Volkswagen Case Study: Analysis of Ethical Failures and Solutions

This case study delves into the Volkswagen emission scandal, examining the ethical issues that arose from the use of "defeat devices" to manipulate emissions tests. The report analyzes the ethical failures, including the violation of environmental regulations and the deception of customers and government agencies. It explores the key stakeholders affected, such as employees, shareholders, and customers, and assesses the impact of the scandal on Volkswagen's reputation, financial performance, and legal standing. The analysis highlights the role of leadership, the influence of factors like rationalization, opportunity, and pressure on unethical behavior, and the consequences of prioritizing profit over ethical conduct. The case study further investigates the application of ethical theories like individualism/egoism in the decision-making process and provides recommendations for ethical leadership and business practices to prevent similar issues in the future, emphasizing the importance of transparency, integrity, and corporate social responsibility. The study concludes by underscoring the long-term damage caused by unethical actions and the need for a strong ethical framework within organizations.

Volkswagen case study

Table of Contents
PART 1............................................................................................................................................3
Ethical analysis............................................................................................................................3
Why it is ethical question.............................................................................................................3
Key stakeholders those who are affected.....................................................................................5
Analysing the way ethical choices have effect on company........................................................6
PART 2............................................................................................................................................8
Qualities or characteristics of an ethical leader...........................................................................8
RECOMMENDATIONS.................................................................................................................9
Analysing the way ethical manager manages business and high ethical standards....................9
.......................................................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business ethics can be defined as study of various business policies as well as practices
related to potentially controversial problems such as discrimination, insider trading etc.
Companies have to face various ethical issues daily. It is required by manager in an organisation
to make business decisions considering ethical issues. Business ethics can also be defined as the
system of moral principles as well as rules applied to companies (Yakovleva, 2017). It is very
much crucial for companies to consider the interest of society as well as business. Manager in an
enterprise must set specific standards and must ensure that all the operations are executed
accordingly, as this will assist firm in eliminating ethical issues. In addition to this management
also need to review codes of conduct periodically in order to suit the changing circumstances.
The present report have focus on identifying the ethical issues faced by Volkswagen due
to unethical activity conducted by an enterprise.
PART 1
Ethical analysis
TO THE SENIOR MANAGER/DIRECTOR OF COMPANY
FROM: ABC123455, MIDDLE MANAGER OF VOLKSWAGEN
SUBJECT OF THE REPORT: NO PROPER CONTRACTS FOR WORKERS…
Objective of Volkswagen is to achieve the leading position in an industry, but the
emission scandal has lead to decline in market share of company. Volkswagen has to face
various legal as well as ethical issues Business entity have to face these issues due to its business
operations has negative effect on society as well as environment. The emission scandal of
Volkswagen have great effect on shareholders and also on the country in which firm operates.
Emission scandal of Volkswagen is all about the utilization of software that is “defeat devices”
installed in the four wheeler for indicating that pollution emissions have been minimized, but this
was not true (Jung and “Alison” Park, 2017).
Why it is ethical question
A sustainability supply chain as well as environmental companionable transportation
solution is considered to be as an indispensable element of demonstrating that it is the
responsibility of an enterprise to protect human right and prevent environment from the
degradation. Volkswagen has utilized the corrupted software due to which firm has to face

ethical issues. The software recognized when a car was being tested for emissions in a lab
because only two of its four wheels were used, at which point it activated emissions-controlling
devices that would have inhibited performance in on-road conditions. In addition to this , an
organization has to face legal issues because of violating United States Clean Air Act (Painter,
and Martins, 2017).
As per the ethical principle, it was the liabilities of software engineers to make sure
safety of the product. In addition to this, Engineers should test devices. There are mainly three
factors has influenced the decision taken by Volkswagen engineers these three variables are
rationalization, opportunity and pressure. These factors have force workers to act unethically.
Pressure, It was intense (Anenberg, Miller and Heyes, 2017).
Rules and regulation, on which every worker was trained in ethics, appears to be
inapplicable in context of management’s autocratic leadership style as well as single-minded
goal to succeed at any cost. In addition to this, Simultaneously with the encouraging the
engineers to come up with a new solution. Diesel-engine-management software which can detect
when a vehicle was being tested and turn on emission-controlling devices , it would be utilized
for internal testing, as usage was illegal in vehicles sold to the customers. In context of given
case scenario, The manager without consulting with other people in an enterprise has taken
decision related to installation of default devices in car. Manager in Volkwagen has taken such
decisions in order to support firm in increasing sales and profitability. Rationalization., present
employees in an enterprise was aware about the fact that earlier this corrupted device was
utilized by existing engineer in Volkswagen which enabled business entity to cheat on newly
enforced emission standards. In addition to this, increase in cost has created pressure on
engineers to make decisions related to the installation of defeat or corrupted devices in the
car((Kolb, Fröhlich and Schmidpeter, 2017).
Completed matter related to the Volkswagen is considered to be as ethical issues based
the fact that this issue was prior known which revealing shows not only a failure of ethical
conduct by installing the “defeat devices” but also the way these issues were not communicated
within an enterprise as well as to the customers. These actions were unethical and everything
went against the Volkswagen rules and regulation symbolize. This specific ethical activity was
executed by Volkswagen in order to increase profitability. In addition to this, the other unethical

act done by an organization is that it continued utilizing the cheating software for reducing the
maintenance of the cars (Miska and Mendenhall, 2018).
The key stakeholders those who are held responsible for this scandal are leaders and
engineers, as they should not have designed such devices. In given case study, concealment of
the devices is considered to be as unethical act, as there was no communication of the issue
(Schwartz, 2017. )..
'
Key stakeholders those who are affected
Stakeholders are those people who are directly or indirectly associated with the company
or business activities. Some of internal stakeholders are employees, board of directors, investors,
shareholders etc. Customers and government get effected as they were not informed about the
defeated devices in the car. Company has given customer an false information about the quality
of diesel engines. Many of the workers in an enterprise have lost their job, as huge amount of
investment has been made by an organization on rectifying the mistake. In addition to this,
manager has given resignatExternal stakeholders are customers, competitors etc. Both internal as
well as external stakeholders are greatly effected by organizational policies, actions, objectives
etc.
In context of Volkswagen emission scandal stakeholders those who are greatly effected
by the unethical act of an enterprise are dealers, employees , customers, shareholders,
manufacturers etc. All these people are effected in several ways such some engineers and
managers have lost their jobs. Both internal and external stakeholders are greatly effected by
organizational policies, actions, objectives etc. In context of Volkswagen emission scandal
stakeholders those who are greatly effected by the unethical act of an enterprise are dealers,
employees, customers, shareholders, manufacturers etc. All these people are effected in several
ways such some engineers and managers have lost their jobs. In addition to this, revelations of
the deception led to the resignation of chief executive officer in Volkswagen. Engineers has to
face criminal charges stemming from the American investigation into the automaker’s emissions
deception( (Wheelen, Hunger and Bamford, 2017).
Due to ethical issues business entity might have to face the difficulty in maintaining the
relationship with customers. These issues also have direct as well as significant negative effect

on the productivity, profitability and also on the working efficiency of firm. Overall ethical
issues has adverse impact on business performance. Continuance of unethical practices by an
organization often leads top high level of dissatisfaction in workers. It also gives rise to high
employee turnover rate which has been analyzed in the case of Volkswagen. In addition to this,
business entity might have to face legal issues. Decline in sales, market shares are some
consequences of unethical issues. In addition to the major ethical issues can lead to increase in
the threat of sustainability of business. A lack of business ethics endangers the future of an
enterprise(Millar and Koning, 2018).
It is very much important for Volkswagen to formulate, implements business ethics
within an enterprise. Management in an organization need to apply ethical principles in its
business culture as this will help in making appropriate decision. In addition to this, leaders in an
organization is required to formulate standards as well as need to communicate the same to all
employees at workplace. In addition to this, it is the duty of leader to ensure that all the business
operations are executed according to the prescribed standards.
Manager in business entity should conduct integrity audit at regular interval of time, as
this will assist them in addressing the issues. An organization should arrange the resources as
well as must prepare with the strategies, as this tactics will support an enterprise in dealing with
ethical issues. In addition to this, leader in an organization need to create an effective culture for
encouraging people share problem. The other strategy which are required to be implemented is,
workers should be provided with open communication system, as this tactic will provide
management an ease in addressing those issues which might have great influence on business
performance (Brown, Gordon and Rose, 2018).
Analysing the way ethical choices have effect on companyIndividualism or theory of Egoism:
The theory Individualism is related to the relationship of an individual to the collective.
As per this theory, an individual make decisions according to their interest. Individualism
theory is related to the ethical decision making as well as justifications for such judgements. The
main objective of establishing any business is to earn high profits. In context of Volkswagen ,
main purpose of an enterprise is to provide high return to its shareholders. Therefore, It has been
analysed from the given case scenario that, an organisation in order to accomplish desired
business objectives has adopted individualistic or egoism approach for making decisions . This

statement has been made considering the various facts in case study, one of them is business
entity has provided customers as well as government with incorrect information related to the
quality of diesel engine, this unethical act was conducted by the firm for increasing sale
(Anenberg, Miller and Heyes, 2017). In addition to this, this statement that business entity has
adopted egoism approach is supported by the fact that Volkswagen in one of the press release
accepted that there is additional suspect software in its 2016 diesel models that would potentially
help to manipulate the results of the exhaust tests. Volkswagen has to face both legal and ethical
issues due to failure to fulfil its responsibilities towards society and environment. Emission
scandal has significant, long-lasting as well as adverse impact on the reputation of the
firm(Yawar and Seuring, 2017).
In addition to this, Business entity has disregarded its responsibility towards society and
environment. In context of Volkswagen, the procedure of achieving leadership position as well as
for retaining market share business entity pursued self interest at the cost of customer. An
organisation for increasing sales of car and earning high profit lied government and public about
the quality of service engine. Consequences of unethical act is that an organisation to make huge
investment on rectifying mistake and has to suffer huge production losses which further have
negative impact on the financial performance of an enterprise. An organisation has taken the
responsibility for an emission cheating scandal (Stanwick and Stanwick, 2017).
All the actions taken by the Volkswagen in such situation are less justifiable. Company
has given justification that due to intense competition business entity has failed to concentrate on
business operations which is considered to be as less justifiable. Such types of ethical issues
would not have been occurred if company might have spent some time on developing or
manufacturing a quality diesel engine. But business entity had focus on increasing sale rather
than delivering quality products or proper services to their customers. An organisation has
sacrifice image as well as integrity just for earning profit. Due to one unethical act, Volkswagen
has lose the trust of investors as well as government (Charter, 2017).
Individualism is considered to be as economic theory which dictates that the obligations
of Volkswagen company is to maximise profits by adopting a legal ways or techniques. It also
states the business entity is responsible for its own act. According to this hypotheses,
Volkswagen has not conducted any illegal act. As in present world, people are able to
communicate to each other very easily and tend to influence others future purchase decisions.

These recalls are very bad publicity for Volkswagen and have a counter effect on the satisfaction
levels for their shareholders . Unethical act conducted by an organisation also have advese
impact on the behaviour of customers towards company. It has also resulted into great decline in
sales as well as profitability of firm (Kirchhain and Zietz, 2018).
Utilitarianism : It has focus on producing the greatest amount of good for the greatest number of
people. As per this ethical theory, decision or an action is morally right if its produces positive
outcomes. This hypothesis states that the effectiveness or accuracy related to the actions taken is
completely based on the consequences. In context of Volkswagen , it was totally wrong action
was taken by an enterprise for earning profit. In other words, it can be stated that unethical path
was chosen by an organisation for accomplishing desired business objectives, due to which firm
has to face severe consequences that furtherer have effect on reputation of company. The only
good thing which has been there in scandal is that Volkswagen has realised the significance of
business ethics. In addition,this Volkswagen has utilised the corrupted software for reducing the
cost of maintenance in order to increase sale of cars, as a result of which customers have to pay
high maintenance cost. Utilitarianism states that he results of cheating are usually bad, and
therefore cheating should be condemned. As per this hypothesis , it is very much important for
leaders or manager in an organisation to consider the effect or consequences of their decision on
employees before making nay decision. According to the theory of Utilitarianism, if manager in
Volkswagen company had considered the interest ass well as opinion of their shareholders, this
could have helped them in eliminating such types of legal as well as ethical issues. The biggest
consequence that comes from this for the Volkswagen is customer dissatisfaction. As the
possibility which is associated with the incident is possibility of an accident being caused by a
failure within these cars that are being recalled (Tse, Y.K., Zhang, M., and Keefe, T., 2017. ).
An accident can greatly hurt not only those who are involved within the accident, but the
Volkswagen as well. Due to the death of person company might have to face more harmful
consequences. In addition to this, as a results of unethical decision by manager the company has
to incurred big losses which have direct as well as significant effect on the financial performance
of an organisation. It is very much important for manager in companies to determiner both
positive as well as negative aspects of implementing specific decisions,. As this strategy will aid
them in eliminating ethical as well as legal issues (Packard, 2017).

PART 2
Qualities or characteristics of an ethical leader
Ethics is concerned with the kinds of values and morals an individual or a society finds
desirable or appropriate. Ethical leader is a person those who have respect for ethical values,
beliefs, rights as well as dignity of other people . They also have charismatic quality which
makes them different from other people at workplace. In addition to this, ethical leaders also
have an effective communication skills which enables them to encourage people to follow
standards. Ethical leaders judge other people on the way of doing their work. In addition to this,
these people has understanding about importance of developing trust. It is the unique quality of
ethical leaders that they facilitate two way communication and ethical leaders engage themselves
directly with colleagues, customers and other stakeholders (Strittmatter and Lechner,2017.).
Ethical leaders does not utilities followers as a medium of achieving goals . They have
respect for decisions, or values of other people. Other characteristics or qualities of an individual
which makes them ethical leader are :
Honesty: An ethical leader are always loyal towards their work , followers and also an
organization in which they are working. They have respect for their followers. It is the quality of
ethical leader that they provide complete as well as reliable information about the circumstances
without being concerned about the effect of such act on their performance. They do not make any
kind of misrepresentation to company or their followers. Ethical leaders given proper
justification for the decision taken by them (Jeanes, 2017).
Dignity and respectfulness: It is the characteristics of ethical leader that they have an effective
listening skills. Ethical leaders respects the opinions or ideas shared by other people.
Justice: It is the quality of ethical leaders that they always make fair decisions.
Community building:Before making any final decision they consider their ans well as followers
and also company interest. They treat their all followers equally(Blyton and Morris, 2017).
Serving other: It is considered to be as an effective quality of ethical leader that they place their
followers or an organization interest at top priority.
Selflessness : This is trait of ethical leader that they are strong on selfless service in the interests
of the greater good (Spencer-Cooke and van Dijk, 2017.). .

Sense of responsibility: It is considered to be an effective quality of ethical leaders that they have
sense of responsibility. They take the responsibilities of their own as well as followers actions
(Waddock and Bodwell, 2017).
The another company is facing minor ethical issue is ford. An organization has design
fault car, as there are high chances of catching fire, if in case car is hit from the behind. The
several people died in accident as well as then sum burn victims has taken ford to the court.
RECOMMENDATIONS
Analysing the way ethical manager manages business and high ethical standards
Manager is a person who is responsible for managing business and various activities
within a company. It is the duty of manager in an organization to develop and bring changes in
the business ethical codes. I will organize ethical program me for assisting the decision making
and for guiding the behavior of workers. As a manager I regularly monitor and ensure that all the
norms are being followed as I perceive that this is very crucial activity for eliminating ethical
issues and for protecting the long-term prosperity of an enterprise I take high initiative by
conducting regular meeting with stakeholders for addressing the issues which might have
negative influence on business performance. As a manager i also organize training for my
followers which purpose is to assist employees in identifying the moral dimension of business
decisions. I have depth understanding about my roles in context of shaping business ethics. I plan
such training programs which also includes the detail about techniques or resources which are
available for assisting employees to develop the skills which are required for handling ethical
dilemmas The other objective of providing training is to clarify as well as inform workers about
the ethical code of company which are required to be followed by them when executing the task
assigned to them (Sunley and Leigh, 2017).
Role of business in society is to produce as well as distribute goods or services to satisfy
a public need or demand. Function of business is to create resources which helps in social
development. Role of business is to build and maintain the conditions of well-being((Jamali,
Lund-Thomsen and Jeppesen, 2017.).
CONCLUSION
It has been concluded from the assignment that ethical issues have direct as well as
significant effect on the business. Study has also concluded that unethical activities conducted by

company can have adverse impact on business performance. It has successfully demonstrated
the way ethical issues might have effect on different stakeholders. Positive ethical can provide
various such as growth opportunity to organizations. It has been concluded from the assignment
that ethical leaders have some unique qualities such as sense of honesty, honesty, etc. which
makes them different from other leaders. Study has also concluded that fulfilling corporate social
responsibility is very much important in context of long term sustainability of business.
There are some strategies has been recommended in the report which can be adopted by
business entity , as this will assist an organization in eliminating the ethical issues.

REFERENCES
Books and Journals:
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pp.219-239.
Yakovleva, N., 2017. Corporate social responsibility in the mining industries. Routle
Barnett, M.L., Henriques, I. and Husted Corregan, B., 2018. Governing the Void between
Stakeholder Management and Sustainability.
Brown, D.R., Gordon, R. and Rose, D., 2018. Re-Aligning Society and Its Institutions:
Ethics,“Social Licence to Operate,” and Responsible Management Practice. Business and
Professional Ethics Journal.
Millar, J. and Koning, J., 2018. From capacity to capability? Rethinking the PRME agenda for
inclusive development in management education. African Journal of Business Ethics,
12(1).
Schwartz, M.S., 2017. Corporate social responsibility. Routledge.
Kolb, M., Fröhlich, L. and Schmidpeter, R., 2017. Implementing sustainability as the new
normal: Responsible management education–From a private business school's perspective.
The International Journal of Management Education, 15(2), pp.280-292.
Miska, C. and Mendenhall, M.E., 2018. Responsible leadership: A mapping of extant research
and future directions. Journal of Business Ethics, 148(1), pp.117-134.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management
and business policy. pearson.
Yawar, S.A. and Seuring, S., 2017. Management of social issues in supply chains: a literature
review exploring social issues, actions and performance outcomes. Journal of Business
Ethics, 141(3), pp.621-643.
Charter, M., 2017. Greener marketing: A responsible approach to business. Routledge.
Waddock, S. and Bodwell, C., 2017. Total responsibility management: The manual. Routledge.
Jamali, D., Lund-Thomsen, P. and Jeppesen, S., 2017. SMEs and CSR in developing countries.
Business & Society, 56(1), pp.11-22.