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The Volkswagen Scandal: Ethical & Unethical Choices Case Study


Introduction

In the 2010s, when environmentalism issues were gaining impressive weight, the discovery of violations of the Clean Air Act by Volkswagen triggered a massive response with the following scandal surrounding the company. In retrospect, by reconsidering its approach toward corporate ethics and focusing on the promotion of ethical behaviors, the organization could have avoided the trouble. Because of the poor corporate ethics standards that were promoted at the time among the members of the organization and its employees, Volkswagen failed to not only prevent the instance of an environmental violation but also produce an adequate response that could have helped manage the issue more efficiently.

According to the details of the study, Volkswagen failed to meet the current standards of environmental sustainability when it implanted what would later be called the defeat device into the design of its products. As a result, the emission tests, which Volkswagen cars had to pass for them to be considered appropriate for further usage and, therefore, allowed to be sold in the global market, were created successfully. The resulting damage that the sold cars have done to the global environment because of the immense rise in the CO2 emission levels is huge. Even though ICTT managed to disclose the fraud within a comparatively small amount of time, Volkswagen will still have to face significant repercussions and carry out some changes to its current ethical standards and approaches to corporate leadership.

A closer look at the bad ethical choices made by the organization will reveal that the firm was guilty of not only having polluted the environment but also denying its obvious fault afterward, thus, exacerbating the issue. If Volkswagen had accepted the blame and admitted its guilt, it would have positioned itself as a responsible firm that, while having slipped when managing its sustainability levels, was still capable of handling the problem maturely and responsibly. However, Volkswagen preferred to wrap itself in denial. The fact that the company was resorting to an evident lie showed that Volkswagen’s ethical standards had dropped significantly. More importantly, the failure to accept the respondents indicated that Volkswagen was suffering from internal issues that had led to the inability to comply with the basic ethical standards.

Therefore, at present, the organization needs to respond to not only the accusations of its failure to meet the EPA standards and the following attempt at concealing the problems in its sustainability policy but also the relationships with its customers and the potential target audience. Indeed, seeing that Volkswagen has jeopardized both the safety and the health of the global community by allowing the production and purchase of air-polluting cars, it is expected that the levels of trust between the company and the global population are going to drop drastically, not to mention the rates of loyalty among the company’s customers. Put differently, Volkswagen now has to redesign its current leadership strategy, approach toward resources management, particularly, the management of waste, and introduce its staff members to a set of new and improved ethical values and requirements, all at the same time.

One might argue that the decisions made by the company could be justified from the perspective of the Utilitarianism approach. To be more specific, unless the organization had resorted to lying, it would have suffered dire consequences and may have possibly gone bankrupt. However, the Utilitarianism perspective also suggests that one’s actions must maximize the utility, which was not the case, given the number of people that were affected by the pollution. Seeing that the contamination process had a global negative impact, the choices made by Volkswagen fail on all levels of meeting the stakeholders’ needs. To address the current situation and rebuild the competitive advantage that will keep its customers loyal, Volkswagen will have to reconsider its current approach toward building corporate ethics, making sure that the company-related decisions are made based on the specified ethical standards, and compel the staff members to accept Corporate Social Responsibility as the foundation for their choices.

Analysis

Although Volkswagen’s case revolves around the issue of ethics, it should be considered from the perspective of leadership first. Indeed, a closer look at the subject matter will reveal that the development of the appropriate leadership strategies would have helped prevent the instance of corporate fraud altogether. In retrospect, if the appropriate corporate values and ethical standards had been reinforced accordingly, Volkswagen would have never had to face the problem under analysis.

Furthermore, the fact that the issues faced by the company were triggered by the need to satisfy the organization’s shareholders points to the obvious problems in the current design of Volkswagen’s corporate governance standards. Also, the issue of crisis management and the response to the corresponding problems has to be listed among the key concerns that must be explored when considering the case. Particularly, the problems in the company’s ethical decision-making can be linked to the issue of corporate governance, nevertheless, also allows viewing the problems in the design of the company’s internal operations.

Unethical Choices: Examples

Much to the dismay of the company leaders, the number of ethically acceptable decisions made when managing the changes in the emission control system was very large. In a chronological process, the fact that the validation of the device was failed deliberately and wrong results were provided on purpose can be viewed as a blatantly unethical move made by Volkswagen – or, to be more specific, one of its employees. The identified instance falls under the category of falsified information and can be viewed as a prime example of misinterpretation of test results. Even though the misconduct itself does not seem major and might be considered unwarranted of the attention that it gets, the environmental implications of the specified unethical behavior were huge. The increase in the CO2 emission levels has had their toll on the enhancement of the global warming process since they have affected the level of CO2 hugely. The absence of duty orientation and customer orientation as the essential traits of ethical behavior can be viewed as the cause of unethical choices.

The lack of concern for the unethical and often illegal decisions made by Volkswagen as far as the production of CO2-emitting cars is concerned should also be interpreted as an example of unethical behavior, though, this time, it has to be attributed to not only the company and its personnel but also the people and groups that were aware of the problem and were silencing it for a significant period. Indeed, the existing evidence shows quite clearly that several organizations knew about the problems associated with emissions yet preferred abstaining from voicing any concern. Therefore, it could be assumed that the ethical issues discovered when addressing the case can be attributed to not only the company itself but also the environment in which it was created and has been operating. The specified phenomenon can be attributed to the lack of moral attentiveness among the target population.

One might add that Volkswagen should have strived to alter the values and ethical standards of the environment in which it has been operating and developing, yet changing the mindset of a specified community is an extremely challenging task that requires not only an immensely huge amount of resources but also a very strong corporate philosophy and a set of values that could withstand the resistance of the people unwilling to change. Seeing that Volkswagen was aimed at increasing its profit margins from the very start as opposed to promoting a new philosophy of business relationships, it would be wrong to accuse it of failing to change the perception of the people and organizations that surrounded it. Indeed, it would be unreasonable to expect that a company should embark on the quest of improving the general audience’s morale and addressing the contemporary system of social justice.

Therefore, the absence of any willingness among the members of the local community or the organizations that represent it to address the problem of pollution, of which Volkswagen was guilty, shows that there has been a significant fault in ethical choices made. Thus, the absence of any initiative among the organizations operating in the vicinity that knew about Volkswagen’s failure to meet the environmental standards should be viewed as a prime example of unethical behavior. In other words, the lack of involvement among the members of the community and the representative soft eh organizations operating in the vicinity or partnership with Volkswagen show that the ethical standards were set very low in the identified environment. Furthermore, the fact that Volkswagen never made any effort to establish different values and promote the concept of openness, transparency, and trust as the foundational values for building relationships with its stakeholders points to the obvious problems in the design of Volkswagen’s ethical philosophy and standards. Similarly, the specified issues can be deemed as the result of the lack of moral attentiveness, as well as conscientiousness,

Another example of unethical choices made to the Volkswagen case, the attitude of the government must be brought up. Instead of bringing the issue to the public attention and calling for action immediately after the discovery of the problem, the local authorities preferred to silence the issue (Zhou 1-2). The specified strategy was, later on, justified by the fact that Volkswagen played a huge role in the development of the European car industry, and restricting the company by filing a complaint against it would mean putting the entire industry to a halt for a significant amount of time, thus, allowing competitors to take over the market (Zhou 3). Despite the obvious ethical flaws in the strategy described above, one must admit that the specified attitude toward the issue might have reasonable grounds. With the introduction of new firms into the identified market environment, the current organizations would have faced significant challenges, which would have slackened down the progress. Indeed, the challenges that the British, German, French, and other governments in Europe would have had to face would have been devastating to the state economy.

Particularly, the car industry would have been brought to a halt, with the following reduction in employment levels and the subsequent increase in the number of economic and social issues. The rise in the unemployment levels would have triggered deplorable consequences for the citizens of the specified states. Furthermore, apart from the social tension, the problems in the economic realm would have emerged immediately. Indeed, with the drop in the efficacy of the car industry and, therefore, a noticeable hiccup in the transportation department, the processes associated with logistics would have been hampered significantly. Consequently, the quality of the products delivered by the rest of the companies operating in the environment of the European market would have become increasingly low, and the customer satisfaction rates would have reached their minimum. The identified processes might have taken some time to lead to tangible results, yet the outcomes would have been drastic for the state economies. Therefore, the choices made by the state authorities regarding silencing the pollution issue could be viewed as Utilitarianism-based, i.e., aimed at achieving the greater good and maximizing the positive outcome.

However, the implications of the decisions made by the state authorities were much greater and much harder to address, of which the governments of the identified countries must have been aware. Indeed, as soon as the effects of the poor environmental policy of Volkswagen were unleashed, immediate threats to people’s health and the global environment were posed. Furthermore, whereas the health concerns would have been finally addressed in most cases, the damage to the environment was irreversible and, therefore, had to be viewed as the key priority for the governments of the European countries in question. Thus, the decision to silence the problem and focus on the immediate profit, instead, was a very unethical move to make. That being said, the decision to silence the problem, which the European government chose, should not be condoned and, instead, must be viewed as a graphic example of unethical behavior.

Ethical Choices: Examples

To its credit, Volkswagen made an effort in addressing the situation and minimizing the harm that it had caused. Particularly, the organization donated $6,500,000,000, or € 7,300,000, to fix the problem and provide the car owners with an opportunity to remodel their vehicle so that it could cause less harm (Zhou 3-4). Therefore, the organization has arguably shown a redeemable side by offering assistance and acknowledging its mistake. Granted that Volkswagen paid impressive fines after the investigation was over, the specified gesture can be considered a rather noble attempt at fixing the problem (Zhou 4). Conscientiousness is one of the foundational traits of ethical behavior that could be considered the reason for the firm to take the identified action. However, it is more likely that the firm used financial rewards as the means of reducing the scale of the scandal.

That being said, the money that the firm suggested to pay to the owners of the cars makes only half of its annual profits (Zhou 4). Therefore, after a closer inspection of what might seem like a gesture of goodwill, it turns out to be a ploy to get back into good graces of the target population and the global community without suffering significant costs. Therefore, even the ostensibly ethical choices that Volkswagen has made so far are entirely overshadowed by the greediness of the organization.

The raiding procedures that the organization started after the issue had been revealed may also be interpreted as ethically valid steps to confront the situation and improve it. Furthermore, additional investigations are bound to take place in the context of the organization to punish the ones that contributed to the development of the problem. While the cause that Volkswagen’s leaders pursue with the specified action is rather understandable, it is highly doubtful that, by replacing the current managers with new ones, Volkswagen will get rid of corporate fraud. The issue seems to be more complex and might deserve being reviewed from the tenets of the regulatory capture theory (RCT).

By definition, RCT suggests that, when facing the need to cater to the needs of a specific demographic especially hard, it may fail to recognize the needs of other stakeholders, customers, and the global community members being the case in point (Carpenter and Moss 26). Volkswagen seems to have been focusing on the demands of its shareholders for far too long to be able to take environmental issues into account. As a result, the scenario involving the idea of corporate fraud stopped seeing unacceptable to the company managers, which finally triggered the problem under analysis. The actions in question could be interpreted as the result of developing a duty orientation as an important ethical behavior trait by the company members. However, it is more likely that Volkswagen has adopted the identified approach under the pressure of legal and ethical repercussions.

Therefore, it could be argued that the unethical decision made by the executives at the identified stage of product development is the result of the inherent problems of the corporate ethics of Volkswagen. The reconsideration of the principles based on which the decisions are made in the company can become the foundation for the improvement of the firm’s current reputation and, therefore, regaining customers’ trust.

As the examples provided above show, even the decisions that Volkswagen did as an attempt to maintain the corporate integrity and meet the global ethical standards still failed as they were targeted at the wrong result and aimed the wrong objectives. Instead of striving to improve its current ethical standards and provide the framework that could show its willingness to introduce better values into its design, the company was geared toward maximizing profits and retaining is position as one of the leading car manufacturers, at the same time increasing popularity levels among potential clients. Therefore, the firm’s endeavors have not led to any tangible results so far.

The situation in which Volkswagen has found itself can be viewed as one of the instances of corporate governance misuse. With an overly heavy emphasis on the interests of shareholders and the subsequent attempts at gaining increasingly large profits, the firm neglected some of the foundational principles of operating in the market environment, i.e., the necessity to reduce the negative impact of the company’s production processes on all those concerned including the people living in the vicinity, as well as the global community, in general.

The choices that the organization has made so far when addressing the issue of environmentalism cannot possibly be justified. Nevertheless, there is a chance for the company to redeem itself and get into people’s good graces once again. For this purpose, Volkswagen’s leaders will have to reconsider the corporate philosophy on which the decision-making processes are currently based. Furthermore, the active promotion of Corporate Social Responsibility as the primary quality that will allow the staff members to make company-related choices based on the new and improved set of values should be considered a necessity. Thus, Volkswagen will be able to survive the predicament in which it currently is.

Conclusion

Volkswagen might be a world-renowned company with a global influence and an impressive number of customers, yet it has made several ethical choices that can be considered questionable at best. The organization has been adopting the ethical standards that cannot be deemed as appropriate since they infringe on the rights of numerous stakeholders. Therefore, the switch toward a more redeemable behavior and the adoption of the ethical standards that allow taking the interests of all stakeholders into account is an inevitable change in pace for Volkswagen. Otherwise, the firm will not be able to function in the environment of the global economy, where the reputation of an organization is defined by its attitude toward a diverse range of stakeholders.

Even though some of the choices made by the company might be viewed as the only possible option given the fact that the company would have had to dismiss a large number of employees at the time, the negative outcomes still outnumber the positive ones. Therefore, when addressing the emission issue, Volkswagen failed at every conceivable level of managing the needs of the target population, including its customers, the global community, and even its staff, who would have to suffer the consequences of the company’s choices in the long run.

Recommendations

At present, it is strongly recommended that the organization should review its ethical standards and make sure that the essential decisions are made based on the moral agency that allows viewing the needs of stakeholders as the prime concern. At this point, one might argue that the interests of different parties involved in a particular area rarely cross. In fact, in most cases, these interests, on the contrary, are as far on the opposite sides of each other as possible. For example, the needs of the company to sell the product at a price as high as possible to gain a greater profit stands in a sharp conflict with the goals of customers, who strive to locate the cheapest product of the finest quality.

While the specified phenomenon does exist, a compromise can, nevertheless, be achieved with the introduction of the principle known as stakeholder balance into the framework of corporate ethics. Typically defined as the strategy aimed at giving all stakeholders equal amounts of attention and meeting the needs of each to the company’s fullest ability, the stakeholder balance, which is often juxtaposed to the approach of stakeholder primacy, suggests that all parties involved should be provided with equal opportunities for benefitting. Thus, the decision-making process carried out in the context of an organization creates premises for the successful management of the needs of all participants involved (Zhou 10-11).

Granted that the identified approach may conflict with the necessity to cater to the needs of shareholders first, which Volkswagen is currently experiencing, it will create the foundation for the firm to improve its current reputation. As a result, a sustainable approach toward managing the environment-related issues can be implemented in the context of the firm. Thus, Volkswagen will be capable of redeeming itself in the eyes of the global community and regain its position as one of the industry leaders by building customer loyalty.

Works Cited

Carpenter, Daniel, and David A. Moss. Preventing Regulatory Capture: Special Interest Influence and How to Limit It. Cambridge University Press, 2014.

Zhou, Angie. Analysis of the Volkswagen Scandal: Possible Solutions for Recovery. School of Global Policy and Strategy, UC, 2016.

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IvyPanda. (2020, November 8). The Volkswagen Scandal: Ethical & Unethical Choices. Retrieved from https://ivypanda.com/essays/the-volkswagen-scandal-ethical-amp-unethical-choices/

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