Analyzing Volkswagen's Ethical Lapses: A Case Study

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Academic and Professional Skills
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Executive Summary
The report provided below discusses the analysis of the case study of Volkswagen concerning
the fraud made through producing defeat devices to cheat the regulators. The company cheated
the regulators through the device that would pass the test of carbon emission but the performance
of the vehicles has been decrease on road as they have started producing large amount of carbon.
The unethical behaviour on the part of different members of the firm has been evaluated. The
negative influences of the unethical activities on the automobile industry have been assessed.
Recommendations have been presented that the firm should incorporate in the functioning of the
corporation under the new CEO.
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Table of Contents
Introduction......................................................................................................................................4
Analysis...........................................................................................................................................5
Conclusion.......................................................................................................................................8
Recommendations............................................................................................................................9
Reference List................................................................................................................................10
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Introduction
The action that involves unethical behaviour includes the activities or behaviour that does not
include morality. In a business environment, unethical behaviour leads to disruption of
relationship with the customers. This can affect the productivity of the corporation negatively
and decrease the morale of the employees. The organisation can lose its credibility as well as
there can be monetary loss in the business.
Volkswagen Group is a corporation that falls in the automobile sector. This firm has been
established in Germany in the year 1937. It has expanded in 27 countries with 100 facilities
centre of production (volkswagenag.com, 2019). The products manufactured in this firm include
vehicles, engines, motorcycles, and turbo machines. The annual revenue that the organisation
generated in the year 2018 was €235.849 billion (volkswagenag.com, 2018). There are multiple
owners of this company, such as Porsche SE holds 30.8% equity and State of Lower Saxony
holds 11.8% of equity. Qatar Investment Authority with 14.6% of equity also owns it. The total
number of employees that work for this corporation is 302, 554 as recorded in the year 2018.
As per the case study of Volkswagen, it has been assessed that the company in the year 2015 has
sold millions of cars that have been fitted with improper devices to cheat the regulations of
emission control (Reitze, 2016). They have been built to pass the emission tests with fraudulent
equipment however, the vehicles on road emit large amount of carbon that is forbidden by the
country’s law.
In the report, there will be analysis of the unethical behaviour of the stakeholders of the chosen
company. Some recommendations will be made on each of them to improve their morality and
ethnicity towards the company. There will also be analysis on the sector of automobile industry
to discuss the key factors that can lead to unethical behaviour. Suggestions have provided that
the industry can adapt to maintain ethics.
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Analysis
Board
The supervisory board of the Volkswagen Company has the function of monitoring the members
of management (volkswagenag.com, 2019). In the present scenario, it has failed in controlling
the activities of the managers in the production department. It can also be said that they have
neglected their duties or have been a part of the fraud.
The supervisors have the functions of organising the functions of the company among the
members and administering the company (Blackwelder et al., 2016). However, the supervisory
board has failed in performing its functions effectively. This has resulted in degradation of
values in the company through unethical behaviour of the members. His irresponsible approach
has made other beak the law that should not be permissible by him. Through this way, it can be
said that the supervisors have failed in their duties towards the workers and the company. It has
shown a wrong example to the subordinates to make sales of the products. The wrong direction
has affected the employees by provoking them to increase the profit through an unethical
method. The supervisor should have moulded the mind of the subordinates towards morality and
should have increase help them in performing effectively. However, in the present case, the
supervisors have affected their performance quality in a wrong them by leading them to adopt an
unethical way to manufacture products. Through their wrong activities, the way of performing
the functions by the employees would be affected, as they would follow the supervisor’s order
that would lead them towards immorality.
Managers
The management of the firm is responsible for different functions of the corporation
(volkswagenag.com, 2019). As per the case study report, the fraud has taken place in the area of
checking the carbon emission by the regulators as defeat devices have been used to pass the
initial test that was unable to regulate the emission when the vehicles run on road. Therefore, it
can be assumed that the managers of the production department have been monitoring the
members of the same department in applying this technique to cheat the regulators. The
managers of Volkswagen Group have been a part of the fraud by giving the engineers permission
to install defeat devices to cheat the regulators. It is through them that the engineers have gained
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the confident to perform the fraud activities. It has been assessed from the given case study that
the software engineers have been responsible for the disgrace of the image of the business.
However, it has been understood that the call has been from the authority or the former CEO.
Despite this, it can be analysed that the managers of the production department have manage the
members in a wrong way and have made them commit a crime by installing a defeat device in
the vehicles that would cheat the regulators by passing the carbon emission test. The task of the
management should have been to manage the people towards success of the business. However,
due to the wrong direction of the managers, other subordinates have become a part of this crime
(Jung and Sharon, 2019). The manager has the role of setting regulations and maintains a good
working environment. However, in the present case, the managers have devastated the ethics and
have ill use their position in the firm. Through unethical behaviour of the managers, the ethics of
the organisation have been destroyed as well as the morality of the subordinates has also been
affected through promotion of unethical activities from top management.
The industry or sector
In the automobile industry, unethical behaviour can happen in the part of the members involved
in the company in any department. As per the case study, the fraud of Volkswagen concerning
the defeat devices to cheat the regulators about the carbon emission will not only harm the name
of the firm but also can affect the industry at large (Irwin, 2018). The sector growth would be
hampered with such activities as well as the sales of the products from this industry would be
lessened because of the failure of the company to maintain trust among customers.
As per the case study report, some members have been part of this fraud, such as engineers and
officer of the company. They have neglected their duties and have deceived the government as
well as the customers upon whom the profit and success of the company have been dependent all
these years (Nelson. 2016). They have not concerned about the image of the company while
doing the fraud or they have concerned about their future. There would be bad influence on the
perception of the customers regarding the sector, as they would question the ethnicity of the
industry in providing quality products to them. The profit earned from the particular sector
would reduce the company in this industry would do unethical activities and have crossed the
legal boundaries. The automobile industry includes large companies that hold important place in
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contributing to the economy of the country. Through the unethical activities in this industry,
there would be negative effect on the economic growth of the region. The accusation made on
the company would lead to closure of the organisation and can affect a large number of
employees working in the firm.
Shareholders
Among the private shareholders, the former CEO, Martin Winterkorn has made a quite unethical
activity by letting the engineers cheat the government by incorporating the use of fraudulent
devices in the tested vehicles. He has been a part of the fraud as he has tried to neglect the rules
made by law on controlling the carbon emissions. In spite of the prohibition made y the workers,
he has been adamant in continuing the production and sales of such automobiles that would have
an adverse impact on the environment of the country. The CEO has misused his authority and
has provided the customers with the vehicles that would have an ill effect on the health as well as
their living environment. He has been an ill example of a leader as he has led some of his
engineers in the wrong way. This has led to his resignation from the post of CEO and any other
person has replaced him.
The former CEO has crossed the limit of fraud when he has been insincere towards media about
his unawareness regarding the defeat devices (bbc.com, 2018). It could not be possible in a
company where he is the CEO and every step is made with the consent of him. It has been
investigated that he was informed about the large amount of carbon emission that the vehicles
made in his company are emitting. He has been irresponsible towards answering or mitigating
them and this has lead to his prosecution.
The investors who are part of the company have been unaware or irresponsible about the things
that are happening in the firm. They also hold important place in the firm. However, they have
neglected their duties in overseeing the functions of the company. They should know about the
activities carried out in the firm regarding the reduction of vehicles on which they are investing
their hard-earned money. Their irresponsible behaviour is quite unethical in the business
environment that can affect the trust of other companies as well as they would not feel that the
shareholders would act responsibly towards the company that can negatively harm the industry
(Barth et al., 2018).
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Conclusion
The conclusion that can be made from the report given above is that there has been discussion on
the unethical behaviour and activities in the part of different stakeholders of the Volkswagen
Group. There have negligence and immorality on the part of the chief executive officer of the
firm. The fraud has been made through the supervisors and management members of the
company. The corporation’s engineers have taken part in the crime by manufacturing the device
that can cheat the regulators by controlling the carbon emission during test. This has made the
company provide the products to the customers that would produce large amount of carbon that
would be quite unhealthy for them as well as for the environment. Through the case study report,
it can be deduced that many members have been part of this crime of fraud. The organisation has
tried to cheat the government and the customers, but the fraud has been soon realised that would
put the members behind bars and would create an example for other organisations to maintain
their ethnicity.
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Recommendations
It can be recommended that the organisation should maintain ethics in the firm and follow the
codes of conduct. Volkswagen Group, under the new CEO should develop the communication
among the members so that information would get unnoticed (Welch, 2019). There should be
proper implementation of the tasks in every department through their proper management. The
supervisory board members should monitor the management by tracking their functions in
management of the employees of every department. The legislation made by the government on
checking the emissions of carbon should be followed and proper techniques and equipment
should be used in the manufacturing of the vehicles that would control the carbon footprints.
However, to improve the performance of the vehicles and induce the profit the corporation
should try to include different technologies for development of the products instead of resorting
to an illegal and unethical way to maintain the performance of the automobiles. The investors
both from the native as well as foreign countries should investigate on the ways the company is
producing the goods as they also have some responsibilities on the environment and on the
health of the people that can be affected through wrong means.
The company should provide ethics training to every member of the firm so that they would lead
the business in an ethical way (Crane et al., 2019). There should be written rules to maintain the
regulations in the organisation. In the production department, there should be regular evaluation
of the parts or vices that are used in making the automobiles. The modification should be made if
the devices could not fill the requirements of the project. An effective team would be able to
create a good working atmosphere as well as simplify the tasks. Respect among the members is
necessary and this can be generated by providing respect to every member of the firm. Sharing
of knowledge would promote honesty that is essential for an ethical surrounding (Engelbrecht et
al., 2017). In the automobile industry, there should be maintenance of safety as well as standard
to maintain the image of the corporation as well as to avoid penalty.
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Reference List
Barth, F., Eckert, C., Gatzert, N. and Scholz, H., 2018. Spillover effects from the Volkswagen
emissions scandal: an analysis of stock, corporate bond, and credit default swap
markets. Corporate Bond, and Credit Default Swap Markets (September 10, 2018).
BBC News. (2018). How VW tried to cover up the emissions scandal. [online] Available at:
https://www.bbc.com/news/business-44005844 [Accessed 13 Jul. 2019].
Blackwelder, B., Coleman, K., Colunga-Santoyo, S., Harrison, J.S. and Wozniak, D., 2016. The
Volkswagen Scandal.
Crane, A., Matten, D., Glozer, S. and Spence, L., 2019. Business ethics: Managing corporate
citizenship and sustainability in the age of globalization. Oxford University Press.
Engelbrecht, A.S., Heine, G. and Mahembe, B., 2017. Integrity, ethical leadership, trust and
work engagement. Leadership & Organization Development Journal, 38(3), pp.368-379.
Irwin, M., 2018. Case Study: Volkswagen's Diesel Emissions Control Scandal. Journal of
Strategic Innovation and Sustainability Vol, 13(1), p.53.
Jung, J.C. and Sharon, E., 2019. The Volkswagen emissions scandal and its aftermath. Global
Business and Organizational Excellence, 38(4), pp.6-15.
Nelson, J.S., 2016. The Criminal Bug: Volkswagen's Middle Management. Available at SSRN
2767255.
Reitze, A.W., 2016. The volkswagen air pollution emissions litigation. Environmental Law
Reporter, 46.
Volkswagenag.com. (2018). [online] Available at:
https://www.volkswagenag.com/ir/Y_2018_e.pdf [Accessed 13 Jul. 2019].
Volkswagenag.com. (2019). Executive Bodies | Volkswagen Group. [online] Available at:
https://www.volkswagenag.com/en/group/executive-bodies.html# [Accessed 13 Jul. 2019].
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Volkswagenag.com. (2019). Volkswagen Group Homepage. [online] Available at:
https://www.volkswagenag.com/ [Accessed 13 Jul. 2019].
Welch, J., 2019. The Volkswagen recovery: leaving scandal in the dust. Journal of Business
Strategy, 40(2), pp.3-13.
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