image: This case of carbon emission create very bad image in the minds of all the
stakeholder, at that time company need to create trust and loyalty, they follow ethical
consideration to build their image again.
European Commission: The Government have force them to take their product back
which produce large carbon and have huge impact on the health of human being. They ask
them to produce fuel efficient cars which help them to build their brand name again.
2.2 What does problems business and stakeholder face to operate in the ethical way
Over the past two years, Volkswagen has been dealing with the aftermath of an
internal scandal that has deeply dented the integrity of the company. In many 2014, a small
research team from west Virginia university, led by Dan Carder, was conducting emissions
tests on small passenger cars from BMW, Mercedes Benz and Volkswagen (ABC).
Stakeholders
These are the people which affect the business in the several ways such as their
policies, action and objective. Recently VW have faced very big scandal which state that
the company have very big impact. Related to that scandal, the stakeholders includes in it
are customers, employees, dealers, shareholders, the environment, other auto
manufacturing, its board of directors, executive, government and court (Battour and Battor,
2011).
For the long term brand reputation the organisation need to maintain good relation
with their customers, suppliers, government and meet the expectation of the different
stakeholders. The company nee to strengthen their mission and vision statement so they
can able to have the success in the future. To do so, the company need several years to do
so, with this situation, the firm need to find that who are their stakeholders needs and wants
7

and their interest can be fulfilled. To repair this problem, they need to create their repair
plan. They need to take their stakeholders as the personalisation and pre-personalisation.
They need to focus on the global market and find different stakeholder in the international
market so that they can able to create the good relationship with their new stakeholders.
All of these stakeholders have been affected in a multitude of different ways
ranging from lost jobs, stock markets change, environment issues and tarnished
reputations.
Market place advantage: If the organisation will properly analysis their different
stakeholders interest, they will come to know that what are the needs and wants of the
customers, suppliers, shareholders etc. These are the stakeholders which are the key
partners for the organisation, if the company is able to satisfy theses stakeholder, they will
able to attract large numbers of customers which help them to cover large market share.
Employee's performance: It is important for the organisation to find the interest of their
employees in the organisation. They are person who produce the quality goods and services
for customers and serve the clients the best experience. If the company will organise
various training and development program for the employees, then they will able to
enhance their skills and knowledge. This will help the company to satisfy their employees
which help them to increase their performance.
TASK 3
3.1 Role of Volkswagen as a moral agent
Morale agent is the individual who have to make judgement related to the moral
that what is wrong and right. Every organisation need to hold trust of stakeholders and
have to maintain the heritage of every country. Volkswagen is trying to follow all the rules
and regulation made by the UK government while operating their business. They need to
keep honesty and integrity and should be dedicate towards ethical policies (Di Foggia and
Lazzarotti 2013). For making their image as renown and repudiated, they need to make
plan in order to achieve ethical standard. The organisation has to follow fair trade practices.
Before this case of car emission, the company was considered in the ethical organisation
and for being the moral agent, they need to do follow all corporate social responsibility.
8

They should have proper and fair communication with the stakeholder and keep their
interest as prior to the profit.
3.2 Development of mechanism so that employee empowerment and involvement can be
achieved.
The concept that have arrived in the organisation market is consideration of
employees. Managers need to take initiative to spring up the employee empowerment and
involvement. Volkswagen is changing their organisation culture by serving quality goods
to their customers. They are adopting business process re-engineering to modify their
business with the involvement of employees (Al-allak, 2010). They are creating new
organisation structure that is flat. The firm have started providing training and development
program so that they can able to take decision own.
Another aspect that they have adopted it continuous improvement of the
employees’ skills that will serve loyalty and trust in the various segment of the
Volkswagen in order to engage all employees for better understanding and learning.
TASK 4
4.1 What ethical issue does the Volkswagen face.
The company is facing very big problem related to the carbon emission, the car
contains the software that turn off emission control when the customer is driving normally
and turns it up when the car is going for the emission test. During normal driving, the car
emit nitrogen at up to 40 time the normal.
Ethical issues of Volkswagen
 The organisation is not only follow the rules and regulation made by the
government but also create such techniques and technology that avoid them.
 The Vehicles that they produce emit large number of nitrogen oxides that have
negative impact on the air and atmosphere of the US (Aldebert and Longhi, 2011).
4.2 How Volkswagen can achieve ethics in their business which achieving their objective
and employee/employer relationships.
To improve the ethics in the organisation, they create the plan for corporate social
responsibility and have to give more attention toward the human rights. The organisation
have to enhance the skills and ability of the employee so that they can able to produce
9

quality goods so that their vehicle will not produce nitrogen oxide more than 40% (Bauer,
2013). Volkswagen should organise training and development program which teach them
use resource in effective and efficient way in order to produce quality goods.
They can also change their organisation structure and make it flat which helps them
to involve all the employees to the decision-making process. This will bring new ideas to
the organisation in order to behave in the ethical way. Organisation can also change their
inventory and machinery which produce that vehicle which emit nitrogen oxide below 40%
4.3 Creation of ethical code for Volkswagen.
There is different ethical code which the organisation follows, that are as follows:
 To be fair and honest with all the stakeholders.
 Protect the job, safety and health of the employees.
 To be compliance with the laws on self-laundering (Battour and Battor, 2011).
 Create and follow all quality policies.
 Privacy and security of all the information and statistics.
 Protect the environment and produce environment friendly products.
 Be fair with the industry association and official distribution network.
 To know and fulfil the interest of business partner and suppliers.
CONCLUSION
It can be concluded from the project report that ethics plays every important role to
build the brand image of the company. Volkswagen have been chosen to continue this
report where the company have very big ethical issue related with the nitrogen oxide
emission. The organisation has put such technology in their vehicles which turn of
emission when it is checked. This practice is against the ethical rules and regulation which
create the bad image in the mind of its stakeholders. The company have created some
strategies such as employee empowerment and involvement which help them to bring back
their image at good position.
10