Ethical Implications of the Volkswagen Emissions Scandal

The Volkswagen emissions scandal, also known as 'Dieselgate,' highlights significant ethical breaches within corporate governance. The company's use of defeat devices to circumvent emission standards has raised critical questions about the integrity of corporate practices. This research paper explores the ethical implications of such actions, analyzing how they undermine trust and accountability in business operations. It delves into the role of leadership and organizational culture in fostering unethical behavior and examines the consequences for regulatory frameworks. By scrutinizing Volkswagen's response to the scandal, including legal repercussions and public relations strategies, this study aims to provide insights into preventing similar ethical failures in other corporations.

RUNNING HEAD: BUSINESS ETHICS 1
[TYPE THE COMPANY NAME]
BUSINESS ETHICS
The Volkswagen Scandal
Submitted by:

The Volkswagen Scandal 2
Executive Summary
The report is regarding the business ethic issue related to Volkswagen that took place in 2009.
Business ethics and responsibilities are important for managing the long term impact caused in
dealing with the issues. The Employees were affected by the scandal. There were many
expulsions in the company. Employees who were found guilty were suspended. This affected a
large section of the employees working it Volkswagen. A major section of employees were
afraid of suspension. The report describes the nature of the dilemma and provide background
information to the factors that lead to the dilemma while focusing over the breach
regulations/law, key affected stakeholders and three ethical theories. The report is based on the
assumption that the incidence caused due to failure in the organizational machinery.
Contents

The Volkswagen Scandal 3
Introduction......................................................................................................................................2
Background......................................................................................................................................2
Nature of the dilemma and factors leading to it..............................................................................3
Key affected Stakeholders...............................................................................................................4
Three ethical theories.......................................................................................................................6
Ethical Egoism.............................................................................................................................6
Utilitarims....................................................................................................................................6
Kant..............................................................................................................................................7
Dilemma resolved............................................................................................................................7
Implication as per the ethical standards in Australia.......................................................................8
Conclusion.......................................................................................................................................9
References........................................................................................................................................9
Introduction
Business ethics are the guiding principles that direct a business to operate in a well and effective
way. Acting in an ethical way is different from doing right and wrong. Business ethics ensures
an existence of certain level of trust in the consumers. The concept of business ethics arose in the
year 1960 due to awakening of different consumer based societies. Business ethics are beyond

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the moral code and attempts to reconcile what company should do to maintain a competitive
advantage. As a part of compliance and ethic program a majority of companies are focusing
over the concept of business ethics. The government agencies across the world are taking
measures to define the process of business this and management. These policies are identified as
a based to gain business integrity. Such policies will lead in a positive direction by creating
ethical awareness and guaranteeing growth. A competitive business environment is creating a
pressure over the employees to perform unethically (Alvesson and Sveningsson, 2015). One of
the examples regarding breach of business ethics is The Volkswagen Scandal. The scandal is
much talked about and bring forward the concern of government and non- government agencies
on the ethical issue (Armour, 2016).
Background
The Volkswagen Scandal started in the year 2015 when the US Environmental Protection
agencies questioned the credibility of the Automobile Company. The German company was
caught under the violation of the Clear Air Act. The scandal brought the attention of
international agencies to the grave issue. The Volkswagen scandal had a long-lasting impact on
the company for deceiving government rules and regulations (Barrett et al 2015). The German
Giant accepted the allegation it caused due to emission. The government agency received the
information regarding intentionally using turbo charged direct injection diesel engines. Due to
this, the vehicles were emitting 40 times more NOx output. In order to undue to act, Volkswagen
called back 11 million cars across the world from 2009- 2015. The emission was brought
forward by the 5 scientist from west virginal University There were severe issues in the
organization culture and the consequences raised by the issue(Avolio, Walumbwa and
Weber,2009). This brought the attention of local and international agencies across the world to
look into the matter. One of the reasons considered the issue was due to the dysfunction of the
Organizational culture. The organizational culture was under question due to the intensity of the
scandal. There was continuous rule breaking deceptiveness in the organization. The
organizational culture and development has an ever lasting impact on the organizational culture.
There were severe gaps in the organizational communication and ethical leadership. The

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continuous fraudulent behavior at a top-level and ignorant attitude of middle level employee is
the reason behind the failure (Baumgartner, 2009).
Nature of the dilemma and factors leading to it
An ethical dilemma is a decision making problem that occur due to moral imperatives. The
situation arises due to a conflict in obeying the result. This is sometimes treated as a moral
philosophy involved to refute the ethical code of conduct. The ethical dilemma occurs due to a
gap in meeting the greater good and lesser evil. A person in this situation has to make a choice
in between the given options. There is a constant conflict in between the two options. An
individual finds difficulty in avoiding the one and choosing the other. For example: The ethical
dilemma can occur in a situation where a poor person has two choices- Either to steal food or to
let his family die. The situation regarding the ethical dilemma is tough to be understood and
creates disparities in gaining better understanding. In the given case study, Volkswagen is
consistently involved in a scandal where the top level management were aware about the
discrepancies in the company. The faith of million was lost due to the scandal. Big corporation
faces ethical dilemma due to an urge to make enormous profit. There was extreme pressure to
show explosive sales. This creates a pressure on the company officials to use ineffective
equipments. The question is regarding the wrong choice made by the official during extreme
pressure from the senior official. Ethical leadership is important in such a situation to manage the
behaviour of the employee. Employees under extreme pressure tend to make such mistake. This
is important for the organization to manage the effectiveness caused due to a gap in
understanding (Blackwelder, et al 2016). Ethical issues are common in such a situation creating
wide gaps in understanding. From the scandal it is clear that system failed due to deceptive
people in the company. Ethical dilemma occurs when people are facing difficulty in choosing the
fair path. Ethical leadership is the most important part in managing the behavior of the top level
executive to make high revenue. The situation here is described as a deceitful activities causing
pressure on the organization causing failure of whole machinery. The condition leadership plays
a chief role in dealing with the competitive pressure. The company faced enforceable
circumstances in an unethical way to make surplus profit. This has made the situation worst for,
any stakeholder’s whose interest was directly and indirectly being attached. Such policies will

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lead in a positive direction by creating ethical awareness and guaranteeing growth. A
competitive business environment is creating a pressure over the employees to perform
unethically. A rapid change in economy has created wide business opportunities contributing in
deceitful activities. Scrutiny of stakeholder has become an important part in managing the
business interest. While managing the business functions it has become important to look into
the changing competitive advantage. The most important part is in handling the miscellaneous
functions. The only purpose is to manage the corporation in case of ethical dilemma. The overall
purpose of introducing a change is to manage the productivity by using ethical means.
Volkswagen has a huge name across the world. This single incidence has contributed in
maligning its image. The organizational development is necessary for managing interest of
people. Business ethics are important for an individual to manage the corporation. The factors
leading ethical dilemma were: One of the reason considered the issue was due to the dysfunction
of the Organizational culture. The organizational culture was under question due to the intensity
of the scandal. There was continuous rule breaking deceptiveness in the organization. The
organizational culture and development has an ever lasting impact on the organizational culture
(Boodoo, 2016).
Key affected Stakeholders
Violation of business ethics does affect the stakeholders in many ways. These stakeholders are
important for meeting business interest. Any such incidence causes a huge impact over the
goodwill of the company and affects stakeholders. There are two types of stakeholders in a
company: Internal and External. The internal stakeholders are the one whose interest is directly
related to the organization. In case of any failure, they are the one who suffers a lot. Employees,
management, customers etc are the internal stakeholders. The external stakeholders are the one
who are indirectly related with the organization (Carroll, Levy and Richmond, 2008). The
external parties are government agencies, media house and other voluntary organizations. Any
such change in the organization, does affect them.
The Volkswagen emission had a long-lasting impact on the various stakeholders. The customers
were the one who suffered a lot due to the emission. Volkswagen called back 11 million cars
across the world from 2009- 2015. This directly had a long lasting impact in the mind of the

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customers. The German brand is famous for the quality automobile. Such incidences shake the
faith of customers (Crête, 2016). Business ethics and responsibilities are important for managing
the long term impact caused in dealing with the issues. The Employees were affected by the
scandal. There were many expulsions in the company. Employees who were found guilty were
suspended. This affected a large section of the employees working it Volkswagen. A major
section of employees were afraid of suspension. This incidence had a long-lasting impact on the
employees. Stakeholder interest was largely affected due to this incidence. It was one of the
kinds of incidence that directly affected every individual attached with Volkswagen (Cue, 2015).
The management also suffered as some of the top management resigned after the exposure of the
act. During the hearing, the CEO, Michael Horn stated that the matter arose due to the
negligence of engineers who installed the software. The organization culture here plays an
important role in managing the organization. Ethical responsibility is responsible for the
organization in dealing with such a situation (Gates et al 2017). Ethical leadership was under
scrutiny, and decisions due to the fraudulent behavior of the top level executive were questioned.
Leadership plays an important role in dealing with the competitive pressure. Top management
has an impact due to the long lasting behavior of the people whose interest is directly attached
with the situation. It has become evident at the part of the company that they have to effectively
develop skills in the employees. Such measures will help in organizing the situation in a better
way (Milne, 2015).
The Government bodies were highly shacked after receiving information regarding tee emission.
There was continuous violation of act. This is due to the fact that the government directly found
violation of environmental act. US Environmental Protection agencies questioned the credibility
of the Automobile Company (Jung and Park, 2017). The German company was caught under the
violation of the Clear Air Act. In such way, it can be seen that the interest of each and every
individual attached with the organization was under question after this incidence. It was due to
the government responsibility to safeguard the interest of public (Oldenkamp et al 2016).

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Three ethical theories
Ethical Egoism
Philosophical arguments in favor and against of ethical egoism have been spirited. This is an
only normative ethical framework doing justice to human motivation. There are two questions to
this propose theory:
(1) Realities of human motivation are important for considerate the realities of human
responsibility
(2) Human are purely motivated with the egoist asserts, purely selfish.
In the given situation, the need completely depends on relationship between facts and values.
Human tend to perform the act specially to which those facts seem to the point. Severe views on
this issue range from the argument related to values to the contention that is desirable at the same
time. The modern views insist the significance of ethics related with human nature (Zoback,
Kitasei and Copithorne, 2010).
Utilitarims
The ethical theory argues that the most precise expression behind the moral point is benevolence.
There is a conventional function that forces an individual to act in a favor or against. This
particularly affects the decision related with the authority and its tendency to maximize utility
over the long term. An individual depart from the activities due to internal and external
criticisms. In case of serious difficulties and measurement of essential concepts there is a gap in
understanding the issue. The theory is completely based on utility. This is based on the demand.
If the demand increases, there will be an increase in the activities. People try to find out different
means to meet their needs. They often choose wrong way to meet the desired target. The failure
is caused due to an excess need to something (Wheelen and Hunger, 2011).
Example: Either actual or hypothetical, situation are put forward to demonstrate deepest moral
convictions. The situation is been over-ruled by the unjust treatment of an innocent victim or
minority. In the given situation, the interest of the customers was compromised in order to

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increase the profit margin. No consideration was given to the moral values while developing the
concept (Smith and Parloff, 2016).
Kant
The Kant theory formulates "supreme principle" in different ways. The two best-known
formulations are:
The first Act is framed only according to that maxim where one can act same time where it will
become a universal law.
The motive behind is to treat every individual with humanity or in that of another, never as a
means only(Meadocroft, 2009).
The overall motive behind the situation is to motivate the rule or policies to satisfy criteria in a
categorical force. The theory is based on the accepted principles that state the unreliable and
unacceptable indicators of right and wrong. These parameters are important for managing the
situation at best provisional. The theory will vindicate the motives that lie beneath them (Mearns
and Yule, 2009).
Dilemma resolved
The dilemma was resolved after the reporting of the issue. Various government bodies took
initiative in managing the situation. The company has to face serious legal charges for damaging
the environment. The situation has lead to many changes where the council purchased the data
generated by PEMS invented in 1995. The findings in the situation were handed over to
California Air Resources Board. Volkswagen became the target of all the regulatory bodies.
The stock price of the company fell down. This severely affected the organization goodwill in
the market. As a result the group CEO resigned (The Volkswagen Emissions Scandal, 2016).
They finally had to make an investment in order to rectify the emission by recalling the vehicles.
The overall purpose was later resolved, as they have to accept there is take. Moreover they are
still re-calling the vehicles from different market. The overall purpose is to resolve the severity
of the issue that is attached with the given situation. The German Giant accepted the allegation it
caused due to emission. The government agency received the information regarding intentionally

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using turbo charged direct injection diesel engines. It has now modulated its internal system in
order to keep a check over such incidences (The Volkswagen emissions scandal explained,
2016).
Implication as per the ethical standards in Australia
The Australian ethical standard serves as an important tool in dealing with the issues arising due
to involvement in unethical activities. The business thereby has to meet the requirements as
mentioned in the Common wealth regulations. Any discrepancy in follow ethical standard is not
good for the company. The local Australian law and organizational body keep a check on the
business organization while accomplishing duties. The Australian or international companies has
to follow the Environmental legislation. It is thereby mandatory for an individual to focus on the
regulations in order to avoid penalties and severe punishment. The federal, state and local
governments are jointly working for protecting the environmental Through the Environment
protection laws in Australia through bilateral agreements. The business enterprise has to
understand the law that applies to the individual.
The federal Environment Protection and Biodiversity Conservation (EPBC) Act, is thereby
administering the Department of the Environment and approves process of national
environmental and cultural concerns. The following matters are taken under consideration while
protecting the Environment. It is clear from the act that both local and international organization
has to follow the legal obligation in order to balance the consequences on the following:
 the sea
 importing
 heritage issues
 hazardous waste
 Fuel quality (Australian Government, 2017).

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Conclusion
To conclude, the concept of business ethics arose in the year 1960 due to awakening of different
consumer based societies. Business ethics are beyond the moral code and attempts to reconcile
what company should do to maintain a competitive advantage. The emission scandal created an
alert in the market. There are situation where the organization has to face the ineffectiveness
caused due to ethical dilemma. These dilemmas are vital to be understood. It is clear from the
report that, a competitive business environment is creating a pressure over the employees to
perform unethically. A rapid change in economy has created wide business opportunities
contributing in deceitful activities. Meanwhile such incidence act as an alarm, it has become
important to relocate the changes in order to manage the business activities on a long run. The
Overall purpose of this report is to focus on the relationship in between business ethics and
organizational goals. Volkswagen emission scandal was one of the kinds of scandal creating a
big impact on the people around thaw world. This created alertness in managing the business
ethics functions in a well-organized way.
References
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%E2%80%99s-emissions-scandal-lessons-corporate-governance-part-2 Accessed
on: October 9 , 2017

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Australin Government, 2017. Enviromental Legislation. (Online) Available at:
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Avolio, B.J., Walumbwa, F.O. and Weber, T.J., 2009. Leadership: Current theories,
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D.W., 2015. Impact of the Volkswagen emissions control defeat device on US
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