A Critical Analysis of Volkswagen's Corporate Governance and CSR

This essay critically evaluates Volkswagen's corporate social responsibility (CSR) issues, focusing on the emission scandal and its implications. The analysis identifies environmental and social/technological frauds, applying utilitarianism and deontological ethical theories to demonstrate the unethical nature of Volkswagen's actions. The paper further examines the ineffectiveness of Volkswagen's leadership in handling the crisis, contrasting their approach with participative leadership theory. The conclusion emphasizes that Volkswagen's failure to take responsibility and address the issues promptly exacerbated the negative impact on its stakeholders and reputation. The essay argues that a more transparent and responsible approach, coupled with ethical decision-making, could have mitigated the damage caused by the emission scandal.

Running head: CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
Corporate governance and social Responsibility
Name of the student
Name of the university
Author note

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Introduction
There are number of media reports being published regarding the corporate social
responsibilities of Volkswagen and most of these reports pointed about the negative and issues
with their approach. This is due to the reason that emission scandal in 2013 for Volkswagen
caused huge dent in their goodwill along with having other major impacts on different
stakeholders. According to the report published by Siano, Vollero, Conte and Amabile (2017),
this issue of emission scandal for Volkswagen is having much deeper root as reason due to the
fact that demands and criteria of the customers lead to this situation (Siano et al., 2017). This
report also stated that emission scandal of Volkswagen showed that it is just the tip of iceberg
and there are number of other companies who are indulging in unethical business practices.
According to the authors, market competitiveness is also responsible for the increase in unethical
behavior of the firms (Krall & Peng, 2015).
In this essay, the major sustainable issues for Volkswagen will be identified and
evaluated from the chosen academic paper. In addition, a number of theories will be used in
justifying the actions and identify their extent of negativity. In accordance to the identified
issues, it will be discussed whether Volkswagen was able to deal with the situation properly or
not.
Identification of the CSR issues
One of the major issues identified is from the environmental point of view. This is due to
the reason that is the emission scandal of Volkswagen caused huge adverse impact on the
environment. They have fitted cheating devices in their diesel cars in order to get overlooked by
the authoritative agency in the United States (Jung, Chilton & Valero, 2017). However, this

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caused in increased level of pollution from the cars and caused huge emission in the
environment. It is stated that faulty diesel cars of Volkswagen were being sold in number of
countries around the world with millions of them were sold only in the United States. Thus, the
emission scandal of Volkswagen causes adverse impact on the environment. There are number of
reports being published where it is stated that faulty diesel cars of Volkswagen emitted a number
of poisonous gas without being noticed that caused impact not only on the environment but also
on the health of global population (Crete, 2016).
Another major issue that is being identified is social and technological fraud of
Volkswagen. This is due to the reason that initiation of the technological fraud in the cars of
Volkswagen caused emission from them over the prescribed limits. It is reported that
technological fraud was done deliberately by Volkswagen in order to pass off the stringent
environmental standard in the United States and also to avoid the reduction in the performance of
the cars. Thus, with millions of car sold around the world, it can be concluded as one of the
biggest technological fraud in the recent time (Mansouri, 2016). This technological fraud is
having impact on the social factor also due to the reason that none of the consumers bought the
diesel cars of Volkswagen were aware about the cheating device. Thus, they are also being
affected from the emission as well as the larger section of the society who also inhaled the
emitted substances (Rhodes, 2016). This can also be termed as failure of the corporate
governance for Volkswagen due to the reason that upper level management was involved in the
emission scandal.

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Application of the theory
Though the major portion of the reports published about the emission scandal of
Volkswagen has termed it as unethical but application of theories will help to identify the
different aspects of this incident. According to the utilitarianism theory of ethics, actions will be
considered as ethical only if the end results provides positive outcome for maximum people and
stakeholders (Lane, 2016). However, in the case of the emission scandal of Volkswagen, the
action and steps taken by them to install the cheating device or software in their diesel cars lead
to larger adverse impact on the environment, internal stakeholders and external stakeholders as
well as to the goodwill of the company. Environment got affected by means of emission of
polluted materials in air. Furthermore, external stakeholders including the users of the cars and
the larger population got exposed to the harmful substances in the air (Barrett et al., 2015).
Internal stakeholders including the employees and upper level management also got affected.
This is due to the fact that number of employees got terminated from the job and some other lost
their jobs due to the financial strain faced by the company (Burki, 2015). On the other hand, a
number of top level management including the CEO got accused in the case and prosecuted
accordingly. Hence, it can be concluded that the installation of the cheating device by
Volkswagen caused no benefits in the long term and thus according to the utilitarianism theory
of ethics, their action can be termed as unethical.
According to the deontological theory of ethics, it is important to follow and uphold the
duties and obligations in initiating certain actions. In addition, this theory also states that promise
should be fulfilled in the most ethical manner. However, in the case of Volkswagen, their
promise of providing cleaner vehicles was not being fulfilled and they also didn’t followed their
obligations of reducing the environmental impact from their cars (Paquette, Sommerfeldt &

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Kent, 2015). Though, the installation of the cheating device helped Volkswagen in portraying the
cleaner image of their cars but they have emitted harmful substances. This refers to the fact that
promise of providing cleaner diesel vehicles was not being fulfilled and Volkswagen was also
not focused on reducing their environmental impact. This can be concluded that according to the
deontological theory of ethics, emission scandal faced by Volkswagen was due to their unethical
business practices (Hall & Page, 2015). Evaluation of the emission scandal of Volkswagen with
the help of two major ethical theories identified that Volkswagen was unethical from their side.
Dealing with the issue
After in the incident, the major shortcoming for Volkswagen being identified is the
ineffectiveness of their leadership. This is due to the reason that ineffective leadership lead to the
improper handling of the issue and further amplified it. It is reported that in the initial stage of
publication of the incident, upper level management of the company tried to delegate the entire
responsibilities to the engineers. This led to further dissatisfaction among the employees. On the
other hand, Volkswagen also tried to counter the facts rather than accepting it in the primary
stage. However, all these issues are being emerged due to the improper handling by their
leadership. According to the theory of participative leadership, decision making process should
be initiated with the inputs from all the involved stakeholders (Lam, Huang & Chan, 2015).
However, in the case of Volkswagen, the decision of installing the cheating device was taken
only by the top level management.
This theory also states that opinions of the employees should be given most preferences,
which was not in the case of Volkswagen. In the case of participative leadership, upper level
management takes the responsibilities and agrees to the opinion of the larger section of

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stakeholders. However, top level management of Volkswagen decided to counter the accusation
and delegate it to the employees. This led to the amplification of the issue among the external
stakeholders as well among the employees. Thus, it can be concluded that as per the theory of
participative leadership, opinions of the stakeholders should have been given more focus and
decision should be taken with consensus.
Conclusion
It can be concluded that Volkswagen was not effective in handling the issue rather their
ineffective management lead to further amplification. It is concluded that Volkswagen should
have agreed to the accusations and promised about taking the necessary steps, rather than
countering it. This would have helped them to reduce the negative impression in the market and
among different forums and would have also helped in maintaining the goodwill of the company.
In addition, it is also identified that top level management should have taken the entire
responsibility for the incident in the initial stage by resigning from their respective posts. This
ensured fair trial and investigations and external stakeholders would have more trust in the
brand. However, due to the delegation of the responsibilities to the employees, top level
management of Volkswagen lost their credibility among both the internal as well as among the
external stakeholders. This essay concluded that emission scandal of Volkswagen was having
number of impacts in different sectors ranging from environmental factors to social factors. In
addition, in this essay, the emission scandal of Volkswagen was also evaluated from the basis of
different ethical theories. Two major ethical theories are being used and concluded that actions
of Volkswagen are unethical in nature. Leadership theory is also being used to evaluate the
effectiveness of Volkswagen in handling the issue.

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Reference
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