Volkswagen Emission Scandal: Ethical Implications and Business Impact

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ACADEMIC AND PROFFESIONAL SKILLS
ASSESSMENT 2
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Executive summary
This report has focused on scandal of Volkswagen related to the emission device used by the
company in most of the cars. This report has focused on the scandal has affected the
company and the overview of the scandal was clearly described in the project. It was clear
that the company had faced negative reputation after the advent of this tragedy and soon the
media, the public and the Government was against polices of the company. This tragedy
demonstrates that the corruption of hierarchical morals can totally weaken an association's
impression. This report had been useful to build up certain admiration that will maintain
morals for the future advancement of an association. This circumstance prompted a deadly
error for the organization and added to a disputation for the absence of moral systems, in
which an fabrication depended on reality and disloyalty, to accomplish a immense result.
Obviously, the outflow of Volkswagen was really an ethical problem and this circumstance
spun around the thoughts and view of the professionals who were responsible for the creation
and the plan.
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Table of Contents
Introduction................................................................................................................................4
Findings and analysis.................................................................................................................5
In the segment of revenue......................................................................................................5
In the segment of managers....................................................................................................7
In the segment of regulators...................................................................................................7
In the segment of public relations and media coverage.........................................................8
Conclusion..................................................................................................................................9
Recommendation......................................................................................................................10
Reference list............................................................................................................................12
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Introduction
Organisational ethics is the principles and guidelines that control organisation’s response
towards the external environment. Organisational ethics include the behaviour, decency and
conduct of the individual internal stakeholder of the particular organisation. This report will
help to evaluate the contribution of organisation’s ethics in organisational development in the
context of Volkswagen. Volkswagen belongs to automobile industry that serves worldwide
with its new and effective models of passenger cars, trucks, and other commercial vehicles.
The interpretation of Volkswagen in German language is ‘people’s car’. The organisation
aimed to be world’s most profitable manufacturing company in the sector of automobiles.
This organisation not only aspires to achieve financial objectives, but also tries to maintain
enriched and superior quality of organisational ethics. The organisation had developed and
implemented several strategies to sustain effective organisational ethics and morals
(Schiermeier, 2015).
For the proper implication of the strategies, the organisation won the tag of outstanding
corporation from the perspective of organisational ethics and environmental management in
the year 2012. This implies that organisational ethics contributes to the organisation’s
financial and moral development. All of the fame fell down in the year 2015, when this
eminent organisation was accused for creating violence and misaiming The Clean Air Act.
This organisation was found guilty of the Global scandal, which diminished the
organisation’s image as an ethical organisation. Volkswagen installed Defeat devices in near
about 11 million models that raised the emission level carbon di-oxide gas (CO2). The
organisation was first known for its ethical values, but in next days, the organisation was
vilified publically for the lack of minimum organisational ethics. This incident shows that the
degradation of organisational ethics can completely deteriorate an organisation’s impression.
This report will be helpful to develop some commendations that will help to uphold
organisational ethics for the future betterment of an organisation.
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Findings and analysis
In the segment of revenue
The VW cheating scandal that rocked the automobile industry in 2015 was essentially
unethical in multiple aspects. As a result, this resulted in the partial demise of the
organization during that time. However, post two years after the unethical fraud in terms of
emissions, the organization recorded record sales for its products.
 First, in the aspect of demise of the organization, the poor adherence to the prescribed
emissions standards and concealing of the facts by the top management resulted in the
organization providing a fine of 29 billion USD. Additionally, the fact that the CEO
of the organization as well the US head of operations Michael Horn tried to dust off
the situation projected an unethical leadership of the organization in the long run
(Eger and Schhfer, 2018).
 Second, in the segment of success of the organization, adherence to international
emission standards as well as the being honest with the customers resulted in the
record sales of the organization in 2017. The figure essentially stood at 10.7 million
units.
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Figure 1: Variation of market share of VW in US over the years.
(Source: statista.com, 2019)
From the above figure, it is evident that the market share of the organization has decreased
over the years. However, the rate of decrease has been low post 2015. Hence, it could be
deduced that a poor adherence to expected and prescribed ethical standards would result in
the reduction in the market share of an organization in the long run (Burki, 2015).
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Figure 2: Five years comparison of the sales volume and revenue
(Source : annualreport, 2017)
From the above figure, it is evident that the sales volume and revenue both has increased post
2015. This would be due to adherence of the ethical standards in the organization. However,
the growth the sales revenue has not been significant. From this data, it could be deduced that
the organization have been subjected to growth due to adherence to ethical standards.
In the segment of managers
Managers usually have an ethical responsibility for the development of the adhering to
prescribed guidelines and enforce the same to their subordinates. However, in the event of
VW, poor adherence to the same resulted in the call back of 600000 units of vehicles from
the US market post publication of the emission scandal (Legget, 2019).
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Since, an organization is as good as its employees, the prosecution and arrest of two
employees and managers of the organization resulted in the minor demise of the organization.
This would be because; compliance officer Oliver Schmidt along with James Liang, a former
engineer was prosecuted by the US department of Justice in connection with the mentioned
scam. Apart from the demise of the managers in US, the CEO, Dr. Winterkon was scheduled
to face trial in Germany (Krall and Peng, 2015). Apart from the mentioned three officials and
managers three more managers were prosecuted or extradited by Germany under multiple
charges of forging and environmental scams. However, adherence to the proposed ethical
standards by the international council resulted in the renewed interest by the customers in the
automobile giant.
In the segment of regulators
The regulators are the specific set of functions that define whether the business activities are
going aligning the rules and specifications of the works identified for the organizations. The
specific operations are listed with some specific points for enabling the management of the
facilities for ensuring the successful outcomes. The regulators of the business for
Volkswagen would be responsible for the determining the sales, pricing strategy
development, and customer management. The possible features of the operations would be
done for enabling the improvement of the activities with the alignment of the sales of
automobiles and accessories. The various regulators for the business execution of the
automobile industry are safety regulations, environmental regulations, and manufacturing
regulations and standards. These have been explained below,
Safety Regulations:
The safety regulations for Volkswagen is responsible for making sure that the vehicles have
probable safety features required for the automobiles. These safety regulations would help in
making sure that the regulations for the secure and effective alignment of the vehicle
functions. The mechanism for the vehicle construction align with the required development
of the activities would be helpful for enabling the information development. The regulations
would be developed for managing the car vehicle safety functions. The safety considerations
would be done for making sure that the rider gets the necessary safety in case of accidents or
any other calamity. The fuel tanks and combustion chamber must be kept at the minimum
safe distance for ensuring that there are no probabilities of any mishap during the running of
vehicles (Zietz and Kirchhain, 2018).
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Environmental Regulations:
It is another major regulator for the development of the automobile production for
Volkswagen. The activity would be developed for enduring the eco-friendly operations.
There are certain rules and regulations that should be followed for keeping the level of the
emission level in car exhaustion. The environmental regulations comprise of some standards
that limits the exhaustion of the various gases in the atmosphere. The consideration of the
innovative methods for reducing the environment pollution must be followed for ensuring the
cohesive production and operation. The set of standards and quality is being met for the
production of the cars in Volkswagen so that they can preserve the eco-friendly means of
manufacturing.
Manufacturing Regulations and Standards:
A set of manufacturing regulations and standards result in the effective manufacturing of the
automobiles. The manufacturing regulations would be formed for enabling the automobile
manufacturing and it would result in the increased productive measures. Volkswagen follows
the process of eco-friendly and technologically innovative manufacturing of the automobiles.
The processes would ensure that the operations could result the development of the specific
standard achievement and formation of the work development (Welch, 2019). The standards
must be achieved with the utilisation of the activities for developing the factor development.
In the segment of public relations and media coverage
The public relations experts said that the scandal of Volkswagen AG has crushed the market
value and has brought down the reputation of the company and it was made worse by the
company when the company started to halt and disjoin public response for several days
(Burki, 2015). The public relations expert termed this scandal as ‘trickling of information’
and said that everything was sluggish in this process. Michael Horn had to come up to the
public and admit about the company and by that time there was an accretion in the expanse of
the defamation over other countries and many investors further ought to have apprehended
juridical litigation (Krall and Peng, 2015). According to the public relations expert, the
company allowed to move so that new revelations chipped the control and said that the
company was not arranging enough and was moving too elusive. The experts said that the
scandal was a disastrous mistake for the company however; they had said that it should
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proceed in a different way and an urgent approach must be taken into consideration (Zietz
and Kirchhain, 2018).
It was said that the company should have started executing the process with deliberate haste
and a good strategy would have been involved in the public relations so that it becomes
difficult to bring on new questions before the action of the plan is already hatched. The social
media made the news worse for the company and said that it was a big blow from the side of
the company, in accordance with the emission scandal and the plot of the company has been
termed as a ‘quackery’ which has progressively gotten graver (Rhodes, 2016). Volkswagen
on social media was looked upon as negative and more than 83% of the emotionally driven
conversations have provided this report (Welch, 2019). Within a period of 10 days, the initial
emissions allegations from the EPA made at 20% increased negative response and the
internet reacted severely to the story developed. People were moderately swinging opposite
to the company, the conversations were getting cynical, and soon the company had to admit
that more than 11 million vehicles were included in the scandal and the internet made it a
situation of stress and shame (Jung and Sharon, 2019).
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Conclusion
From the above study, it is clear that the emission scandal of Volkswagen was actually a
moral dilemma and this situation revolved around the ideas and perceptions of the engineers
who were accountable for the production and the design, however when not able to reveal
this before launching the cars in the market. This becomes a dilemma when the professionals
working in this situation where threatened for the loss of career and were forced to do
something unethical, which means that the dilemma was actually an act of selfishness and
dishonesty to the horrific action and illegitimacy of the environment. Therefore, this situation
led to a fatal mistake for the company and contributed to an argument for the lack of ethical
frameworks, in which a lie was based on the truth and betrayal, to achieve a favourable
outcome. It would have been better if the company would have taken a utilitarian perspective
and have revealed the truth after the production process, which could have actually
influenced the wellbeing of the majority of the population.
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Recommendation
The first option that can be taken by the company is utilising an action-forcing event in which
the engineers and scientists of the company will have to take the design of the cars into
consideration so that the emissions do not reach the high-level and proper investments will
have to be completed for that reason too. It was seen that the device attached to the cars was
showing proper levels of emission and it stated that the emission level was quite less and
somehow, somebody inside the company has performed the validation incorrectly, which is
also the base of this problem (Schiermeier, 2015). To get rid of this biggest tragedy, the
company will have to gather for the conferences where they will have to show the
repercussions and will have to show that they were wrong for the things they have done and
the act of valour in the history of the car industry (Eger and Schhfer, 2018).
The company will also have to invest some amount of money for fixing the cars and
preparing them inside the pollution standards and will have to pay a fine of 30000 Dollars per
car. The company will have to apologize to the public and recall all the vehicles with TDI
engines and will have to suspend the top executive for a period of time for the wrong they
have done, as they were the master of the plan of the manipulation software (Krall and Peng,
2015). The company will also have to focus on creating a contract, in which the roles and
responsibilities of the agent will be specified along with the penalties and rewards for the
behaviour of this person. This will help to overcome the agency problems and the company
will have to screen and select the mechanism to reduce information asymmetry.
The company will also have to increase reporting and monitoring requirements and will have
to conduct random audits. Institutional checks and balance will have to be implemented so
that the norms and standards of the company become much clearer and the agents cannot
deviate from the professional behaviour. To deal with the problems of the consumers and
stakeholders, the company can start the operations under a new legal name and will have to
set up an independent bond and verification agency, which can help to retune credibility to its
company (Jung and Sharon, 2019). The company will also have to indulge themselves in the
local communities and the Non-governmental organisations and will have to show that they
care about the society and sustainability and will have to illustrate the CSR policies in the
companies’ report, which is likely to increase transparency with the stakeholders and
consumers.
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