Ethics and Leadership: An Analysis of Volkswagen's Practices

This report examines the ethical failures of Volkswagen, focusing on the 2015 emissions scandal. The introduction highlights the importance of ethics in organizational success, emphasizing how ethical practices foster trust among stakeholders. The analysis delves into the role of ethics, illustrating how Volkswagen's unethical actions, including the use of defeat devices to cheat emissions tests, led to significant financial losses, damage to its reputation, and environmental harm. The report further explores the measures an organization can take to ensure ethical practices, such as addressing pressure, opportunity, and rationalization within the company. It discusses the impact of Volkswagen's actions on shareholders, customers, managers, revenue, and the environment. The conclusion summarizes the key findings, emphasizing the critical role of ethical behavior in organizational success and the severe consequences of unethical conduct. Recommendations are provided, including restructuring the board, promoting environmental awareness, and establishing a whistle-blowing culture to prevent future ethical lapses.

Academic and
Professional Skills

Executive Summary
“Do what is right, not what is easy.” It is a famous quote which can correctly describe the
status of this report. Volkswagen is a German multinational company dealing in automobiles.
And this study, revolves around the ethical practices revolving around Volkswagen. Ethics is
what makes an organisation. Ethics can be considered as a code of conduct followed by an
organisation in order to establish an effective and efficient management. Ethics are not rules and
regulation that needs to be followed, but, they are an efficient set of principles whose absence
can destroy an organisation, same happened with Volkswagen.

INTRODUCTION
Academic and Professional development is an important portion of any individual as
these components have a minor effect on the life led by a person. This study will cover a part of
theoretical and professional improvement which will be useful in leading both the parts
efficiently, that is, Ethics. Ethics refers to the element that led people to trust the organisation.
Ethical practices lead to the implementation of a strong relationship between employees,
customers, top management, suppliers and various stakeholders of an organisation. This study
will cover the unethical practices of Volkswagen which lead them to their failure (Brown and et.
al., 2018).
Volkswagen- Das Auto. Das Auto is tagline of the brand and it is a German term, which
means “The Car” . It suggests that the car manufactured by Volkswagen is the real definition of
cars. Volkswagen is German company who manufactures cars and sell it on Global level. It deals
in manufacturing cars, commercial vehicle, motorcycles, internal combustion engines and
turbomachinery. It is headquartered in Berlin, Germany and provide various services as well,
like, Banking, insurance, finance and lease financing.
In 2015, Volkswagen came into limelight when they were caught doing dishonourable
recitation of unsporting their customers, authorities and the surroundings as well. The engineers
of Volkswagen were not capable to create a car which can fitting their choice modular and does
not emit the carbon as stated by the law of US. It results in Volkswagen software engineers
creating a software that were installed in the car so that they can pass from the quality check and
were later uninstalled when car hit the road. This study will have a complete exposure over this
issue.
Analysis
Role of Ethics in an organisation
Every organization inevitably to have a convinced set of motivation, that they need to
follow in order to set up a good orientation in the marketplace and a powerful relationship with
the customers, provider and market intercessor (Burchardt, 2015). It mention to corporate belief
that are created from the external and internal stimulus. These values are often perceived from
the environment and practices that can have an impact on the workings of an organisation. Often,
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the nation, civilization and the experiences of the beginner maneuver a minor duty in
establishing ethics of the administration.
These practices have a large effect on an organisation prosperity as well as demise. If an
organisation have a great picture in the market and is able to establish a strong relation with the
market intercessor, then, there is a immense opportunity that these administration will taste the
success, whereas, if the organisation is not able to implement a strong relationship with the
market negotiator, then, there is a huge chance that the organisation will not be able to succeed
(Castañeda-Peña, 2018).
Picking the case of Volkswagen, the dishonorable pattern crystal rectifier them to
immense failure. The case here was, that Volkswagen was a successful international
organisation, headquartered in Berlin, Germany and deals in manufacturing and selling
automobiles. From the time being, Volkswagen was not capable to create a good which can meet
the quality standards as well as can able to the meet the US carbon emission policies as the car
with the better quality was producing large amount of carbon emission. To conceal the crime
about carbon emission, Volkswagen created a device which was able to simple the Environment
Protection Agency, as they were not able to trace the fraud of Volkswagen. It was International
Council on Clean Transportation (ICCT) who performed some tests by setting BMW as a
modular for comparison. It showcased some results which were shown here
(Source- Carbon emission by cars of Volkswagen and BMW, 2019)
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Illustration 1

This graph clearly indicates the carbon emission made by cars of Volkswagen Jetta and
Passat in comparison with the BMW, which was a concerning issue as carbon emission was at a
high rate in Volkswagen, more than stated by the law (Heinrichs, Dev and Davies, 2018). This
results in ICCT to directly contact Environment Protection Agency which found out that around
480,000 diesel cars were producing large amount of carbon emission polluting the environment
(Zilberbrant and MacKenzie, 2016).
Volkswagen was able to hide this level of fraud from the governing agents by a device
which reduced the performance of engine when tested for carbon emission. The device
mentioned here is a software created by software engineers of Volkswagen that can observe
when a test is taking place, and thus, signals the engine to turn into efficient mode.
Due to the fraud, Volkswagen hit the bull's eye and damaged all the intangible generated
by them all over the years. In context of ethics, they not only cheated the environment but also
the various stakeholders too. Consumers now have to pay higher taxation of their vehicles
because of the car categorization on high level. This is as well inverted the net income perimeter
into immense losings for Volkswagen. By the end of 2015, Volkswagen was in 1.5 Billion
losses. Though, they were able to generate 5.14 billion profits by 2016 but the losses in previous
year were hard to fill (Lau, 2017).
From the context of Volkswagen, it can be established that ethical practices play a major
role in the establishment of success or demise of an organisation. For Volkswagen, it was able to
prove as a demise as it was able to hinder the trust of customer, government policies, goodwill of
the firm and profit ratio.
Measures an organisation can take to ensure ethical practices
There are various measures that can be interpreted by Volkswagen to insure that the
flowing of actions is ethical. Volkswagen was not able to confirm the honorable action because
of some of the honourable issues precede in the organisation. These ethical issues are:
 Pressure: The one of the major issue was the pressure. The basic code of conduct in
Volkswagen is to have every worker disciplined ethically and have true cognition of their
work. Workers were not able to create as required because of the force extracted to them
by the top administration as the leading was not effectual (Politis and et. al., 2017).
 Opportunity: The opportunity mention to the adulterous that could have confront. It
refers to the chance that happened because of the cognitive content of various others from
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the top administration to software engineers who created such software. This intimate the
philosophy issue which could have been obviate if the proper cognition of morals should
have furnish to the workers.
 Rationalization: The policy of carbon emission were formulate in 1970s which was fine
of $ 120,000. the engineers and organization felt that they could be free from such a
crime which resulted in this fraud. Better policies need to be defined to set up improved
honourable pattern.
These ethical issues showcased various problems for the Volkswagen as there several
stakeholder faced many problems out of it (Ponce Gómez, López Cruz and Carmona Mejía,
2018). There were certain expressions that can showcase it. They are:
On shareholders: Shareholders faced many problems because of the unethical code of
conduct displayed because of defeat devices of Volkswagen. Like, shareholders experienced lots
of losses because of it. Volkswagen experienced losses of $1.5 billion which was met by the
shareholders of the organisation.
On Customers: Because of the defeat devices fraud of Volkswagen, customers lost the
trust for the organisation and was to pay higher taxes due to the car shifted to higher level as
mentioned in the US laws. Customers were cheated from Volkswagen especially those who have
a high regard for nature and environment.
On Managers: Though managers were aware about the happenings of the organisations,
but, it was pressure that made them do it. Managers of Volkswagen ask their software engineers
to create a defect device that lead to the establishment of this unethical behaviour. The role of
software engineers was to realise that what they are doing is unethical and will not be accepted in
the market.
On Revenue: Revenue was not generated that year by Volkswagen as they acquired lots
of losses by changing the equipments. Also, the customers started returning back the cars and all
the orders received were cancelled by the customers. There was a negative impact of all these
things on the profit margin of Volkswagen (Tessuto, Bhatia and Engberg, 2019).
On Environment: Environment had the largest implications of what Volkswagen did. As
due to the large carbon emissions excessive toxic fumes were released which triggered lots of
premature deaths in the world. A research analysed around 9500 per year premature deaths dur to
pollution.
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There are several measures that can be considered for better ethical practices in Volkswagen.
Some of these measures are:
 Internal Measure: In order to establish an ethical behaviour, Volkswagen should try to
provide the knowledge about the ethical code of conduct expected from the employees
and try to establish in the workings. Other than that, management should keep an eye on
the workings and should not pressurize the employees so much that they use the unethical
methods to meet with the needs of organization (Weymann, 2016).
 External Measure: In order to establish an ethical behaviour, in the context of external
environment, Volkswagen can try to organise maintenance and quality check of the
vehicles running on the roads to make sure there is no or less carbon emission. Other than
that, Volkswagen can organise random checks of the vehicles in order to make sure that
the automobiles are in good conditions and will not cause any harm to the people driving
it.
CONCLUSION
From the above case, it can be analysed that ethical behaviour play a huge role in the
success or in demise of an organisation. Same goes for Volkswagen as Volkswagen unethical
code of conduct led them to their demise. It happened due to the involvement of top management
in the creation of defect device in order to hide the carbon emission created by the vehicles and
automobiles of Volkswagen. The defect device was also created with the help of software
engineers of Volkswagen in order to hide the unethical behaviour of Volkswagen. Volkswagen
do try to change the doing by changing the elements of the faulty devices and take back all the
cars back and because of that they experienced major losses in that year which they covered in
next year by adding profits in their balance sheet.
RECOMMENDATIONS
From the above case the several recommendations can be provided to Volkswagen in
order to secure their old position in the market. The recommendations can be: Re-structuring: The first recommendation that can be provided to Volkswagen is to re-
structure their board in order to make the better decisions as the board of Volkswagen
was aware of the wrongful actions of surrounded in the actions that may hamper the
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future prospect of Volkswagen. So, the restructure of board may help in establishment of
better ethical practices. Environment Awareness: Volkswagen can have a separate environmental department
that will help the organisation in rising the awareness towards environment as
automobiles are considered as one of the biggest reason for the pollution around the
globe. This can be done by the department to establish standards for the Volkswagen as it
will help in creating a product which will emit less carbon and will be more environment
friendly. Whistle-blowing Culture: It refers to undercover operation done by people in order to
know the reality of some things. This is done to know that if there is any fraud taking
place or not. As this is the only technique which led to the failure of Volkswagen. The
organisation can try to put some strict measures over the insider people who may have
led to this as other time they may release some inside information to competitors.
 Corporate Social Responsibility: Volkswagen should endeavor to concentrate more
towards the CSR activities of the firm as it will able to create a amended picture of the
administration in the market and will able to establish a better code of conduct in the
organisation.
These recommendations will be useful in establishing expeditious transaction in the workplace of
Volkswagen.
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