Business Ethics and Responsible Management: VW's Ethical Failures

This report provides a comprehensive analysis of the Volkswagen emissions scandal, focusing on the ethical dimensions of the company's actions. It begins with a report to a senior manager, outlining the ethical issues related to consumer deception and the manipulation of emission results. The report then explores two key ethical theories: utilitarianism, which emphasizes maximizing overall happiness, and virtue ethics, which focuses on the development of good character traits. The study further examines the characteristics of an ethical leader, emphasizing respect, integrity, and the importance of ethical principles in business practices. The report highlights the role of business in society, key stakeholders, and the factors contributing to the ethical failures within Volkswagen's corporate culture. It concludes with recommendations for ethical practices and emphasizes the need for transparency, honesty, and responsible management to prevent similar crises in the future. The report also stresses the importance of long-term focus and ethical decision-making to sustain business growth and consumer trust.

Business Ethics and Responsible
Management - Case 5 VW The case of
consumer deception and corporate culture

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
A. Report to senior manager.......................................................................................................1
B.Two ethical theories that apply to the case..............................................................................4
PART 2............................................................................................................................................5
What makes an ethical leader......................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business ethics is the study of complex business practices and behaviors that gives rise to
ethical issues in organizations. It is the study of business situations, activities and decisions
where issues of right and wrong are addressed. It means an application of moral rights and
wrongs in an organizational setting. It aims at inculcating a sense within the company's employee
population of how to conduct business responsibly. The present study is based on Volkswagen, a
German company that deals in manufacturing automobiles and operates its business worldwide.
Furthermore, the report describes the ethical dimensions and issues faced by the corporate. The
key stakeholders of the company are also discussed in the report. The study also explains the
general ethical factors that are adopted by the leader to perform his task ethically and two ethical
theories are demonstrated as per the case.
PART 1
A. Report to senior manager
To: Senior Manager
Volkswagen
From: Junior manager
Volkswagen
Subject: Application of ethical analysis helps in managing business reputation in the
environment.
Sir,
In accordance with managing the corporate culture as well as brining the effective
information among the stakeholders on which it is recommended that Volkswagen must have
ethical consideration in operational (Koplin, Seuring and Mesterharm, 2007). As per considering
the emission scandal in 2015 on which firm has been claimed by the government that they are
manipulating the results of emission. It is denoting the manipulations have been made by the
software which manages their diesel engines that have determining the emission data in test
mode which defines less outcomes such as 40% and lower in reality (Valentini and Kruckeberg,
2018). It was pretending the outcomes that the cars are more fuel efficient than the actual
outcomes. Therefore, it has been known as consumer deception as buyers are buying vehicles
which do not create them higher after costs (Wu, Wang and Shen, 2018). However, in
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accordance with considering the environmental operations which have defined that there have
been increment in toxicity in the environment would affect the health and invites various disease.
Ethics: Considering the ethics in the operational practices of Volkswagen on which
managing operational practices of organisation would reflect adequate gains, growth and
reputation in the environment (Mansouri, 2016). It has been determined here that, making
adequate operational changes would reflect the business to must have proper operational
ascertainment (Koplin, Seuring and Mesterharm, 2007). As per considering the ethics in and
automotive industry on which it can be said that, there must be consideration over the hard-edged
relationship between business and consumers. Thus, the business must design the products which
are based on consider satisfaction and desires which would lead it to develop a sound relationship
with the buyers (Valentini and Kruckeberg, 2018).
Along with following the government laws and regulations will be effective in making
adequate ascertainment of the international council on clean transportation (ICCT) which have
presented guidelines for the automotive industries in relation with disclosing the adequate details
regarding the emission, installation of any devices or software which would be effective in
meeting issues at the right time (Wu, Wang and Shen, 2018).
Role of business in society and obligations:
Volkswagen have been working as an automotive industry since many of years. Their
mission is to control the carbon emission in their vehicles for bring the best fuel efficient and less
pollutant vehicle in environment (Mansouri, 2016). The California Air Resources Board (CARB)
and Environmental protection administration (EPA) have imposed various standards on which
Volkswagen do not believe as they said they do not want to compromise their performance for
retaining the competitive advantages (Koplin, Seuring and Mesterharm, 2007). Developing
vehicle which are sufficient in bringing the best mileage as well as luxurious experiences would
have impact on the operational motives and goals to be meet safely in managing the risks and
engaging the business procedure.
Key stakeholder for defining the corporate culture
In defining the cultural perspective of the business on which it can be said that
Volkswagen deceptive emission practices has sent shock waves in the environment. Therefore,
due to such reasons the CEO Martin Winterkorn had resigned the company which have
simultaneously impacted on reducing the stock prices and there have been invitations to the
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various legal consequence on the business (The Volkswagen scandal shows that corporate
culture matters, 2017). However, there have been consideration over the several elements which
have resulted in defining the troubles have been faced by organisation in better operational
control such as:
Culture rolls downhill: The roles and responsibilities of CEO in the organisation which
have been determining that they must have proper control over the behaviours and practices
performed in the organisation (Volkswagen and the Culture of Silence, 2016). There are various
activities which were being performed in Volkswagen and its is not necessary that they must
have information regarding each and everything (Valentini and Kruckeberg, 2018). Therefore, to
manage such operations on which there is requirement of increasing the communication and
interaction between employees and CEO.
Short-term focus skews judgment: The biggest mistake of VW is that they focus on the
short-term gains instead of operating for the long terms advantages (Wu, Wang and Shen, 2018).
Therefore, it would not sustain business growth and consumers will serve for the immediate
needs which compromises world’s trust in products.
A 1-degree error can put you miles off course:
It has been denoted by the leadership advisors Dieter F Uchtdorf that, a massive ethic
violation can initiate with a 1-degree of errors which would affect a slip in judgement (Mansouri,
2016). However, it is required that before making any decisions one must analyse how far they
come and how far they have to go because a single negative decision would lead them down and
face crisis.
Good choices benefit companies and bad choices have negative impacts
Adoption of various new techniques would be effective in leading the business on right
stage. However, right decision made by the business professionals would be effective for the firm
in retaining appropriate appreciation, gains as well as marketable returns at the right time
(Valentini and Kruckeberg, 2018). On the other side, as per making non-beneficiary decision
which costs the firm higher would not affect positively in sustaining the growth as well as
generating profits. Before implicating any reformative action on which it is necessary that the
business must have effective control on the operational gains.
There are plenty of good ideas which would results in profitable gains but VW must
consider those ideas which are ethically accepted as well as are capable of bringing the best
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marketable returns (6 Reasons Leaders Make Bad Decisions, 2013).
Recommendations:
On the basis of analysing the emission scandal case of Volkswagen on which it can eb
recommended that the professionals are required to implicate ethics into the work practices.
Considering the guidelines stated by various standards and boards will be helpful to the firm in
retaining the higher success in market. There would be increment in revenue that will result in
sustaining appropriate gains.
B.Two ethical theories that apply to the case
Utilitarianism theory- It is the theory of moral philosophy that is based on the principle
that an action is morally right if it produces a greater quantity of good or happiness than any
other possible action. It is the belief that if an action is good it benefits someone and an action as
bad if it harms someone (Pearson, 2017). For example- As Volkswagen is cheating with the
insights of the people, promising something else and providing emission diesel cars and
deception their shareholders leads to bad consequences on the society so it should apply this
theory as an ethical practice. It maintains that the correct principles of right and wrong are those
that would maximize happiness if society adopted them. This theory applies to case of
Volkswagen as the issue was raised about the emission by the company which results in
dishonesty towards the society and the environment. This theory highlights the importance of
consequences to business ethics. As in this theory, the decisions in relation to ethics are based on
consequences so it is also called as consequentialism theory (Chell, and et.al., 2016). The
perspective of this theory reflects the fact that it is a way to weigh out the influence of behavior
and identifying the greatest good for majority number. Volkswagen by using this theory in order
to make out the difference between good and bad as per majority of the person and in making
decisions on what will benefit the majority of the people. The company can resolve its conflicts
and overrides moral luck through this utilitarianism theory. It appeals to a large cross section of
society and considered workable as it treats all persons as equals. The actions produce different
results in different circumstances, almost anything might, in principle, be morally right in some
particular situation.
Virtue ethics- Virtue theory is the view the foundation of morality is in the development
of good character traits, or virtues, not good acts (Jamali, and Karam, 2018). It includes courage,
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temperance, justice, prudence , fortitude, liberality and truthfulness. Virtue ethics focuses on
character or virtues rather than rules or consequences, as the key element of ethical thinking. It is
agent based, describing the character of a moral agent as the driving force for an ethical behavior
(Kolk, 2016). This theory is concerned with a person's motivation for action and not with the
action itself. This theory best suits to the case of Volkswagen as it was the responsibility of the
engineers and the leaders to assure safety and honesty in the product. Installation of this software
generates a perception that virtue is lacking in the company. In this case, honesty is the trait that
is applied here. Concern for integrity and common good is not supported by the action of the
organization. The leaders of the organization should establish the standards ethically which are
open and transparent at every level of routine operations (Quarshie, Salmi, and Leuschner,
2016). The corporate should conduct the audit in context of integrity and honesty to overcome
the problems regarding ethical issues. Volkswagen promises such resources that seek alternative
action when conflicts in relation to ethical issues arises. Virtue ethics represent the actions of the
enterprise and its workers. The software engineers of the company drops idea of cheating or
defeat devices as soon they realize that it is not right and ethical towards the brand image of the
entity and for the external users like stakeholders, investors etc. the internal integrity and
character of the individuals should be allowed to flourish in the ethical climate of the business as
per the virtue theory.
PART 2
What makes an ethical leader
The most essential traits that makes an ethical leader are showing respect and honor
towards the team by inviting suggestions from them, rewarding their contributions and creating
harmony in the organization. Some ethical principles that I need to follow for becoming an
ethical leader are enumerated below-
Respect- Being an ethical leader, for managing and building the business ethically leaders
must ensure respect to other members in the firm and to themselves as well. Respect for the
workers reflects that all the employees have equal right to exercise as per their desire (Vitell,
2015). Showing respect for people is an approach to function the business ethically. This
principle of an ethical leader focuses on the freedom of choice, where the team have right to
accept or reject to be a part of the work.
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Honesty- It is ethically important for the leaders to be honest. For earning respect in the
organization, honesty is a major trait. The leaders should present the circumstances and fact
truly, fairly and completely (Dawson, 2018). As a honest leader I will never misrepresent the
members about any fact. For driving the success of the firm it is essential that the manager fulfill
all the ethical responsibility. Corporate can always rely upon and authorize the leaders who are
honest towards their work and goal of the firm.
Community building- An ethical leader takes into consideration his own as well as the
purpose of other people, while making the strategies and policies to attain the goals that fulfill
the objectives of both individual and organization (Spence, 2016). Thus, I should work in the
interest of the society so that image of the company can be enhanced in the overall market across
the globe. The leader must take care about the goals of the community and should work hard to
achieve those goals.
Justice- A leader is said to be ethical when he treats all the workers equally. The personal
bias should not be there in relation to status or gender. If the employees are treated differently
then the reasons for the different treatment should be clear, fair and built on the basis of morality.
Hence, as an ethical leader will not discriminate individuals and ensure justice to them.
Honor- Leader should honor and appreciate the employees and team as well (Pearson,
2017). Facilitating special attention to the outstanding performers so that they work with the high
morale and to the best of their potential. The workers reaching the target beyond the set standard
should be rewarded with both financial and non-financial incentives like bonus, promotion etc.
Result oriented- Leaders functioning ethically states that they should focus on achieving
the results with creating the value of the company in the market. Developing such product that
meet the needs and wants of the customers and they feel highly satisfied. The pricing of the
product should be set in such a manner that is affordable and reasonable as per the normal people
so that every people in the market can consume it (Schrempf-Stirling, Palazzo, and Phillips,
2016). Effective leaders determines the results as per the expectation of the consumers and then
support their team to achieve the results in accordance with expectation. Leaders should provide
timely feedback on the performance of the workers in an effort to assist the employees in
achieving their full potential and the results that leads to the success of the business.
Risk-taking- A leader must be risk- taker as it is an important attribute for growing,
thriving and prospering the enterprise ethically. For inviting innovations and new things, it is
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essential that the leader must possess the quality of taking risk and encourage the team members
for creating innovating things so that goals can be achieved with efficiency. Great leaders attract
those employees who voluntarily shows the willingness to take risk and they motivate, support
and reward them for taking the risks (Ferrell, and et.al.,2019). When the risk taking resulted
positive outcomes for the enterprise then the team should be rewarded with extra benefits like
incentives. When the risks bearing resulted negative outcomes or do not pay off then the leaders
should analyze and review about the things went wrong so that they can do better next time.
Passion- Leaders should be passionate about the work and the tasks that they are
performing at the workplace. Ethical leaders work with excitement, challenges, and believe that
task should be performed with efforts so that any change cannot affect the operations of the
business.
Persistence- For maintaining the consistency of the people working in the organization,
leader should create a positive and belonging environment in the work environment (Tran,
2019). As an ethical leader I need to put ample of time and hard efforts in hiring the right pool
of talent who builds values. They should communicate to their team regarding the significance of
these values to the plans, decisions and strategy.
Hence, to become and work as an ethical leader I need to build or indulge all the skills in
me. For instance: Sometimes business unit gives high level of respect and priority to one
department as well as its personnel over others. Hence, in this, ethical leader has an
accountability in relation to not discriminating individuals on the basis of age, race, disability,
gender etc. Along with this, sometimes, business unit undertake advanced technology with the
motive to maximize both productivity and profitability (Chuang, and Huang, 2018). Hence, in
this, as per personal ethics leader needs to ensure that all the activities get completed in an eco-
friendly manner.
CONCLUSION
From the above report it is concluded that business ethics helps the Volkswagen to protect
their reputations. It is needed to make business activities fair and reasonable for consumers.
Business ethics is especially important in dealing with customers, including customer service and
customer issues. It enables the company in determining obligations and duties towards individual
and groups outside the organization. It is a branch of social science that deals with moral
principles and social values.
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REFERENCES
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