Incident and Unethical Actions
The Volkswagen emissions testing scandal was among the most egregious examples of business wrongdoing in recent history. Volkswagen was found to have manipulated the results of pollution tests for its diesel vehicles in 2015, according to the US Environmental Protection Agency (EPA). Volkswagen was able to manipulate the nitrogen oxides (NOx) released by its diesel vehicles using software known as the “defeat device,” making it appear during testing that the vehicles were in compliance with US emission requirements (Kashfia, 2020). The autos, however, released up to 40 times the legal limit of NOx when driving in actual traffic. Volkswagen consistently promoted its diesel vehicles as “clean diesel,” highlighting the advantages of their vehicles for the environment, which made this incident all the more frightening.
The unethical behavior of Volkswagen and its employees has adverse effects on the environment and customer confidence in the brand. Volkswagen had purposefully exaggerated the accurate emissions levels of their vehicles to customers, authorities, and the general public. Also, the defeat device was created to cheat emissions inspections and evade American environmental laws, resulting in air pollution that was bad for both the environment and human health (Ferrell et al.,2016). In addition, Volkswagen’s activities damaged the reputation of the whole automobile industry by casting doubt on the reliability of emissions testing and the moral character of other businesses.
Ethical issues that occurred in the company.
The Volkswagen emissions testing scandal clearly violated ethical standards for the company and its employees. Volkswagen’s decision to install the defeat device in its diesel vehicles was an egregious breach of trust, as it was deliberately designed to deceive regulators and consumers (Kelsi, 2020). It violated the ethical principles of honesty, integrity, and responsibility. In addition, Volkswagen’s actions negatively affected the automotive industry’s overall reputation. By deceiving regulators and consumers, Volkswagen undermined the public’s trust in the industry and damaged the importance of other companies working to comply with emissions standards (Kelsi, 2020). Furthermore, Volkswagen’s unethical behavior could have a long-term effect on the environment. The defeat device had allowed many of its vehicles to emit up to 40 times the allowable amount of NOx.
Management Role and Causes
Management’s role in the unethical actions of Volkswagen can be traced back to the decision-making processes that were taking place within the company. At the root of the problem is the prioritization of profits over ethical considerations (Ferrell et al.,2016). In the Volkswagen case, management was willing to take the risk of installing software that would allow the company to deceive regulators and customers alike to increase the efficiency of their vehicles and avoid the cost of compliance (Kashfia, 2020). This decision was motivated by the desire to maximize profits and maintain a competitive edge in the marketplace.
Management also played a role in creating a culture of secrecy within the company. The engineers responsible for developing and installing the software were encouraged to keep the project secret and given incentives to do so (Kashfia, 2020). It created an environment in which unethical behavior was not only tolerated but also encouraged. Furthermore, management acted so that employees felt they could not voice any ethical concerns they may have had. This lack of communication and transparency only enabled the unethical behavior to continue.
Management’s role in the unethical actions of Volkswagen’s emissions testing scandal can be seen as a crucial factor in the scandal’s occurrence. As highlighted by L. Hibbert in The Volkswagen Emissions Testing Scandal, “It is indisputable that the company’s senior management was aware of the software and made the decision to deploy it.” it demonstrates that the management team was not only aware of the unethical actions that Volkswagen was taking but that they actively made the decision to go through with it (Ferrell et al.,2016). This decision can be attributed to a variety of causes and motivations.
The company’s reputation would have influenced the decision. Volkswagen’s management team was at risk of being viewed as technologically backward because their rivals could build more efficient automobiles. Using the program, VW may exaggerate its marketability and preserve its position as an industry leader. Last but not least, the management team would have felt under pressure from their corporate sponsors and stakeholders to find a means to maintain their competitiveness (Maaityt & Virbait, 2018). Due to this pressure, the management team might have come to believe that skirting the rules was the only option to keep their competitive edge.
The primary cause of the unethical action was a lack of ethical leadership. The company’s senior executives had long been aware of the potential consequences of their actions and yet chose to ignore them (Ditlev-Simonsen & Ditlev-Simonsen, 2022). This lack of moral leadership meant that Volkswagen’s management team felt encouraged to participate in unethical behavior, believing they would not be held accountable for their actions.
After the scandal was revealed to the public, Volkswagen took several steps to address the ethical issues. Firstly, Volkswagen accepted responsibility for its actions and apologized to the public. The company set up a unique website describing the emissions cheating scandal, the steps it took to address the issue, and the steps it took to ensure that similar problems did not happen again. Furthermore, Volkswagen agreed to pay fines of up to $25 billion, including a $2.8 billion criminal penalty, to settle the scandal. In addition to the financial penalties, Volkswagen set up a program to buy back vehicles from customers and pay for necessary vehicle repairs. The company also established an independent trust fund to promote clean air initiatives, such as developing zero-emission cars.
These steps taken by Volkswagen were significant and suggested that the company took the issue seriously. However, it is difficult to say whether or not these actions were sufficient. For one thing, it needs to be clarified if the company adequately addressed the ethical issues that led to the scandal in the first place (Mačaitytė & Virbašiūtė, 2018). They did not make any changes to their corporate culture or internal processes that could prevent similar problems from arising. Furthermore, it is possible that the monetary penalties and fines were not sufficient to deter the company from similar unethical behavior in the future. Volkswagen also implemented several new internal controls, including appointing an independent auditor to supervise the company’s compliance with its ethical code of conduct (Kabeyi, 2020). Additionally, the company implemented a comprehensive, honest training program for all employees and established a complete reporting system to identify and address potential ethical issues quickly.
Despite these steps, some have argued that Volkswagen’s actions were insufficient. For example, the settlement does not require Volkswagen to change its corporate culture, which has been criticized for being too lax concerning ethical standards. In addition, the company still needs to be held accountable for the full impact of its actions, such as the potential health effects of the emissions on the public (Kashfia, 2020). Furthermore, the company needs to address the root causes of its unethical behavior, such as the lack of transparency and corporate accountability. On the other hand, these steps taken by the company were undoubtedly sufficient in light of the severity of the scandal because the company was open and transparent with its response, taking responsibility for its actions and actively working to rectify the situation. They took steps to ensure that the affected vehicles were fixed and paid the necessary fines for their wrongdoings.
Recommendations to Prevent Recurrence
The company and its board must take several measures to prevent a recurrence of the unethical actions taken by Volkswagen in the emissions testing scandal. First, the company should implement a comprehensive code of ethics, which should include a clear statement of the company’s commitment to ethical behavior and a zero-tolerance policy for any unethical behavior (Salin et al., 2019). This code should be widely communicated and reinforced through training, policies, and procedures. The code should also include a mechanism for reporting violations of the code, including a confidential and anonymous system for employees to report any unethical actions they observe.
The Volkswagen emissions testing scandal has highlighted the need for improved professional ethics in business. Companies should act proactively and appoint an independent Ethics Officer to ensure that all employees display ethical behavior. This officer should monitor the company’s adherence to its code of ethics and investigate any reports of unethical behavior (Kabeyi, 2020). To provide the Ethics Officer with authority, disciplinary action, including termination, should be imposed in cases of code violations. Companies should also ensure that they keep up to date with changes in the professional ethics landscape and regularly update their code of ethics to reflect the latest developments.
Companies should provide ethics training to their employees to ensure that everyone understands their responsibilities and the consequences of unethical behavior. Finally, companies should provide an internal reporting system and guarantee confidentiality for employees who wish to report unethical behavior. By implementing these measures, companies can ensure that their employees are held accountable for their behavior and that professional ethics are respected.
The Volkswagen emissions testing scandal has illustrated the need for greater emphasis on professional ethics. Companies can take several steps to improve the ethical environment of their workplace, one of which is establishing an independent ethics committee. This committee should be composed of senior executives from the company and external experts. The committee should have the power to investigate any reports of unethical behavior and to make recommendations for corrective actions. This committee is essential in ensuring the company’s ethical standards are upheld, as the presence of an independent body reinforces the importance of ethical behavior.
An independent ethics committee can address conflicts of interest and implement measures to prevent unethical behavior from occurring in the future. The presence of this committee can also aid in creating an atmosphere of trust, as staff members will be aware that unethical behavior will be swiftly addressed. Ultimately, an independent ethics committee is a vital tool in creating and maintaining an ethical work environment, which is essential to ensure the success of any organization.
The Volkswagen emissions testing scandal has highlighted the need for greater emphasis on professional ethics. Companies can take several steps to improve the ethical environment of their workplace, including establishing an independent ethics committee, implementing a comprehensive code of ethics, and providing ethics training to all employees. Additionally, companies should keep up to date with changes in the professional ethics landscape and update their code of ethics regularly to reflect the latest developments. By taking these measures, companies can ensure that their employees are held accountable for their behavior and that professional ethics are respected.
Ditlev-Simonsen, C. D., & Ditlev-Simonsen, C. D. (2022). The Business Case for Sustainability. A Guide to Sustainable Corporate Responsibility: From Theory to Action, 103-128. https://link.springer.com/chapter/10.1007/978-3-030-88203-7_5
Ferrell, A., Ondracek, J., Saeed, M., & Bertsch, A. (2016). Failed Decision-making at Volkswagen. In Annual Eurasian Business Research Conference. Manila, Philippines. https://www.academia.edu/download/54832340/2017-07_Volkwagon_Final_Published_Paper.pdf
Kabeyi, M. J. B. (2020). Corporate governance in manufacturing and management with analysis of governance failures at Enron and Volkswagen Corporations. Am J Oper Manage Inform Syst, 4(4), 109-123.
Kashfia Ameen. (2020). Failure of Ethical Compliance: The Case of Volkswagen. Retrieved from https://www.ijsmsjournal.org/2020/volume-3%20issue-1/ijsms-v3i1p102.pdf
Kelsi Loudenslager. (2020). The Volkswagen Emissions Scandal: An Ethics Case Study. Retrieved from https://libraetd.lib.virginia.edu/downloads/td96k3017?filename=Loudenslager_Kelsi_STS_Research_Paper.pdf
Mačaitytė, I., & Virbašiūtė, G. (2018). Volkswagen emission scandal and corporate social responsibility–a case study. https://essuir.sumdu.edu.ua/bitstream/123456789/68151/1/Ma%C4%8Daityt%C4%97_Virba%C5%A1i%C5%ABt%C4%97_Emission.pdf
Salin, A. S. A. P., Ismail, Z., Smith, M., & Nawawi, A. (2019). The influence of a board’s ethical commitment on corporate governance enhances a company’s corporate performance—Journal of Financial Crime.