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Summary of the Scandal and the Leading Facts
Every business has an ethical responsibility towards its customers about prioritizing their welfare, as well as adhering to the rules of law that govern its various markets (Howard 51). An ethical business should be in a position to provide clear moral principles that justify its decision-making process. The main reason for this is the need to build a good reputation, as well as maintain a competitive advantage in the market.
Volkswagen Group is Germany’s premier carmaker and one of the market leaders in the global automobile industry. The company started in 1937 by the German Labor Front, has gained a reputation for its high-quality passenger cars that industry experts describe as environmentally conscious (Ewing 29). This element has played a major role in strengthening the company’s brand in the contemporary world owing to the growing challenge of global warming. The company focuses on producing cars whose emissions do not contribute to the depletion of the ozone layer by increasing the concentration of greenhouse gases in the atmosphere. As a custom, all cars ought to undergo an emissions test before being introduced to any market, especially in Europe and the United States (Howard 70).
The scandal faced by the Volkswagen group happened in 2015, after the United States Environmental Protection Agency (EPA), made a discovery that the automaker had violated the country’s Clean Air Act that stipulates the environmental regulations that all cars should meet (Ewing 112). Since the introduction of emission control programs, the United States has demonstrated a high level of strictness and adherence. With Volkswagen having a considerable market share in the United States, everyone expected that the company would conform to the country’s regulations in a straightforward manner.
A report by EPA claims that the Volkswagen group installed the cars that underwent the emissions test with a special program, which helped it to pass the air pollution test where results showed they had low emission levels. However, the cars that the company released into the market were not fitted with the said program, which was a clear act of disregard to the environmental regulations in the country (Ewing 137). Research showed that the cars that were already in use across the country were emitting harmful gases into the atmosphere way beyond the allowed limits. Following the investigations, the United States demanded a response from the automaker about the findings, to which they admitted to having cheated in the emissions test (Ewing 158).
Moral Issues Raised by the Scandal
Two notable moral issues the scandal has raised are the effects of autocratic leadership within an organizational setup and the disregard for corporate social responsibility (Howard 109). Business experts argue that a change of leadership at the automaker created a fertile ground for the bad decisions that led to the scandal. Martin Winterkorn took over as the company’s Chief Executive Officer with an ambitious plan of increasing the automaker’s annual sales in a bid to dislodge Toyota from the top. In addition, the plan was aimed at managing the effects of the global financial crisis that had greatly affected the company’s profitability (Ewing 207).
He saw the American market as the biggest opportunity that the company had to exploit to meet its target. However, the challenge was passing the pollution test in the country by creating fuel-efficient diesel cars (Ewing 212). This was a decision against the idea of the company venturing into the hybrid market, which offered a more viable alternative to meeting the emission regulations (Howard 144). Diesel cars emitted more greenhouse gases, thus the reason the automaker unethically decided to cheat in the test because it desperately needed the American market.
The Reaction by Volkswagen
The reaction of Volkswagen to the emissions scandal exhibited a lot of regret for how it broke the trust of its global customers, as well as hurting a reputation that had taken a lot of effort and sacrifice to build. The top management team at the automaker said it was unacceptable for a company of its caliber to be entangled in such unethical business practices considering its prolonged commitment to achieving the common good, as stipulated in its corporate social responsibility programs (Howard 200). The Chief Executive Officer resigned, while several members of the senior management were suspended.
According to the company, the scandal was necessitated by three factors, namely pressure, opportunity, and rationalization (Ewing 230). The employees were under immense pressure to deliver at any cost in a working environment that seemed to disregard the ethical code of conduct. The presence of an opportunity to cheat in the emissions test also contributed to the scandal because the management knew that emission control devices could not be fitted in cars designed for public use (Ewing 236). Further, the company argued that its history of rationalization made it easy for the management to approve the decision to program the cars that were subjected to the emission test.
Since they knew the punishment for cheating was going to be light, the management thought approving the decision would eventually be in the interest of the company. This was unethical on the part of the automaker, because the decision disregarded its corporate values and the principle of the common good (Ewing 259). Although the automaker recalled all the cars that had been released into the market with the anomaly and agreed to meet the costs, it was unacceptable to release them with the full knowledge of the mistake they were doing.
Ewing, Jack. Faster, Higher, Farther: The Inside Story of the Volkswagen Scandal. Penguin Random House, 2018.
Howard, Steven. Leadership Lessons from the Volkswagen Saga. Caliente Press, 2017.