Volkswagen: Ethics, Social Responsibility, and Corporate Governance
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This report provides a comprehensive analysis of Volkswagen's ethical issues, social responsibility, and corporate governance, primarily focusing on the diesel emissions scandal. The report begins with a company analysis, covering Volkswagen's history, core values, and ethical culture. It then delves into stakeholder analysis, identifying key stakeholders and their stakes, and creates a stakeholder map to illustrate their relationships. A CSR analysis examines Volkswagen's corporate social responsibilities, evaluating their nature and extent concerning various stakeholders. The core of the report lies in its problem/issue analysis, which identifies the ethical problems, their causes, and symptoms, including the 'diesel dupe' scandal. It explores the 'why, when, where, and how' of these ethical issues, the stakeholders involved, and their consequences. The report concludes with an evaluation of management actions, recommending actions at the time of the issue and present-day recommendations, offering insights into how Volkswagen should have handled the crisis and how it should move forward. This analysis covers the EPA regulations, the use of defeat devices, and the impact on the environment and stakeholders.
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
Table of Contents
Introduction - Company Analysis..........................................................................................................2
Background & History.......................................................................................................................2
Core Values.......................................................................................................................................2
Ethical Culture...................................................................................................................................3
Stakeholder Analysis.............................................................................................................................3
Key Stakeholders...............................................................................................................................3
Stakeholder Map................................................................................................................................4
CSR Analysis........................................................................................................................................4
CSRs..................................................................................................................................................4
Nature & Extent of the Responsibilities to the Stakeholders.............................................................5
Problems/Issue Analysis........................................................................................................................5
Ethical Problems/Issues (dilemma), Causes, and Symptoms.............................................................5
Reasons for Ethical Issues.................................................................................................................6
Why, When, Where, and How.......................................................................................................6
Stakeholders Involved.......................................................................................................................9
Consequences of the Ethical Problems..............................................................................................9
Evaluation............................................................................................................................................10
Management/Leadership Actions to deal with the Ethical Issues....................................................10
Correctness of the Management/Leadership Actions.......................................................................11
Recommended Actions at the time of the Issue...............................................................................12
Recommended Actions at Present...................................................................................................12
Conclusion...........................................................................................................................................13
References...........................................................................................................................................13
1
Table of Contents
Introduction - Company Analysis..........................................................................................................2
Background & History.......................................................................................................................2
Core Values.......................................................................................................................................2
Ethical Culture...................................................................................................................................3
Stakeholder Analysis.............................................................................................................................3
Key Stakeholders...............................................................................................................................3
Stakeholder Map................................................................................................................................4
CSR Analysis........................................................................................................................................4
CSRs..................................................................................................................................................4
Nature & Extent of the Responsibilities to the Stakeholders.............................................................5
Problems/Issue Analysis........................................................................................................................5
Ethical Problems/Issues (dilemma), Causes, and Symptoms.............................................................5
Reasons for Ethical Issues.................................................................................................................6
Why, When, Where, and How.......................................................................................................6
Stakeholders Involved.......................................................................................................................9
Consequences of the Ethical Problems..............................................................................................9
Evaluation............................................................................................................................................10
Management/Leadership Actions to deal with the Ethical Issues....................................................10
Correctness of the Management/Leadership Actions.......................................................................11
Recommended Actions at the time of the Issue...............................................................................12
Recommended Actions at Present...................................................................................................12
Conclusion...........................................................................................................................................13
References...........................................................................................................................................13
1

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
Introduction - Company Analysis
Background & History
Volkswagen is the German automobile company that was found in the year 1937 and the
company has its headquarters in Wolfsburg, Germany. The company is the flagship marquee
of the Volkswagen Group and its car model called Beetle has been its most popular product
till date. Around 40% revenues of the organization come from China and the organization
was also recognized as the largest automaker in 2016 and 2017.
The establishment of the company was done in 1937 by the German Labour Front and it was
carried out in Berlin. Ferdinand Porsche was one of the Austrian automotive engineers and
was hired by the German Labour Front in the year 1934. This led to the development of path
for the establishment of the new factory. All of this took place in Lower Saxony in the year
1938. However, the manufacturing could not begin as the World War II broke out in 1939.
The factory was in ruins by the end of the war and it was built again under the British
supervision in 1946. At this time, the control was given to West German Government. The
company rapidly expanded in 1950s and released some of the successful products, such as
Transporter Van and Karmann Gia Coupe (Volkswagenag, 2017). The company established
its presence in the United States in 1955 and the landmark advertising campaigns were run by
an advertising agency called Doyle Dane Bernbach. The release of Beetle gave Volkswagen
a lot of popularity and acceptance among the customers. The company started manufacturing
and releasing the rear-engine cars in 1970s and the most successful model was Golf. The
organization gradually expanded to the other parts of the world, such as Mexico, Brazil,
China, India, France, etc. There are many other automotive company that are owned by
Volkswagen, such as Audi and Porsche in Germany, Skoda in Czech Republic, Lamborghini
in Italy, Bentley in UK, and Bugatti in France.
The company ended the production of its most popular model, Beetle, in 2019.
Core Values
There are a number of core values that the organization has included in its organizational
policies and processes. Integrity, servant’s attitude, accountability, continuous improvement,
teamwork, and fun are some of the core values that the organization abides by.
2
Introduction - Company Analysis
Background & History
Volkswagen is the German automobile company that was found in the year 1937 and the
company has its headquarters in Wolfsburg, Germany. The company is the flagship marquee
of the Volkswagen Group and its car model called Beetle has been its most popular product
till date. Around 40% revenues of the organization come from China and the organization
was also recognized as the largest automaker in 2016 and 2017.
The establishment of the company was done in 1937 by the German Labour Front and it was
carried out in Berlin. Ferdinand Porsche was one of the Austrian automotive engineers and
was hired by the German Labour Front in the year 1934. This led to the development of path
for the establishment of the new factory. All of this took place in Lower Saxony in the year
1938. However, the manufacturing could not begin as the World War II broke out in 1939.
The factory was in ruins by the end of the war and it was built again under the British
supervision in 1946. At this time, the control was given to West German Government. The
company rapidly expanded in 1950s and released some of the successful products, such as
Transporter Van and Karmann Gia Coupe (Volkswagenag, 2017). The company established
its presence in the United States in 1955 and the landmark advertising campaigns were run by
an advertising agency called Doyle Dane Bernbach. The release of Beetle gave Volkswagen
a lot of popularity and acceptance among the customers. The company started manufacturing
and releasing the rear-engine cars in 1970s and the most successful model was Golf. The
organization gradually expanded to the other parts of the world, such as Mexico, Brazil,
China, India, France, etc. There are many other automotive company that are owned by
Volkswagen, such as Audi and Porsche in Germany, Skoda in Czech Republic, Lamborghini
in Italy, Bentley in UK, and Bugatti in France.
The company ended the production of its most popular model, Beetle, in 2019.
Core Values
There are a number of core values that the organization has included in its organizational
policies and processes. Integrity, servant’s attitude, accountability, continuous improvement,
teamwork, and fun are some of the core values that the organization abides by.
2

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
Ethical Culture
The core values, mission, and vision of Volkswagen support the ethical culture and practices
that the company aims to achieve.
However, there have been instances in the past wherein the adherence with the ethical culture
has not been maintained.
Stakeholder Analysis
Key Stakeholders
There are several stakeholders that are associated with the Volkswagen organization.
Volkswagen Group: The primary stakeholder is the Volkswagen group itself that
comprises of the board members and CEO of the group. These are the entities that
have stakes in the organization and are also the primary decision-makers on the
policies and strategies that are carried out by the organization.
Parent Organizations: The parent organization of the Volkswagen group is Qatar
Investment Authority which has the direct stakes in the organization.
Daughter Companies: There are many other automotive company that are owned by
Volkswagen, such as Audi and Porsche in Germany, Skoda in Czech Republic,
Lamborghini in Italy, Bentley in UK, and Bugatti in France. These have an impact
with the decisions that are taken by the parent group (Galpinvolkswagen, 2020).
Competitors: The automobile industry is a global industry that has a lot many giants
in the market. Some of these include Mercedes, BMW, etc. The decisions taken by the
Volkswagen group and its performance in the market have a direct implication on the
competitors and vice-versa (Hotten, 2015).
Customers: Volkswagen Group has become an international brand and it has its
customers in Germany and all parts of the globe. The organization is required to make
sure that these stakeholders are provided with the expected services and response in
the form of products, service, and assistance.
Suppliers: The manufacturing of the automobile is based on a number of components
that are integrated with each other. The suppliers are the key stakeholders that are
involved and Volkswagen is required to provide effective support to the suppliers and
vice versa to maintain the supplier distribution network adequately.
3
Ethical Culture
The core values, mission, and vision of Volkswagen support the ethical culture and practices
that the company aims to achieve.
However, there have been instances in the past wherein the adherence with the ethical culture
has not been maintained.
Stakeholder Analysis
Key Stakeholders
There are several stakeholders that are associated with the Volkswagen organization.
Volkswagen Group: The primary stakeholder is the Volkswagen group itself that
comprises of the board members and CEO of the group. These are the entities that
have stakes in the organization and are also the primary decision-makers on the
policies and strategies that are carried out by the organization.
Parent Organizations: The parent organization of the Volkswagen group is Qatar
Investment Authority which has the direct stakes in the organization.
Daughter Companies: There are many other automotive company that are owned by
Volkswagen, such as Audi and Porsche in Germany, Skoda in Czech Republic,
Lamborghini in Italy, Bentley in UK, and Bugatti in France. These have an impact
with the decisions that are taken by the parent group (Galpinvolkswagen, 2020).
Competitors: The automobile industry is a global industry that has a lot many giants
in the market. Some of these include Mercedes, BMW, etc. The decisions taken by the
Volkswagen group and its performance in the market have a direct implication on the
competitors and vice-versa (Hotten, 2015).
Customers: Volkswagen Group has become an international brand and it has its
customers in Germany and all parts of the globe. The organization is required to make
sure that these stakeholders are provided with the expected services and response in
the form of products, service, and assistance.
Suppliers: The manufacturing of the automobile is based on a number of components
that are integrated with each other. The suppliers are the key stakeholders that are
involved and Volkswagen is required to provide effective support to the suppliers and
vice versa to maintain the supplier distribution network adequately.
3
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
Small Shareholders: There are several small shareholders that are associated with the
organization that have invested in the company and are implicated with the shifts in
the company performance.
Regulatory Bodies: There are several national and international bodies that have
defined the standards and bare minimum requirements that are to be followed by
every product. These are in terms of the safety norms, pollution & emission, design &
make, and a lot more.
Stakeholder Map
(High)
Power
(Low)
Keep Satisfied
Customers
Suppliers
Manage Closely
Volkswagen Group
Parent Organizations
Regulatory Bodies
Monitor (Least Effort)
Competitors
Keep Informed
Daughter Companies
Small Shareholders
(Low) Interest
(High)
CSR Analysis
CSRs
There are a number of corporate social responsibilities that the Volkswagen Group is required
to include and showcase in the activities that it performs. The idea of sustainability is
recognized by the group and it can be fulfilled only when the CSRs are included and carried
out. The sustainability shall be obtained and enhanced with the economic, social, and ethical
objectives and the adherence to the respective core values.
It shall be the responsibility of the organization to follow the sustainable practices so that the
impact on the environment and the people is gradually reduced. It has been seen that there is
all kinds of waste that the automobile industries generate which causes damage to the
environment and all forms of living beings. The Volkswagen group shall incline towards the
sustainable practices so that the impact can be reduced (Baur, 2015).
4
Small Shareholders: There are several small shareholders that are associated with the
organization that have invested in the company and are implicated with the shifts in
the company performance.
Regulatory Bodies: There are several national and international bodies that have
defined the standards and bare minimum requirements that are to be followed by
every product. These are in terms of the safety norms, pollution & emission, design &
make, and a lot more.
Stakeholder Map
(High)
Power
(Low)
Keep Satisfied
Customers
Suppliers
Manage Closely
Volkswagen Group
Parent Organizations
Regulatory Bodies
Monitor (Least Effort)
Competitors
Keep Informed
Daughter Companies
Small Shareholders
(Low) Interest
(High)
CSR Analysis
CSRs
There are a number of corporate social responsibilities that the Volkswagen Group is required
to include and showcase in the activities that it performs. The idea of sustainability is
recognized by the group and it can be fulfilled only when the CSRs are included and carried
out. The sustainability shall be obtained and enhanced with the economic, social, and ethical
objectives and the adherence to the respective core values.
It shall be the responsibility of the organization to follow the sustainable practices so that the
impact on the environment and the people is gradually reduced. It has been seen that there is
all kinds of waste that the automobile industries generate which causes damage to the
environment and all forms of living beings. The Volkswagen group shall incline towards the
sustainable practices so that the impact can be reduced (Baur, 2015).
4

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
It is also the responsibility of the organization to work and give back to the society in all the
ways possible. It shall include the manufacturing of the products for people of all the income
groups. It shall also include the community assistance and development programs that the
organization must carry out.
The CSRs also include the early identification of all forms of environmental, societal, and
other risks in the value creation and generation processes. It includes the resolution of these
risks as early as possible so that the production lifecycle is maintained and the customers are
provided with the end-products.
Nature & Extent of the Responsibilities to the Stakeholders
The CSRs associated with the Volkswagen Group can be attained only when the stakeholders
provide their support and contribution.
The parent and daughter firms along with the Volkswagen Group shall include CSR and the
associated objectives in their policies. This should reflect as outputs collectively and there
must be strict monitoring and reviews that shall be organized to manage the same.
The customers and suppliers are also required to show responsible attitude by engaging with
the organization only when it meets the defined legal and regulatory standards and meets the
CSR objectives (Volkswagenag, 2017).
It is also the responsibility of the regulatory agencies to keep a check and release the findings
on the public forums. This will enhance the reputation of the organization if it manages to
achieve the CSR objectives. Otherwise, it will be motivated to showcase the same so that the
market reputation and the global brand image are maintained at all times.
Problems/Issue Analysis
Ethical Problems/Issues (dilemma), Causes, and Symptoms
Environmental Protection Agency, EPA came with the new norms to make sure that the
emissions from the automobiles did not have an adverse impact on the environment. The
norms were defined for emitted nitrogen oxide which has extremely negative implications on
the environment and on the living beings.
The new standards that were defined led to the significant issues for the automobile
manufacturers to make their cars and other vehicles fuel efficient while maintaining the
5
It is also the responsibility of the organization to work and give back to the society in all the
ways possible. It shall include the manufacturing of the products for people of all the income
groups. It shall also include the community assistance and development programs that the
organization must carry out.
The CSRs also include the early identification of all forms of environmental, societal, and
other risks in the value creation and generation processes. It includes the resolution of these
risks as early as possible so that the production lifecycle is maintained and the customers are
provided with the end-products.
Nature & Extent of the Responsibilities to the Stakeholders
The CSRs associated with the Volkswagen Group can be attained only when the stakeholders
provide their support and contribution.
The parent and daughter firms along with the Volkswagen Group shall include CSR and the
associated objectives in their policies. This should reflect as outputs collectively and there
must be strict monitoring and reviews that shall be organized to manage the same.
The customers and suppliers are also required to show responsible attitude by engaging with
the organization only when it meets the defined legal and regulatory standards and meets the
CSR objectives (Volkswagenag, 2017).
It is also the responsibility of the regulatory agencies to keep a check and release the findings
on the public forums. This will enhance the reputation of the organization if it manages to
achieve the CSR objectives. Otherwise, it will be motivated to showcase the same so that the
market reputation and the global brand image are maintained at all times.
Problems/Issue Analysis
Ethical Problems/Issues (dilemma), Causes, and Symptoms
Environmental Protection Agency, EPA came with the new norms to make sure that the
emissions from the automobiles did not have an adverse impact on the environment. The
norms were defined for emitted nitrogen oxide which has extremely negative implications on
the environment and on the living beings.
The new standards that were defined led to the significant issues for the automobile
manufacturers to make their cars and other vehicles fuel efficient while maintaining the
5

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
standards. The diesel cars were the ones that were badly hit by these changes. Volkswagen;
however, emerged as a market player and could provide fuel efficient diesel cars and released
the same in the US markets. The other primary competitors of the organization, such as
Honda, Nissan, Hyundai, and others were finding it extremely challenging to incorporate the
new standards while maintaining enhanced performance (Eger and Schhfer, 2018). However,
in 2015, Volkswagen announced the ‘diesel dupe’ that it carried out to make sure that the
emission tests could pass with less pollution emitted by the vehicles as compared with the
original emissions (Atiyeh, 2017). The company made use of a defeat software or device in
the diesel engines of the cars which was done with an objective of modifying the vehicle
performance in order to achieve the enhanced result. The company pretended that the
vehicles were in accordance with the standards set up by EPA and the tests were conducted in
the labs rather than the roads. The software that was incorporated could determine the
scenarios wherein the vehicle was under the emission test and the modified information from
the brakes, steering, and other parts were collected in order to pass the test (Macaityte and
Virbasiute, 2018). This software made certain changes in the engine setting so that the
reduced nitrogen oxide levels were emitted and the actual results were over 35 times as
compared with the results shown by the software.
Such an act by a renowned company like Volkswagen is extremely unethical since the
organization did not follow the defined standards and used dishonest mechanisms to hide the
information from the public and the regulatory agencies. The increased nitrogen oxide
emissions from the diesel cars cause significant negative impacts on the vehicles and goes
against the corporate social responsibility of the organization (Ewing, 2017).
Reasons for Ethical Issues
Why, When, Where, and How
EPA accompanied the new norms to ensure that the emissions from the automobiles didn't
badly affect the environment. The norms were characterized for emitted nitrogen oxide which
has incredibly negative ramifications on the environment and on the living beings. The new
standards that were characterized prompted the critical issues for the car makers to make their
cars and different vehicles fuel efficient while keeping up the standards (Gates et al., 2015).
The diesel cars were the ones that were severely hit by these changes. Volkswagen; be that as
it may, developed as a market player and could give fuel efficient diesel cars and discharged
the equivalent in the US markets. The other essential contenders of the association were
6
standards. The diesel cars were the ones that were badly hit by these changes. Volkswagen;
however, emerged as a market player and could provide fuel efficient diesel cars and released
the same in the US markets. The other primary competitors of the organization, such as
Honda, Nissan, Hyundai, and others were finding it extremely challenging to incorporate the
new standards while maintaining enhanced performance (Eger and Schhfer, 2018). However,
in 2015, Volkswagen announced the ‘diesel dupe’ that it carried out to make sure that the
emission tests could pass with less pollution emitted by the vehicles as compared with the
original emissions (Atiyeh, 2017). The company made use of a defeat software or device in
the diesel engines of the cars which was done with an objective of modifying the vehicle
performance in order to achieve the enhanced result. The company pretended that the
vehicles were in accordance with the standards set up by EPA and the tests were conducted in
the labs rather than the roads. The software that was incorporated could determine the
scenarios wherein the vehicle was under the emission test and the modified information from
the brakes, steering, and other parts were collected in order to pass the test (Macaityte and
Virbasiute, 2018). This software made certain changes in the engine setting so that the
reduced nitrogen oxide levels were emitted and the actual results were over 35 times as
compared with the results shown by the software.
Such an act by a renowned company like Volkswagen is extremely unethical since the
organization did not follow the defined standards and used dishonest mechanisms to hide the
information from the public and the regulatory agencies. The increased nitrogen oxide
emissions from the diesel cars cause significant negative impacts on the vehicles and goes
against the corporate social responsibility of the organization (Ewing, 2017).
Reasons for Ethical Issues
Why, When, Where, and How
EPA accompanied the new norms to ensure that the emissions from the automobiles didn't
badly affect the environment. The norms were characterized for emitted nitrogen oxide which
has incredibly negative ramifications on the environment and on the living beings. The new
standards that were characterized prompted the critical issues for the car makers to make their
cars and different vehicles fuel efficient while keeping up the standards (Gates et al., 2015).
The diesel cars were the ones that were severely hit by these changes. Volkswagen; be that as
it may, developed as a market player and could give fuel efficient diesel cars and discharged
the equivalent in the US markets. The other essential contenders of the association were
6
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
discovering it very testing to join the new standards while keeping up upgraded execution.
Notwithstanding, in 2015, Volkswagen reported the 'diesel dupe' that it completed to ensure
that the emanation tests could go with less contamination emitted by the vehicles as
contrasted and the first emissions. The organization utilized a defeat software or device in the
diesel engines of the cars which was finished with a goal of changing the vehicle execution so
as to accomplish the improved outcome (Mansouri, 2016). The organization imagined that
the vehicles were as per the standards set up by EPA and the tests were directed in the labs
instead of the roads. The software that was fused could decide the situations wherein the
vehicle was under the emanation test and the adjusted data from the brakes, steering, and
different parts were gathered so as to breeze through the assessment (Chu, 2015). This
software rolled out specific improvements in the engine setting so the decreased nitrogen
oxide levels were emitted and the genuine outcomes were more than 35 times as contrasted
and the outcomes appeared by the software (Chronister, 2018).
Martin Winterkorn, the then CEO of the organization resigned in September, 2015 and made
an official announcement on being unaware of the overall scandal that took place. There are a
number of reasons that are presumed to be associated with the issue. It is believed that there
were technical limitations that were associated with the organization which were emerging as
barriers to meet the new standards while maintaining the performance. These shortcomings
prompted the organization to take such an unethical path. The Chairman made an
announcement that some of the engineers associated with the organization decided to develop
the software and rig the emission test when EPA had announced the new standards in 2005.
The decisions were made at such an early stage due to the potential technological limitations
and shortcomings that the engineers were aware of (Schiermeier, 2015). There was certain
timeframe and budget that was allotted to the engineers to make sure that the technology was
developed to meet the new standards. The time span was crossed and the engineers could
develop the solution through which the new standards could be met. However, they preferred
to rig the test rather than carrying on with the new solution.
The unethical outcomes and path was not adopted due a single failure or mistake. Rather, it
could happen because of the chain of mistakes and unethical activities that took place. The
corporate culture that is followed in the organization also contributed towards the planning
and execution of the issue (Topham et al., 2018). The compliance-based culture is followed
in the organization wherein all of the employees are required to follow specific rules and
policies that are set-up by the organization. This has resulted in the work environment
7
discovering it very testing to join the new standards while keeping up upgraded execution.
Notwithstanding, in 2015, Volkswagen reported the 'diesel dupe' that it completed to ensure
that the emanation tests could go with less contamination emitted by the vehicles as
contrasted and the first emissions. The organization utilized a defeat software or device in the
diesel engines of the cars which was finished with a goal of changing the vehicle execution so
as to accomplish the improved outcome (Mansouri, 2016). The organization imagined that
the vehicles were as per the standards set up by EPA and the tests were directed in the labs
instead of the roads. The software that was fused could decide the situations wherein the
vehicle was under the emanation test and the adjusted data from the brakes, steering, and
different parts were gathered so as to breeze through the assessment (Chu, 2015). This
software rolled out specific improvements in the engine setting so the decreased nitrogen
oxide levels were emitted and the genuine outcomes were more than 35 times as contrasted
and the outcomes appeared by the software (Chronister, 2018).
Martin Winterkorn, the then CEO of the organization resigned in September, 2015 and made
an official announcement on being unaware of the overall scandal that took place. There are a
number of reasons that are presumed to be associated with the issue. It is believed that there
were technical limitations that were associated with the organization which were emerging as
barriers to meet the new standards while maintaining the performance. These shortcomings
prompted the organization to take such an unethical path. The Chairman made an
announcement that some of the engineers associated with the organization decided to develop
the software and rig the emission test when EPA had announced the new standards in 2005.
The decisions were made at such an early stage due to the potential technological limitations
and shortcomings that the engineers were aware of (Schiermeier, 2015). There was certain
timeframe and budget that was allotted to the engineers to make sure that the technology was
developed to meet the new standards. The time span was crossed and the engineers could
develop the solution through which the new standards could be met. However, they preferred
to rig the test rather than carrying on with the new solution.
The unethical outcomes and path was not adopted due a single failure or mistake. Rather, it
could happen because of the chain of mistakes and unethical activities that took place. The
corporate culture that is followed in the organization also contributed towards the planning
and execution of the issue (Topham et al., 2018). The compliance-based culture is followed
in the organization wherein all of the employees are required to follow specific rules and
policies that are set-up by the organization. This has resulted in the work environment
7

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
wherein the human resources execute their respective tasks within the centralized structure.
The culture followed demands the employees to meet the organization expectations
irrespective of the burden or the performance levels of the employees. This culture followed
is different from most of the other automobile companies (Busby, 2017). The autocratic
culture is followed wherein the employees are not involved in the decision-making processes
and the level of collaboration is relatively low. Such organization cultures motivate the
employees to follow the unethical path as the requirement of meeting the organization
expectations is supreme (Burki, 2015). The EPA standards; therefore, have a lesser role to
play in the activities that occurred and the outcomes were primary because of the gaps in the
organization culture and the resulting work environment. The organization culture does not
support collaboration and discussion which is a necessity to make effective decisions and
meet the ethical compliance levels. There is a lot of competition in every sector and the
employees associated with Volkswagen are aware of the same (Afp. 2019). They are required
to meet the organization expectations failing which the job security may be at risk. It prompts
the employees to take up the unethical alternative to meet the goals.
Another reason that is determined for the occurrence of the issues is the rewarding system
that is followed in the organization. It is the rewarding system that prevented the employees
involved in the entire event to remain quiet for several years rather than revealing the details
in public or in front of the associated agency. The reward system that is followed in the
organization is common for all the positions and designations irrespective of the level or
hierarchy (Georgescu, 2019). Also, the rewards are distributed to the employees on the basis
of their performance and the employee performance also has an impact on the rewards that
are distributed to the team. There can be an assembly line worker and a top executive present
in one team which puts undue pressure on the lower level resources to abide by the decisions
taken by the seniors (Chappell, 2019).
The information around the diesel dupe became public in 2015 and Bernd Osterloh, the
labour leader of the organization stated that the organization culture and approach towards
the resources in not ethical. He also suggested that it was necessary that some of the value-
based changes were taken in the organization so that the communication gaps between the
lower level and the higher level employees could come down (Cars.com, 2019). It is believed
that the case occurred due to the profits and revenues that the organization had estimated in
return. However, the primary reasons which led to the occurrence of the case were the faulty
8
wherein the human resources execute their respective tasks within the centralized structure.
The culture followed demands the employees to meet the organization expectations
irrespective of the burden or the performance levels of the employees. This culture followed
is different from most of the other automobile companies (Busby, 2017). The autocratic
culture is followed wherein the employees are not involved in the decision-making processes
and the level of collaboration is relatively low. Such organization cultures motivate the
employees to follow the unethical path as the requirement of meeting the organization
expectations is supreme (Burki, 2015). The EPA standards; therefore, have a lesser role to
play in the activities that occurred and the outcomes were primary because of the gaps in the
organization culture and the resulting work environment. The organization culture does not
support collaboration and discussion which is a necessity to make effective decisions and
meet the ethical compliance levels. There is a lot of competition in every sector and the
employees associated with Volkswagen are aware of the same (Afp. 2019). They are required
to meet the organization expectations failing which the job security may be at risk. It prompts
the employees to take up the unethical alternative to meet the goals.
Another reason that is determined for the occurrence of the issues is the rewarding system
that is followed in the organization. It is the rewarding system that prevented the employees
involved in the entire event to remain quiet for several years rather than revealing the details
in public or in front of the associated agency. The reward system that is followed in the
organization is common for all the positions and designations irrespective of the level or
hierarchy (Georgescu, 2019). Also, the rewards are distributed to the employees on the basis
of their performance and the employee performance also has an impact on the rewards that
are distributed to the team. There can be an assembly line worker and a top executive present
in one team which puts undue pressure on the lower level resources to abide by the decisions
taken by the seniors (Chappell, 2019).
The information around the diesel dupe became public in 2015 and Bernd Osterloh, the
labour leader of the organization stated that the organization culture and approach towards
the resources in not ethical. He also suggested that it was necessary that some of the value-
based changes were taken in the organization so that the communication gaps between the
lower level and the higher level employees could come down (Cars.com, 2019). It is believed
that the case occurred due to the profits and revenues that the organization had estimated in
return. However, the primary reasons which led to the occurrence of the case were the faulty
8

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
organization culture and the approaches that were followed in the organization (Rhodes,
2016).
Stakeholders Involved
Initially, the organization had suspended 9 of its senior managers due to their involvement in
the case. The Chairman of the organization stated that the managers infested unethical mind-
set in the departments which potentially led to the occurrence of the issue. The company
released an official statement in October 2015, mentioning that the number of employees
involved in the incident were low (Hakim and Tabuchi, 2015). The CEO mentioned to the US
lawmakers that he was not aware of the incident and it the reason due to which the employees
adopted the unethical practices was not clear either.
The external investigator of Volkswagen called Jones Day carried out internal reviews and
investigations and there were 50 employees that confessed of being aware of the rigging of
the emission test. It was also revealed that some of the engineers had reported the use of the
software to rig the emission tests and the supervisors did not pay attention to the matter
(Singh, 2018).
It was revealed that there were a large number of resources at managerial and non-managerial
positions that were involved in the scandal. The nine managers that were suspended by the
organization belonged to varied departments, such as the quality control department, plant
managers, supervisory board, and others. There were also the managers of Audi and Porsche
that were involved in the scandal (Shepardson and Spector, 2019). EPA stated in its
investigation report that there are millions of lines of codes that are included in every car and
the incorporation of the defeat device code was done in these lines of code. This made it very
difficult to identify the manipulation and Volkswagen could successfully carry out the rigging
of the test as an outcome. EPA also stated that the involvement of a third-party programmer
could not be ruled out that may have been involved in the development of the code (Krall and
Peng, 2015).
Consequences of the Ethical Problems
There have been significant impacts of the ethical problems on Volkswagen and the other
stakeholders associated with the organization.
The consequences are primarily faced by the people as their health and lives have been put at
risk by the automobile manufacturer. As per the defined standards by EPA, the rigged tests
9
organization culture and the approaches that were followed in the organization (Rhodes,
2016).
Stakeholders Involved
Initially, the organization had suspended 9 of its senior managers due to their involvement in
the case. The Chairman of the organization stated that the managers infested unethical mind-
set in the departments which potentially led to the occurrence of the issue. The company
released an official statement in October 2015, mentioning that the number of employees
involved in the incident were low (Hakim and Tabuchi, 2015). The CEO mentioned to the US
lawmakers that he was not aware of the incident and it the reason due to which the employees
adopted the unethical practices was not clear either.
The external investigator of Volkswagen called Jones Day carried out internal reviews and
investigations and there were 50 employees that confessed of being aware of the rigging of
the emission test. It was also revealed that some of the engineers had reported the use of the
software to rig the emission tests and the supervisors did not pay attention to the matter
(Singh, 2018).
It was revealed that there were a large number of resources at managerial and non-managerial
positions that were involved in the scandal. The nine managers that were suspended by the
organization belonged to varied departments, such as the quality control department, plant
managers, supervisory board, and others. There were also the managers of Audi and Porsche
that were involved in the scandal (Shepardson and Spector, 2019). EPA stated in its
investigation report that there are millions of lines of codes that are included in every car and
the incorporation of the defeat device code was done in these lines of code. This made it very
difficult to identify the manipulation and Volkswagen could successfully carry out the rigging
of the test as an outcome. EPA also stated that the involvement of a third-party programmer
could not be ruled out that may have been involved in the development of the code (Krall and
Peng, 2015).
Consequences of the Ethical Problems
There have been significant impacts of the ethical problems on Volkswagen and the other
stakeholders associated with the organization.
The consequences are primarily faced by the people as their health and lives have been put at
risk by the automobile manufacturer. As per the defined standards by EPA, the rigged tests
9
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
showed the acceptable levels of emissions. However, the actual levels were 35 times more
that the acceptable standard. The Volkswagen and Audi engine resulted in the emission of
36.7 Million Kg nitrogen oxide additionally which resulted in the adverse impact on the
environment as well as the living beings (Afp, 2020). It has been determined that these
emissions had a direct role to play in 31 chronic bronchitis cases and 34 other respiratory
problems in the patients in the United States. The sickness of the people infected from 2008
to 2015 will result in financial impacts of $450 Million for the US government. It was also
stated that if the organization does not recall the defected devices then there will be 140
premature deaths that will occur because of the excessive emissions (Kirchhain, Mutl, and
Zietz, 2019).
The sales of Volkswagen and the market reputation of the organization were also negatively
impacted as a consequence of the ethical violation. There was a significant slump in the
workforce’s bonus along with the sales of the organization. The associated brands, such as
Audi, Skoda, and others also had to face the similar impacts and there were benefits gained
by the competitor firms. The share value of the organization also dropped considerably after
the acceptance of the scandal by Volkswagen (Ewing, 2017).
Evaluation
Management/Leadership Actions to deal with the Ethical Issues
The management and the leadership of the organization had a direct role to play in the ethical
issues. There was significant negligence and incorrect managerial decisions that were
associated which led to the occurrence of the ethical issues. At first, the association had
suspended 9 of its ranking directors because of their inclusion for the situation. The Chairman
of the association expressed that the managers swarmed unethical outlook in the departments
which conceivably prompted the event of the issue. The organization released an official
articulation in October 2015, referencing that the quantity of employees engaged with the
episode were low. The CEO referenced to the US officials that he didn't know about the
occurrence and it the explanation because of which the employees received the unethical
practices was not satisfactory either. The outside specialist of Volkswagen got Jones Day
completed inner surveys and investigations and there were 50 employees that admitted of
monitoring the apparatus of the emanation test. It was additionally uncovered that a portion
of the engineers had revealed the utilization of the software to fix the emanation tests and the
10
showed the acceptable levels of emissions. However, the actual levels were 35 times more
that the acceptable standard. The Volkswagen and Audi engine resulted in the emission of
36.7 Million Kg nitrogen oxide additionally which resulted in the adverse impact on the
environment as well as the living beings (Afp, 2020). It has been determined that these
emissions had a direct role to play in 31 chronic bronchitis cases and 34 other respiratory
problems in the patients in the United States. The sickness of the people infected from 2008
to 2015 will result in financial impacts of $450 Million for the US government. It was also
stated that if the organization does not recall the defected devices then there will be 140
premature deaths that will occur because of the excessive emissions (Kirchhain, Mutl, and
Zietz, 2019).
The sales of Volkswagen and the market reputation of the organization were also negatively
impacted as a consequence of the ethical violation. There was a significant slump in the
workforce’s bonus along with the sales of the organization. The associated brands, such as
Audi, Skoda, and others also had to face the similar impacts and there were benefits gained
by the competitor firms. The share value of the organization also dropped considerably after
the acceptance of the scandal by Volkswagen (Ewing, 2017).
Evaluation
Management/Leadership Actions to deal with the Ethical Issues
The management and the leadership of the organization had a direct role to play in the ethical
issues. There was significant negligence and incorrect managerial decisions that were
associated which led to the occurrence of the ethical issues. At first, the association had
suspended 9 of its ranking directors because of their inclusion for the situation. The Chairman
of the association expressed that the managers swarmed unethical outlook in the departments
which conceivably prompted the event of the issue. The organization released an official
articulation in October 2015, referencing that the quantity of employees engaged with the
episode were low. The CEO referenced to the US officials that he didn't know about the
occurrence and it the explanation because of which the employees received the unethical
practices was not satisfactory either. The outside specialist of Volkswagen got Jones Day
completed inner surveys and investigations and there were 50 employees that admitted of
monitoring the apparatus of the emanation test. It was additionally uncovered that a portion
of the engineers had revealed the utilization of the software to fix the emanation tests and the
10

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
supervisors didn't focus on the issue. It was uncovered that there were countless resources at
managerial and non-managerial places that were engaged with the scandal. The nine
managers that were suspended by the association had a place with shifted departments, for
example, the quality control department, plant managers, supervisory board, and others (Hans
and Fiedler, 2018). There were likewise the managers of Audi and Porsche that were
associated with the scandal. EPA expressed in its investigation report that there are millions
of lines of codes that are remembered for each vehicle and the consolidation of the defeat
device code was done in these lines of code. This made it hard to distinguish the control and
Volkswagen could effectively do the apparatus of the test as a result. EPA likewise expressed
that the inclusion of an outsider software engineer couldn't be precluded that may have been
associated with the advancement of the code.
The corporate culture that is followed in the association additionally contributed towards the
arranging and execution of the issue. The compliance-based culture is followed in the
association wherein the entirety of the employees is required to follow explicit guidelines and
strategies that are set-up by the association. This has brought about the workplace wherein
the HR executes their separate assignments inside the concentrated structure. The culture
followed requests the employees to meet the association desires independent of the weight or
the presentation levels of the employees. This culture followed is not the same as the vast
majority of the other car organizations. The autocratic culture is followed wherein the
employees are not engaged with the dynamic procedures and the degree of coordinated effort
is generally low. Such association cultures persuade the employees to follow the unethical
path as the prerequisite of meeting the association desires is preeminent (Li, McMurray, Xue,
Liu, and Sy, 2018). The EPA standards; hence, have a lesser task to carry out in the exercises
that happened and the results were essential on account of the holes in the association culture
and the subsequent workplace. The association culture doesn't bolster joint effort and
conversation which is a need to settle on viable choices and meet the ethical compliance
levels. There is a great deal of rivalry in each part and the employees related with
Volkswagen know about the equivalent. They are required to meet the association desires
bombing which the job security might be in danger. It prompts the employees to take up the
unethical choice to meet the objectives.
Correctness of the Management/Leadership Actions
The managers must not have acted in the manner that they did. There were automotive
engineers that informed their supervisors about the use of defeat device and the supervisors
11
supervisors didn't focus on the issue. It was uncovered that there were countless resources at
managerial and non-managerial places that were engaged with the scandal. The nine
managers that were suspended by the association had a place with shifted departments, for
example, the quality control department, plant managers, supervisory board, and others (Hans
and Fiedler, 2018). There were likewise the managers of Audi and Porsche that were
associated with the scandal. EPA expressed in its investigation report that there are millions
of lines of codes that are remembered for each vehicle and the consolidation of the defeat
device code was done in these lines of code. This made it hard to distinguish the control and
Volkswagen could effectively do the apparatus of the test as a result. EPA likewise expressed
that the inclusion of an outsider software engineer couldn't be precluded that may have been
associated with the advancement of the code.
The corporate culture that is followed in the association additionally contributed towards the
arranging and execution of the issue. The compliance-based culture is followed in the
association wherein the entirety of the employees is required to follow explicit guidelines and
strategies that are set-up by the association. This has brought about the workplace wherein
the HR executes their separate assignments inside the concentrated structure. The culture
followed requests the employees to meet the association desires independent of the weight or
the presentation levels of the employees. This culture followed is not the same as the vast
majority of the other car organizations. The autocratic culture is followed wherein the
employees are not engaged with the dynamic procedures and the degree of coordinated effort
is generally low. Such association cultures persuade the employees to follow the unethical
path as the prerequisite of meeting the association desires is preeminent (Li, McMurray, Xue,
Liu, and Sy, 2018). The EPA standards; hence, have a lesser task to carry out in the exercises
that happened and the results were essential on account of the holes in the association culture
and the subsequent workplace. The association culture doesn't bolster joint effort and
conversation which is a need to settle on viable choices and meet the ethical compliance
levels. There is a great deal of rivalry in each part and the employees related with
Volkswagen know about the equivalent. They are required to meet the association desires
bombing which the job security might be in danger. It prompts the employees to take up the
unethical choice to meet the objectives.
Correctness of the Management/Leadership Actions
The managers must not have acted in the manner that they did. There were automotive
engineers that informed their supervisors about the use of defeat device and the supervisors
11

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
should have immediately reported the matter to their seniors and the production should have
halted. Also, the control of the existing vehicles should have been done at that time to ensure
that the issues did not occur. There were loopholes in the organization culture and policies
that prompted the managers to take unethical paths (Li, McMurray, Xue, Liu, & Sy, 2018).
The managers should have made changes in the culture and the organizational policies to put
a check on the employee actions.
Recommended Actions at the time of the Issue
The managers should have taken the following actions at the time of the issue.
The managers should have collaborated with the assembly line workers and all the
other engineers to take the collective decision on the incorporation of the EPA
standards while maintaining the fuel efficiency. This should have been done in 2005
when the announcement of the standards was done.
The supervisors should have informed their seniors about the actions taken by the
engineers to deal with the changed standards. This happened in 2011.
The managers should have adopted democratic and collaborative style of management
and leadership in the place of autocratic style. This would have ensured that the
employees followed ethical approach and there were such discussions carried out at
all levels.
Recommended Actions at Present
Volkswagen shall carry out regular reviews and the review board must include the
CEO, Chairman, and the representatives of the parent and daughter organizations. The
board shall set up strict guidelines that shall be followed in terms of the EPA
standards, ethical policies, and likewise.
Volkswagen has announced the collaborative culture and ethical trainings for the
employees and the practice shall continue to make sure that the violations do not take
place.
Volkswagen shall provide compensation to the patients and their families that got
impacted due to the emissions from the diesel cars.
Volkswagen shall also carry out environment and social campaigns and shall launch
the programs towards sustainable development to make sure that the further impacts
on the environment can be controlled.
12
should have immediately reported the matter to their seniors and the production should have
halted. Also, the control of the existing vehicles should have been done at that time to ensure
that the issues did not occur. There were loopholes in the organization culture and policies
that prompted the managers to take unethical paths (Li, McMurray, Xue, Liu, & Sy, 2018).
The managers should have made changes in the culture and the organizational policies to put
a check on the employee actions.
Recommended Actions at the time of the Issue
The managers should have taken the following actions at the time of the issue.
The managers should have collaborated with the assembly line workers and all the
other engineers to take the collective decision on the incorporation of the EPA
standards while maintaining the fuel efficiency. This should have been done in 2005
when the announcement of the standards was done.
The supervisors should have informed their seniors about the actions taken by the
engineers to deal with the changed standards. This happened in 2011.
The managers should have adopted democratic and collaborative style of management
and leadership in the place of autocratic style. This would have ensured that the
employees followed ethical approach and there were such discussions carried out at
all levels.
Recommended Actions at Present
Volkswagen shall carry out regular reviews and the review board must include the
CEO, Chairman, and the representatives of the parent and daughter organizations. The
board shall set up strict guidelines that shall be followed in terms of the EPA
standards, ethical policies, and likewise.
Volkswagen has announced the collaborative culture and ethical trainings for the
employees and the practice shall continue to make sure that the violations do not take
place.
Volkswagen shall provide compensation to the patients and their families that got
impacted due to the emissions from the diesel cars.
Volkswagen shall also carry out environment and social campaigns and shall launch
the programs towards sustainable development to make sure that the further impacts
on the environment can be controlled.
12
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
Conclusion
Volkswagen got involved in the ethical scandal wherein the organization rigged the EPA
emission test and it resulted in the emission of the nitrogen oxide by the diesel cars. The
scandal occurred mainly because of the corporate culture followed at the organization along
with the reward policies and other organizational policies followed at Volkswagen. There are
certain actions that the management and the leadership could have taken at the time of the
scandal to control the ethical violations. However, the contributed negligence and mistakes
resulted in the impacts that were faced by the people, government, and the stakeholders.
13
Conclusion
Volkswagen got involved in the ethical scandal wherein the organization rigged the EPA
emission test and it resulted in the emission of the nitrogen oxide by the diesel cars. The
scandal occurred mainly because of the corporate culture followed at the organization along
with the reward policies and other organizational policies followed at Volkswagen. There are
certain actions that the management and the leadership could have taken at the time of the
scandal to control the ethical violations. However, the contributed negligence and mistakes
resulted in the impacts that were faced by the people, government, and the stakeholders.
13

Volkswagen – Ethics, Social Responsibility, and Corporate Governance
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15
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Volkswagen – Ethics, Social Responsibility, and Corporate Governance
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