Analyzing the Impact of the Volkswagen Emissions Scandal

The Volkswagen emissions scandal serves as a pivotal case study in understanding the intersection of business ethics and corporate responsibility. By installing software to manipulate emissions testing results, Volkswagen significantly impacted environmental policies and corporate governance standards. This analysis delves into the ethical breaches involved, the subsequent changes in corporate strategies, and policy adaptations within the automotive industry. It highlights how Volkswagen's actions led to a loss of stakeholder trust, prompting significant shifts towards more transparent and responsible business practices. The study underscores the importance of robust CSR policies and regulatory frameworks to prevent similar occurrences, aiming to restore confidence among consumers, investors, and regulatory bodies.

Running Head: Corporate governance and accountability
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Project Report: corporate governance and accountability

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Contents
Project Report: corporate governance and accountability................................................1
Introduction.......................................................................................................................3
Comapny overview...........................................................................................................3
Case discussion.................................................................................................................4
Analysis of scandal events................................................................................................5
Evaluation of the case.......................................................................................................6
Conclusion........................................................................................................................7
References.........................................................................................................................9

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Introduction:
In this report, a major public scandal done by the Volkswagen has been analyzed.
This report depicts that how that scandal has impacted over the performance of the business
and the society as whole. For this report, various newspaper article, journal article, annual
report of the comapny, stakeholder’s report etc has been analyzed and found that by what
level the performance, stability, flexibility, position, profitability etc of the comapny has been
impacted. For analyzing this scandal, firstly, the comapny background has been analyzed.
Further, the scandal has been studied and it has been evaluated that how much it has impacted
over the position of the comapny.
In addition, the scandal event done by the company has been analyzed. This scandal
depict that the event done by the comapny has impacted over the overall performance f the
comapny (Thomas and Cotter, 2007). For this report, primary and secondary data has been
used to identify that what was the level of the scandal and how it has affected the society and
the stakeholders of the comapny. Corporate governance strategy of the comapny has been
analyzed and on the basis of that strategy, the scandal level of the comapny has been
investigated.
Comapny overview:
Volkswagen is a German comapny which manufactures the automobile products. It
operates its activities as a manufacturer as well as the distributor of automobile parts in the
international market. This comapny has diversified its business globally; this comapny has
many subsidiary companies as well to run the business and activities of the comapny in
international market smoothly (Palpacuer, 2008). The main activities of the business are to
design, produce and distribute the cars and various other vehicles in global market. Mainly
two division of the company carries out its activities which are financial services and namely
automobile. The division of automobile contains the development of engines and vehicles as
well as the selling and manufacturing of commercial vehicles, buses, passenger cars and
trucks. Financial division of the comapny involves customer financing, dealer financing,
baking, leasing and other insurance services, fleet management and rentals management
(Nitschke and Innes, 2008).
This comapny leads the international market in the car segment. The major production
line of the company is POLO, Volkswagen POLO etc. the major emphasize of the business is

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to enhance the focus over the core business, reducing the manufacturing cost and enhance the
profit of the comapny. For achieving the target and objective of the comapny, this comapny is
using various new strategies and policies to manage and enhance the level of the production
and market share, comapny has seen various ethical and unethical ways to enhance the
profitability and reduce the manufacturing cost of the comapny, due to unethical action of the
comapny, comapny has faced various losses and the market share of the comapny has also
been reduced.
Case discussion:
Comapny has installed some software into millions of its cars to trick the agency of
environment protection to testers into analyzing and thinking that the automobiles of the
comapny are more environmental friendly then they used to be. Company has disclosed this
fact into September, 2016 in front of its stakeholders. By hearing this, the investors of the
comapny has understandably deserted the activities and the business of the comapny.
Volkswagen has cheated in emission testing by using the car appear which expect that
the cars of the comapny are less polluting from the earlier cars of the comapny in past. The
environmental protection agency of the US has discovered that the 4,82,000 Volkswagen
diesel cars on the international roads which were actually producing approx 40 times more on
the toxic fumes than it is permitted (Meredith, 2011). That is the why the comapny has
planned to install some software into its cars so that the agency could not found that total
pollution rate from the cars of the company. This fraud of the comapny has affected the 11
million cars globally.
The defeat device of the Volkswagen is not a normal and physical device but it is a
programme actually in the engine software which lets the car perceive that if this car would
be driven as a test drive or under some conditions than the anti pollution mode of the car
would start and thus it has become difficult for the agencies to identify that how much
pollution is actually occurred by the cars of Volkswagen. The function of ‘clean diesel”
engines cut the emission through various techniques such as exhaust flows, adjusting air fuel
ratios or some urea based solution to render the harmless NOx. When the car is driven
normally than it requires the greater performance, the control over the VW would not be done
in the similar way (Markvart, 2015).

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(Githui, 2012)
This picture describe about the case briefly, it depict that how the comapny has
planned to manipulate the mind of the environmental agencies as well as the stakeholders of
the comapny. The further study has been done over the analysis of the case and the evaluation
of the case to analyze the scandal and its impact over the corporate and society as well.
Analysis of scandal events:
According to the report of EPA, the vehicle of Volkswagen in global market has been
reduced due to this scandal. Around 11 millions car of this comapny has been affected in
international market. It has been found that the vehicles of the comapny are responsible for
the 2,37,161 to 9,48,691 tonnes of NOx Emission every year. According to this, the NOx gas
which also includes the nitrogen dioxide has been pumped in the air. In September 2015, it
has been violated by EPA that the act of VW group is claiming that the producer had
programmed TDI (Turbocharged Direct Injection) engines which is used to activate the
emission control at the time of laboratory trails (Freeman, 2010).
This scandal has impacted over the performance and the market share of the company.
Society as a whole has also been affected due to it. Through this report, it has been found that
the market share and the performance of the comapny has affected at a huge level after this
escalation. Through the reports and news articles, it has been found that the Volkswagen has

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cheated in emission testing by using the car appear which expect that the cars of the comapny
are less polluting from the earlier cars of the comapny in past. The environmental protection
agency of the US has discovered that the 4,82,000 Volkswagen diesel cars on the
international roads which were actually producing approx 40 times more on the toxic fumes
than it is permitted (Fortune, 2015).
That is the why the comapny has planned to install some software into its cars so that
the agency could not found that total pollution rate from the cars of the company. This fraud
of the comapny has affected the 11 million cars globally. Through this scandal, the trust of
the society over the comapny has become lower and thus the turnover of the comapny has
also become lower (Brief, 2015). Further, it has been found that this scandal was one of the
biggest scandals of corporate governance. This has affected the entire auto mobile industry as
while for a particular period of time. This report also depict that the investors have started
divestment from the comapny.
Even, directors of the comapny has justified that it has taken place due to some
misunderstanding and it was not the motto of the comapny to manipulate the inventors,
society, customers, financial institutions, debtors etc. further, it has also been described that
the company has made the changes into its various models and the cars to enhance the
customer’s trust again. Further, the reports of the comapny depict that after the director’s
statement of the comapny, and changes into the models of the comapny, the comapny ahs
again started to gain the trust of the comapny (Burki, 2015).
In the year of 2015, it has been found that the numerous models of VW had software
which is called as “Defeat Device” which has been installed by the company to manipulate
the regulatory board of the US and show that all the models of the comapny are
environmental friendly. But in reality, all the models were harming the environment allot.
Ethical obligation of the comapny is not only make the changes into the problems but
it is also required for the comapny to accept the scandal which has been done (Bongaerts,
1999). The CEO of the comapny has said that they have not done any mistake, they didn’t
lie with the regulatory board of the US, it was just a misunderstanding which has taken place
and due to which, this case has became a scandal.
Evaluation of the case:

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Ethical obligation of the comapny is not only make the changes into the problems but
it is also required for the comapny to accept the scandal which has been done (Coghlan,
2015). If a comapny do not accept its mistake and just ignore the issues than it could become
a big problem for the company in future as the investors and stakeholders do not trust over
the comapny again and found that this comapny would offer them high loss in near future.
In case of Volkswagen Scandal, the CEO of the comapny has said that they have not
done any mistake, they didn’t lie with the regulatory board of the US, it was just a
misunderstanding which has taken place and due to which, this case has became a scandal. In
the entire statement, he has never mentioned that this was their mistake and due to which the
investment rate in the comapny became stable at the same time, the society has also started to
but the cars of another company rather than the VW’s car (De Gante, Aslan and Matrawy,
2014).
According to a report, it has been analyzed that the US market is second biggest
market in the world. But if the sales of the VW are analyzed than the total sales of the
comapny was only 6% after the scandal. Through it has also been analyzed that the sales of
VW has reduced in all over the world. The Russian market has been affected more due to this
scandal (Donker, Poff and Zahir, 2008).
Further, it has been found that the diesel cars of the comapny have been hurter a lot.
After the VW scandal, entire companies have reduced the level of diesel car. The comapny
has faced a reduction in the share price of the comapny. The worth of the comapny has been
reduced in the market. Through this study, it has also been analyzed that the comapny has
made lot changes in the cars and thus currently, the turnover of the comapny has again
exceed. The new policies of the comapny are helping the comapny to come back again the
market with a good production process and less polluted cars.
Conclusion:
Through this study, it has been analyzed that the VW has installed some software into
millions of its cars to trick the agency of environment protection to testers into analyzing and
thinking that the automobiles of the comapny are more environmental friendly then they used
to be. Due to this scandal, the worth of the comapny has been reduced in the market. Through
this study, it has also been analyzed that the comapny has made lot changes in the cars and
thus currently, the turnover of the comapny has again exceed. The new policies of the

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comapny are helping the comapny to come back again the market with a good production
process and less polluted cars.
Through this scandal, it has been analyzed that the comapny is required to make some
changes into its policies and the strategies as well as the CSR policies to become competitive
gain and this would also help the comapny to get back the trust of the stakeholders.

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References:
Bongaerts, J 1999 ‘Carbon Dioxide Emissions and Cars: An Environmental Agreement at EU
Level’ European Energy and Environmental Law Review, Vol. 8, no.4, pp. 101-104.
Brief, P 2015 ‘Policy Solutions to Reduce Vehicle Exhaust Emissions under Real-World
Driving Conditions’ Policy.Washington,DC: The International Counsel on Clean
Transportaion.
Burki, T K 2015 ‘Diesel cars and health: the Volkswagen emissions scandal’ The Lancet.
Respiratory medicine.
Coghlan, A 2015 ‘The curious case of NO x pollution’ New Scientist, Vol.227, no. 3041, pp.
10-11.
De Gante, A., Aslan, M. and Matrawy, A., 2014, June. Smart wireless sensor network
management based on software-defined networking. In Communications (QBSC), 2014 27th
Biennial Symposium on (pp. 71-75). IEEE.
Donker, H., Poff, D. and Zahir, S., 2008. Corporate values, codes of ethics, and firm
performance: A look at the Canadian context. Journal of Business Ethics, 82(3), pp.527-537.
Fortune. 2015. The biggest scandal of 2015. Retrieved from
http://fortune.com/2015/12/27/biggest-corporate-scandals-2015/ available as on 20th Oct
2017.
Freeman, R.E., 2010. Strategic management: A stakeholder approach. Cambridge university
press.
Githui, D.M., 2012. Ethical issues in the construction industry in Kenya: A critical analysis of
the professional conduct in engineering technology management.

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Markvart, T 2015 ‘Do we need a solar power breakthrough?’ The Conversation.
Southampton: eprints
Meredith Belbin, R., 2011. Management teams: Why they succeed or fail. Human Resource
Management International Digest, 19(3).
Nitschke, C.R. and Innes, J.L., 2008. Integrating climate change into forest management in
South-Central British Columbia: An assessment of landscape vulnerability and development
of a climate-smart framework. Forest Ecology and Management, 256(3), pp.313-327.
Palpacuer, F., 2008. Bringing the social context back in: governance and wealth distribution
in global commodity chains. Economy and Society, 37(3), pp.393-419.
Thomas, R.S. and Cotter, J.F., 2007. Shareholder proposals in the new millennium:
Shareholder support, board response, and market reaction. Journal of Corporate Finance,
13(2), pp.368-391.