Business Ethics: Volkswagen Case Study and Ethical Theories Report

This report delves into the critical aspects of business ethics, using the Volkswagen scandal as a central case study. It examines the company's fraudulent "Clean Diesel" campaign, which deceived consumers and violated ethical standards. The report analyzes Volkswagen's role in society, its responsibilities towards stakeholders, and the ethical choices that impact other companies. It provides recommendations for developing ethical policies, including establishing an ethical attitude, recruiting for ethics, demonstrating ethical standards, and rewarding ethical behavior. Furthermore, the report explores relevant ethical theories that can be applied to improve business operations. The analysis highlights the importance of honesty, integrity, and transparency in business practices, and the detrimental effects of unethical conduct on stakeholders, including employees, customers, and the environment.

Business Ethics and
Responsible Management

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
A case study- VW: the case of consumer deception...................................................................1
Role of business towards society and stakeholders.....................................................................2
Ethical choices which impact other companies .........................................................................3
Recommendations in developing ethical policies in company...................................................4
Ethical theories............................................................................................................................5
PART 2............................................................................................................................................7
Working as an ethical manager to manage business in high ethical standard.............................7
Conclusion.......................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Business ethics is the important concern for all the organisations. It is the study or
development of policies and practises by which company will able to contribute their part
towards corporate governance, insider trading, discrimination, or corporate social responsibility
by which company will able to gain public acceptance. In this present report case study of
Volkswagen is to be discussed under which detailed information is to analysed and also two
ethical theories is to be explained for the implement in chosen organisation. Further, in this
report a view is provided as an ethical manager to conduct ethical policies in organisation.
PART 1
A case study- VW: the case of consumer deception
This case study is about the false advertisement done by Volkswagen company to
deceived customers with its “Clean Diesel” campaign. A federal consumer has sued on the
company regarding their false advertisement of vehicle in which they are promoting with saying
clean digital vehicles as environmentally friendly.(Li and et.al., 2018.) They are doing business
since seven years and has almost sells 5,50,000 diesel cars by promoting fraudulent
advertisement. In a survey it is found that they cleared test of clean diesel task on vehicle by
installing illegal software under the vehicle. Theirs vehicles are polluting environment above the
provided limit of government in world. This scandal opens up in market when US protection
agency issue notice to this German group regarding Clean Air act. All this leads to arrest of CEO
on 18 July 2018. According to the compliant report it is said that company is doing their
promotional activities through high profile marketing campaign which is through Super Bowl
ads, also with social media marketing campaign, and with print advertisement among consumers.
They are constantly promoting and claiming that they have low levels of emission in
which they reduce use of Nitrogen Oxides emission by 90% in their cars. But in a test it is found
that they have used Nitrogen Oxide emit up to 40% which is very much dangerous for the
environment. They also claim that their vehicles has passed in the test of federal emissions
standards but this claim was proved wrong when that report of FTC appears, and it is mentioned
that they have ill-legally installed software in car tank to passed that test. This all result in paying
more that 20 billion dollars fine in polluting sir environment of US and also a hundred of angry
customers has filed suit against Volkswagen company.(Valentini and Kruckeberg, 2018)
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Now the question arise this is what they have paid to the environment in regulating their
operations. This is what they have contributed in ethical behaviour or in maintaining
responsibility towards social environment of the city. And this is what they have played their
roles in maintaining business environment.
Role of business towards society and stakeholders
Business is considered as the backbone for development of society. It is the responsibility
of business organisation to contribute their part in developing social responsibilities towards
environment and also to maintain environment which does not affect stakeholders of the
company. For developing large business operations' organisation has to develop effective
policies and strategies by which they will able to maintain their responsibility towards
development of society and also not to harm environment with doing fraudulent activities.
According to the case study of Volkswagen, with doing this fraudulent activity they have
tremendously affected business environment as well as their key stakeholders. For every
company their key stakeholders are society, local government, creditors, suppliers, and unions.
They all are affected with organisation's actions, with their objectives and with developed
strategies.(Tanaka and et.al., 2018.) Due to this scandal which is done by Volkswagen, major
impact is that they lose their relationship with the stakeholders. Role of company towards society
is to develop effective relationships with their stakeholders as well to contribute their part
towards development of society. To gain public acceptance business organisation have to care
about the development of society which also helps them to attract customers in the organisation.
Volkswagen, in doing their false advertisement loose with the customers as well as
stakeholders. To improve their overall operations company have to develop effective ethical
business policies which helps them to run operation smoothly in business environment. Majorly
affected with this fraudulent advertisement of company is there key stakeholders who have
provided an interest towards Volkswagen operations. In losing their stakeholders it will prove
very difficult for the engineers who are involved in this deception with customers to hold
effective relationships and to provide true and fair information on impact of environment which
is demanded by stakeholders. All this fraudulent activities has dangerously affected stakeholders.
They have lost their jobs, stock market changes, their reputation in market got decrease and have
faced many environmental issues.(Crane and et.al., 2017.) Role of business is to develop
effective policies in maintaining ethical policies in business by which they will able to develop
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effective relationships with their stakeholders which provide contribution in improving overall
performance and profitability of the organisation. Under the company Volkswagen they have
applied individual approach in deciding ethical decision of company. They also lied with
consumers and governments by promoting clean diesel cars. Their main aim is to maximise
profit by which they have disregarded their responsibilities towards environment and lost with
the stakeholders of the company.
Ethical choices which impact other companies
Business ethics is an area under which corporates are legally bounded to conduct their
operation in an ethical manner. To conduct business operation there are five key elements which
company have to follow and that include honesty, integrity, trust confidentiality and openness.
Volkswagen creates a fraudulent activity which is not appropriate in accordance with ethics.
Company choose to advertise in false manner in which they have provided false information
regarding clean diesel cars. Firstly by doing this promotion company's sales tremendously
increases and they have achieved tremendous profit with their operations. They sold cars in
billions but when a report of federal commission has appeared they caught with their fraudulent
activity.(Crane and Matten, 2016.)
All these activities have created a negative impact on other companies who are doing
business in same operation. Stakeholders like customers, employees, local government, creditors,
and suppliers have finished their contract or some stakeholders are demanding true and accurate
information from companies about their policies and strategies in maintaining business ethics.
Customers have lost trust from companies and also government has now provided strict
guidelines regarding business operations which must be followed with proper code of conduct. If
companies are following positive ethical code of conduct in business then they not only get
support from customers but also government will support their operation of business.
To generate effective sales distribution and to achieve profits company has to develop
effective ethical strategies by which they will able to earn effective growth of the company.
Fraudulent activity by one company affects others company's sales and profit because they also
have to face strict guidelines of the government and also anger of customers in doing their
business operation. Nowadays customers are only get attracted towards company who has
effective participation in maintaining environment or in developing corporate social
responsibilities of the environment. Activities of Volkswagen has damage environment 40 times
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higher than limit provided by government by which company have to face punishment and
penalties which suffers their overall business and also other company's business got affected by
these activities.(Ewest, 2018.) Volkswagen also burn billions of cars when complaint has been
generated but this process have affect environment very badly because of that CEO got arrested
with decision of court. All this scandal created a huge impact on other company's sales because
now customers and stakeholders are paying more attention regarding company's products.
Therefore, company's have to provide accurate information to customers and stakeholders in
maintaining their position in market and also to engage them in the organisation.
Recommendations in developing ethical policies in company
Ethical development is the most necessity element in world which is full of challenges
and failure. After all this scandal happened in Volkswagen, new CEO promises to develop more
ethical culture in organisation by which they will able to improve their overall decision-making
process in the company. Company has faced a lot penalties in their fraudulent activities by which
company suffers a loss from their operations in business market. To increase their overall
profitability and to build again that image in front of stakeholders and customers and also to
engage them in an organisation, company have to make effective strategies which is to be in
accordance with ethical manner. Recommendations are as follows-
Establish ethical attitude- before developing any ethical culture in organisation company have
to understand the term which is called ethics. By learning responsibilities towards societies and
also towards employee, managers of the company will able to develop specific set of policies and
procedure by which they will able to achieve needs of targeted market and also will able to
develop effective work coordination between employees which result them in getting effective
work.(Byun and et.al., 2018.) All these ethical policies have to be effectively communicated with
employees and employers by which each and every person of organisation will work hard in
maintaining company's overall position.
Recruit for ethics- company is in need to develop effective work procedure and to get that work
company have to recruit candidates which have the potential to work and to achieve
organisational objective. Company's managers have to develop effective communication with the
employees by which they will able to clarify them with organisational objectives and also to
motivate them for doing the best performance in company. For meet organisational standards
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company have to present organisation's priorities among employees which work in accordance
with ethics in company.
Demonstrate ethical standards- Volkswagen has developed ethical standards but which is only
to discover discrimination, corruption and to do fraudulent advertisement activities in an
organisation. To improve their position in market which they have lost company not only have to
take this seriously but they also have to apply in their workplace to achieve organisational
objectives of the firm. Company have to create ethical disclosure among employees it is because
when company will not present their ethical priorities in front of employees then work which
they will get from employees is not that proper and also not with proper code of conduct.
Reward for ethical acts and punish for unethical code- company have to develop effective
strategies in which to encourage employee in their working they have established reward system.
This reward system must specify that if employee or managers of the company work with proper
code of conduct or with ethical acts then company will provide them with reward and if they find
any unethical act or behaviour in working of employees then penalties are to taken. These rules
will develop an effective ethical policies and also get work in ethical manner.
These are the recommendations which is to be developed in Volkswagen organisation.
These recommendations help them to achieve their lost position and also to improve overall
work performance of the industry.(Klein, Michal and David, 2018) To work in ethical manner
company will have to established these rules' by which effective work performance of the
organisation will be presented in front of customers and stakeholders of the organisation.
Stakeholders will also get satisfied if company will disclose their accurate information regarding
their strategies and policies which they are conducting in an organisation.
Ethical theories
To operate business operation in suitable manner ethical theories are to be taken into
consideration by the Volkswagen organisation. Two theories of ethics are as follows-
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 Deontology- to know what is right or what is wrong this theory is applied in organisation.
According to this theory it is said that people only have followed rules and to play their
roles in an organisation. A person have to work purely in performing his duty within
good manner. Operations is to be carried out with morale and values in achieving
organisational objectives. Adoption of these theories helps management to carry business
operation and actions in effective way. According to this theory end does not justify
means.
 Utilitarianism- it is the ethical theory which maximize utility of the best action which
one over other. Under this theory end justify means of the action. It is the theory which
minimize pain and maximize pleasure. To improve performance of the organisation
company have to apply this theory in getting the best actions which helps in achieving
organisational objectives.(Do You How Deontology is Different From
Utilitarianism,2018.)
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Illustration 1: theories of ethics
(Source: Do You How Deontology is Different From Utilitarianism, 2018)

PART 2
Working as an ethical manager to manage business in high ethical standard
To manage ethical standards in a business I will follow certain procedures and this are as
follows-
Justice- to work as an ethical leader I will always be fair and make work environment also true
and fair. Under the organisation I will not become biased and treat everyone equally in my
working so that I will able to encourage employees to work hard to achieve organisational
objectives. I will also protect rights of the employee that no one treated in biased manner by
anyone.
Respect others- as an ethical leader I will always respect others and also develops a culture
where all the employees are respective each others. In doing my work I will always show respect
towards members so that they will effectively contribute their views in workplace by that
organisational objectives will effectively get achieved in an organisation.
Focus on team building- as an ethical leader my work is to build effective teams in organisation
so that work of the organisation runs in a proper coordination and also effectively. I will always
make genuine efforts in developing team spirit which encourages employee to take challenges
and also to work hard for organisation in achieving targeted future needs of the organisation.
(Chuang and Huang, 2018.)
Encourage initiatives- as an ethical leader to achieve organisational goal I will always work in
proper and effective way so that I will able to encourage employees to work hard for
organisation. To develop that effective work I will develop some strategies by rewarding best
performer which encourage them to improve skills which required in an organisation.
Value awareness- as an ethical leader I will always develop effective communication with the
employees to clarify them with the expectations of the organisation. By doing regular
communication I will able to encourage employees in achieving organisational objectives of the
organisation.
No tolerance for ethical violations- as an ethical leader I will not tolerate any ethical violations
in the organisation. If employees are not working under proper code of conduct I will not at all
tolerate that misbehave in organisation and will charge penalties in their unethical working.
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These are the standards which I follow in managing high standards of ethics in an
organisation to achieve overall performance and profitability of the organisation in proper code
of conduct.(DesJardins, 2014.)
Meaning of personal ethics
Personal ethics is the philosophy of an individual belief in doing their action which is
either wrong or right. Personal ethics includes way of doing work in an own manner which
sometimes brings unethical organisation and practises in values and methods of practises of
organisation. It is affected by individual factor, their personal behaviour of doing work in
organisation. Some peoples do work in their own way and also does not follow proper code of
conduct in their work place which affect organisational practises and behaviour. (Epstein, 2018.)
To achieve organisational objectives personal ethics of an individual person plays an
important role. If they work in proper ethical manner they will able to achieve organisational
objectives but an unethical behaviour of working not only reduces their won work performance
but it also affects overall performance of the organisation which leads to reduction of
profitability of the organisation. It creates legal issue because government has created a legal
procedure of doing work in organisation and if individuals are not following that properly then
organisation fails to achieve their needs and it will also reduce overall goodwill of the
organisation.(Principles of personal ethics,2018.) It also affects work of the employees in
organisation. A leader has to develop effective personal ethics in his working if he will not
develop that ethical behaviour then overall performance of the employees of organisation will
get effected and management will not able to achieve organisational objectives.
Employee performance will also get affected when leader will not develop effective
personal ethics in his working. Leader work is to motivate employee but if he will not develop
proper regulations and rules then workers sometimes feels demotivated which overall affect
organisational performance by that profitability of organisation gets decreased. To prevent
unethical behaviour in an organisation managers have to establish effective goals and set of
procedure in workplace for employees of the organisation. Expectation of company's must be
clearly communicated among employees if it will not communicate then they work in unethical
manner which overall reduces company's performance. Proper training is to be developed in
organisation regularly which helps organisation in motivating employees. This training and
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development programs helps organisation to motivate employee by which they will take
challenges and will work hard in achieving organisational objectives.
Conclusion
From the above study it can be concluded that ethics plays an important role in an
organisation. To achieve organisational objectives in proper code of conduct organisation have to
develop effective business ethics policies in their workplace. In this report a case study of
Volkswagen is discussed which is the case of consumer deception. Role of business towards
society and business holders and ethical choices which impact other companies is explained with
recommendation in developing ethical policies in company. Further, in this report ethical
theories and working as an ethical manager to manage business in high ethical standard is
explained.
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REFERENCES
Books and Journals
Byun and et.al., 2018. A three-level examination of the cascading effects of ethical leadership on
employee outcomes: A moderated mediation analysis. Journal of Business Research. 88.
pp.44-53.
Chuang, S.P. and Huang, S.J., 2018. The effect of environmental corporate social responsibility
on environmental performance and business competitiveness: The mediation of green
information technology capital. Journal of Business Ethics. 150(4). pp.991-1009.
Crane and et.al., 2017. Measuring corporate social responsibility and impact: enhancing
quantitative research design and methods in business and society research.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
DesJardins, J.R., 2014. An introduction to business ethics. McGraw-Hill/Irwin.
Epstein, M.J., 2018. Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
Ewest, T., 2018. The Challenges Within Ethical Leadership Theories. In Prosocial
Leadership (pp. 23-42). Palgrave Macmillan, New York.
Klein, P., Michal, J. and David, B., 2018 October. Business ethics and corporate social
responsibility as a tool to stimulate interest in the living environment. In Proceedings of
Business and Management Conferences (No. 6810197). International Institute of Social
and Economic Sciences.
Li and et.al., 2018. Industry-wide corporate fraud: The truth behind the Volkswagen
scandal. Journal of Cleaner Production. 172. pp.3167-3175.
Tanaka and et.al., 2018. Climate effects of non-compliant Volkswagen diesel
cars. Environmental Research Letters. 13(4). p.044020.
Valentini, C. and Kruckeberg, D., 2018. “Walking the environmental responsibility talk” in the
automobile industry: An ethics case study of the Volkswagen environmental
scandal. Corporate Communications: An International Journal. 23(4). pp.528-543.
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Online
Do You How Deontology is Different From Utilitarianism.2018. [ONLINE]. Available through
<https://opinionfront.com/how-is-deontology-different-from-utilitarianism>
Principles of personal ethics.2018. [ONLINE]. Available through
<https://www.oreilly.com/library/view/business-ethics-and/9789332511255/xhtml/
c1s2.xhtml>
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