Corporate Governance Analysis: Volkswagen Case Study and Impact

This research project investigates the corporate governance issues affecting Volkswagen, focusing on the 2015 emission scandal. The introduction outlines the research aims, objectives, and questions, followed by a background of the company. The literature review explores the concept of corporate governance, the specific issues faced by Volkswagen due to the scandal, and the impact of these issues on the company's functioning. The project examines the legal and ethical failures, including the use of defeat devices to cheat emission tests, and the subsequent impact on Volkswagen's financial performance, brand reputation, and stakeholder trust. The research highlights the importance of transparency, accountability, and ethical behavior in corporate governance, and concludes with recommendations and an action plan for improving governance practices within the company and the automotive industry. The project uses both secondary and primary research methods to analyze the issue.

Research Project

Table of Contents
INTRODUCTION...........................................................................................................................1
Research aim...............................................................................................................................1
Research objectives.....................................................................................................................1
Research question........................................................................................................................1
Background of organization........................................................................................................2
LITERARTURE REVIEW..............................................................................................................2
Concept of corporate governance................................................................................................2
Issue faced by Volkswagen due to corporate governance..........................................................4
Impact of corporate governance over the functioning of Volkswagen.......................................5
DISCUSSION OF THE SECONDARY AND PRIMARY RESARCH ........................................6
CRITICAL REVIEW OF THE RESULTS OF THE RESEARCH................................................7
RECOMMENDATIONS AND ACTION PLAN .........................................................................11
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

Title: To analyse the issue of corporate governance that affects the functioning of an
organisation. A case study on Volkswagen.
INTRODUCTION
Corporate governance is refers to the collection of processes and relation by which
business are operate, regulate and controlled. Mainly, the encompasses the external factors that
directly affect the interests of shareholders such as suppliers, government regulation, customers
and many more of business organisation. In this regards, the board of director is responsible for
creating the whole framework for corporate governance that best line up business along with its
objectives. Along with this, the main purpose of corporate governance is to evaluate
entrepreneurial and prudent management that help in delivering long term success of business
organisation (Head and Alford, 2015). As it is consider as a system by which companies are
directly controlled and directed. It also affect the entire functions and operational activities of
company. Good corporate governance includes set of rules that determine the positive relation
between management, stakeholders and the board of directors of business and at the same time
also influence how a firm is operating their activities. One of the main objectives of corporate
governance is to increase value of shareholders and also protect their interests that assist in
enhancing positive brand image of company at market place.
Research aim
“To analyse the issue of corporate governance that affects the functioning of an organisation.” A
case study on Volkswagen
Research objectives
 To understand the concept of corporate governance.
 To identify the issue faced by Volkswagen due to corporate governance.
 To identify impact of corporate governance over the functioning of Volkswagen.
Research question
 What is the concept of corporate governance?
 What ate the issues faced by Volkswagen due to corporate governance?
 What is the impact of corporate governance over the functioning of Volkswagen?
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Background of organization
Volkswagen is a famous German auto-maker company operate their business in over the
world. It was founded in 1937 by the German Labour Front and its headquartered in Wolfsburg.
It sales their services worldwide with the aim of increasing their market share. The biggest
market of this company is in China which serve around 40% of its sales and profitability. In this
context, corporate governance is stands for responsible, transparent corporate management that
aims to add by long term value. As an effective and good corporate governance is not only based
on lasting corporate success but also a key aspect for strengthening the trust of their shareholders
like customers, business partners, employees and business partners and its financial markets
(Slack and Brandon-Jones, 2018). If company follow good corporate governance that each and
every shareholder treated equally and fairly as it is making sure that shareholder are aware of
their rights within and also know how to exercise them. Furthermore, board of directors also
maintain commitment to ensure about accountability, fairness, transparency within the corporate
governance.
LITERARTURE REVIEW
It is one of the important section of research as it provide depth information about the
topic that may assist in providing a path and direction to investigator with the aim of attaining
positive and reliable results. Mainly, it is a part of secondary method that is based on published
material on different sites such as books, journals, articles, news paper and many more. With the
help of this, researcher can easily take right decision and also draw a valid conclusion at the end
of the study. It is describe as published information which is connected to a specific area and a
particular topic or subject. It can be a basic summarisation and conclusion regarding a specific
subject but is basically has an organisational pattern and includes both summery and synthesis.
Concept of corporate governance
Corporate governance refer to those plans and policies through which an organisation is
governed and organised by the administration. It can be a technique which is utilised by the
management of companies to run their business in adequate and appropriate way in a particular
business industry. It mentions carrying a business firms as per the needs and requirements of
investors and stakeholders. According to Prince J. N.(2020), corporate governance is the
communication between several people of the company like board of directors, shareholders and
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others, in term of processing the performance of a company and the way it is executing towards.
Corporate governance includes systems and processed formulated to structure governance,
balance responsibility and provide accountability to shareholders at all levels (Armstrong and et.
al., 2015). It is beneficial for the companies because better governance ensures corporate growth,
financial development and provides effective inducement to the owner of the company and
managers to achieve aims and objectives that are according to interests of the shareholders. It
allows to company to place their effective traits and abilities on display. It trade with the manner
the providers of finance assurance themselves of acquiring a fair return on their investment
funds.
As per the view of Thomson L. M.(2009), corporate governance indicates to the set of
methods, principles and activities through which a firm is regulated. They offers the direction
that how a company can be directed or controlled in term of accomplishing its set business aims
and objectives. It help in adding value in the firm and also beneficial to the shareholders till long
term. It is based on principles such as organising the business with all honesty and fairness,
making transparency in context of all transactions, complying with all the laws of the land,
responsible and answerable towards the stakeholders and organising business in more ethical
way (Griffith, 2015). It is important and crucial for the company so that business of different
companies can be operate and run in effective or ethical manner in competitive market in term of
accomplishing business aims and objectives. Accordant to Porter M. E. (2019), corporate
strategy refer to those plan of actions which are framed and formulated by the management of
the company for effective governance of an organisation. Simply, it is an organisation-wide plan
to chose and develop particular market in which contend while developing various functions and
units of the business. There are two major components of corporate strategy like variegation and
straight segregation. Variegation indicates to explore market are and move to run business in to
new field while vertical integration states that when a firm make expansion into areas that
antecedently covered by suppliers (Jacoby, 2018). The plan and strategies which is developed for
effective governance of the company concern that how a firm can gain rival' benefits with the
help of its business. There are different things which should be consider by the administration of
a business firm in their plan of action such as flexible business activities, accurate market
information, effective production quality and effective assess to monetary fund etc. this all will
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help in effective governance and administration of the business and it help in increasing
profitability and productivity of the company.
Issue faced by Volkswagen due to corporate governance
Corporate governance simply refer to the process of governing the business of an
business company in ethical manner by formulating and implementing effective strategies and
tactics. As per the view of Price J. N. (2020), corporate governance is a tool which is
implemented by company to run the business in effective manner without suffer from any
complexities. It favourably influence the company because when the company develop effective
plans and polices to operate business like better marketing strategy, pricing, sales and
administration strategies, then it can operate its business in more crucial manner. When the plans
and regulation which are formulated by the company are not goods or not followed by the
management of the company in more effective manner, then it create issues and complexities in
the business of the organisation.
Volkswagen which is a large auto-mobile company faced a issue in its business. It was
occurred in the company because the firm was not make transparency in its business activities
and products. The reason of this issues that the company was not properly following the rules
and regulation of the government of the nation in context of environment safety (Jiang and Kim,
2015). The management of the company was using a pollution detecting devise in its car product.
When the cars were operating under possessed laboratory conditions which typically concern
putting them on a stationary test rig and the device seems to have put the vehicle into sort of
safety mode in which the engine ran below power and execution. Once on the road, the engines
switched out of this test mode. When the investigation was conducted in context of it then this
issue was come in to sight. The major reason of this problem was ineffective and unappropriated
implementation of government laws. Government experts argue the cheating was predictable
because of Volkswagen lax boardroom controls and peculiar corporate culture.
According to Goodman L. M. (2015), this emission scandal arise in the company because
the administration of the firm neglect and ignore the regulation which are developed in context
of environment protection by national authority of US (Larcker and Tayan, 2015). The reason of
this scandal is to maximise the sales and profitability in term of offering a product which
consume less fuel and generate less pollution. So for getting this benefit, the company use
pollution detecting devises and the results in a higher production of Nitrogen Oxide compared to
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their counterparts of Petrol engines. If the company properly consider the rules and regulations
of the government then these kind of issues and complexities can be minimise and remove from
the business and the firm can operate its business appropriately.
Impact of corporate governance over the functioning of Volkswagen
Corporate governance indicates to the proper administration of business functions,
operation and activities of a company so that the organisation can operate its business concern
operations and activities in an developed manner. Basically it can be an activity of making
control on business actions and lead them in accurate manner. According to Hotten R. (2015),
corporate governance is a structure of conditions that explain the limits within each segment of
shareholders must lead to safeguard the interest of the firm. It is become efficient due to different
kind of frauds in several companies. If the company effectively follow the rules and regulation in
appropriate manner then it positively affect the company and it business activities in term of
enhancing productivity and increasing profitability (Lau, Lu and Liang, 2016). For instant, as per
current research, Volkswagen was facing emission scandal because the regulatory bodies and
administration did not follow the environmental protection laws in accurate manner and cheated
with them by using detecting devices in their car products which generate high level of pollution.
It had been framed unfavourable impact upon the business of the company in term of
influencing its sales, profitability and productivity in negative manner.
As per the view of MacLennan S. (2020), this scandal and fraud negatively affect the
business of Volkswagen in term of the shares has been rapid and the company company losing
35% of its market capitalisation. Due to it, number of investors run and firm pay fine to the
government for this fraud. This scandal negatively affect the sales of the company and when the
sales was minimised, the profitability ration of the company also reduce due to productivity of
the products. This fraud also affect the brand image and brand position in the market due to
which its economic situation was also affected in unfavourable manner (Steger, 2015).
Volkswagen branded cars have been worst hit by the scandal in term of operating profit margins
plunged to €73m from €514, year earlier.
The management of the company pay 26 billion euros in fines, compensation and
buybacks, mainly in the US. The Volkswagen group is the world's biggest car-maker but due to
this fraud the sales of the firm decrease badly cause of its consumer's trust and believe. This
scandal not only affect the company and its business as well as affect employees and workforce,
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organisational culture and rules & regulations of the company. The major reason would be
behind this fraud, may have wanted to avoid the cost of additional hardware to meet tough US
emission standards, so it came up with a cheaper software fix (Tricker and Tricker, 2015). But it
negatively affect the organisation and the US government levy a fine as high as $37,500 per
vehicle affected. If the regulatory authorities of a company do not follow the rules and relations
in proper manner then it negatively affect the business of the firm. It is crucial to organisations to
frame and formulate better and effective laws and consider them in accurate manner so that
business of the firm can operate and run in ethical manner.
DISCUSSION OF THE SECONDARY AND PRIMARY RESARCH
Research refers to the effective process that provide in-depth study towards the specified
topic or issues. Thus, it is crucial for investigator to select or use suitable and effective method to
undertake the research activities. Mainly, there are two type of research methods such as primary
and secondary research. Both type of research method support investigator to gather relevant
data and information about the specified topic of investigation on which study is undertaken.
Current investigation is based on both primary and secondary methods which help investigator in
collecting relevant and valid information on the basis of research topic (Mair, Mayer and Lutz,
2015). In addition of this, primary method assist in preparing questionnaire that support in
collecting detailed and authentic information which is based on the actual views and opinion of
selected respondents. On the other side, secondary method support in collecting in-depth data
that is collected through published material. For this books, journals, articles, magazines and
many more are used by investigator to collect best and detailed data. This is the reason that it is
beneficial for Volkswagen to collect data towards the research problem. Apart from this, there
are some other research methods for undertaking primary and secondary research understood by
following points:
Research philosophy: Interpretivism and positivism are two type of research philosophy
that help in undertaking the study in systematic manner. For this investigation, interpretivism
philosophy will be used as it provide detailed data about the research topic.
Research approach: There are two type approach such as inductive and deductive but in
this investigation, inductive approach with be applied by investigation that assist in providing in-
depth evaluation about the research problem (Bell, Filatotchev and Aguilera, 2014). By this
researcher can easily take right and valid decision at the end of the study.
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Research choice: In undertaking investigation, there are two type of research i.e.
qualitative and quantitative. Current research is based on the qualitative research because it give
more valuable and suitable information about the research topic in order to improve the
possibilities of attaining positive outcomes (Fu and Deshpande, 2014).
Research design: It is refers to the plan or procedures that used to controlling and
organising the research project. In this, descriptive, exploratory and experimental are the major
research design. For undertaking this research, descriptive research design that is based in the
situation, individual behaviour as it give depth analysis towards the specified research topic and
problem as well.
Source of data: For collecting information, there are two type of data such as primary and
secondary that assist in taking valuable decision at the end of the research. Primary data is
collected from first time and also based on views and opinion of selected respondents. Mainly, it
includes questionnaire, observation, survey and many more. On the other side, secondary data is
based on already published data as it provide detailed information about the research topic. For
collected data investigator use books, journals and many more. For this study, both methods will
be applied that support in gathering reliable and authentic data on the basis of particular issues.
Data collection techniques: For undertaking research, there are different techniques
which use to gather data in order to attain positive results. Interview, survey, questionnaire are
the different techniques to collect valid information about the research topic. As per this,
questionnaire will be used by research as it includes various close- ended questions that help in
understanding the view point of selected participants.
Sampling: It is consider as an important process to select group and sample size from
large number of population with the aim of collecting relevant data and information. As it is
classified on the basis of two methods such as probability and non-probability sampling
technique (Mason and Simmons, 2014). For undertaking current research, probability technique
will be applied in which sample size is select as per random basis. By this, 50 respondents will
be selected to collect data.
CRITICAL REVIEW OF THE RESULTS OF THE RESEARCH
Questionnaire
Name:
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Age:
Contact no.:
Email id.:
Q1) Do you aware about corporate governance?
a) Yes
b) No
Q2) Does good corporate governance is important for business to operate their functions?
a) Yes
b) No
Q3) As per your view point, what are the main issues faced by Volkswagen due to
corporate governance?
a) Transparency
b) Conflict of interest
c) Emission Scandal Emissions Scandal
Q4) Does Emission Scandal is main issue of corporate governance that was faced by
Volkswagen?
a) Yes
b) NoQ5) What are the affect of emission Scandal on business operations and functions of
Volkswagen? a) Decline in sales
b) Lack of customer loyalty
c) Decline in business growth
Q6) According to you, how did Volkswagen defeat device work?
a) Trapping The Pollutants
b) Treating Them With Urea
c) Other
Q7) What are the ways through which company can overcome issue that are arisen due to
emission scandal?
a) Proper implementation of Corporate governance
b) Development of training and program
c) Proper monitoring and controlling device work
Q8) What is the impact of corporate governance of Volkswagen on its shareholders?
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a) Positive
b) Negative
c) Neutral
Q9) Recommended the ways by which Volkswagen can overcome from corporate
governance.
Q1) Do you aware about corporate governance? Frequency
a) Yes 35
b) No 15
Q2) Does good corporate governance is important for business to
operate their functions?
Frequency
a) Yes 40
b) No 10
Q3) As per your view point, what are the main issues faced by
Volkswagen due to corporate governance?
Frequency
a) Transparency 10
b) Conflict of interest 10
c) Emission Scandal Emissions Scandal 30
Q4) Does Emission Scandal is main issue of corporate governance that
was faced by Volkswagen?
Frequency
a) Yes 40
b) No 10
Q5) What are the affect of emission Scandal on business operations
and functions of Volkswagen?
Frequency
a) Decline in sales 15
b) Lack of customer loyalty 15
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