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Volkswagen (VW), which is one of the largest car automakers in the world, was found guilty of rigging in diesel emission test on September 18, 2015. According to Environmental Protection Agency (EPA), this action was a serious violation of the Clean Air Act. The German Automaker admitted that it had intentionally equipped its new Turbocharged Direct Injection (TDI) diesel models with a faulty device aimed at bypassing vital elements in emission control system during emission testing (Mansouri 20). In fact, initial reports had indicated that over 600,000 VWs diesel cars were fitted with the faulty device between 2008 and 2011(Stables and Keirl 10). As the scandal unfolded, the number of vehicles affected escalated to about 12 million across regions. EPA had discovered that many of the VW fitted with “defeat device’ had the capability to detect when the vehicles were being tested, and therefore, altering the performance to improve results (Stables and Keirl 13). As a result the program literally made nitrogen Oxide (NOx) emitted by VW vehicles to comply with US standards during emission testing but in reality the emission went up to 50 times more (Stables and Keirl 15).
As a consequence, the VW became the subject of regulatory investigations in different countries across the globe. Volkswagen’s profit dropped more than 23% at the beginning of the year as car sales continued to fall in the wake of diesel emission scanda (Mansouri 23). Later, the CEO of Volkswagen Group Mr. Winterkorn resigned, including top managers drawn from research and development (R&D) department of Porsche and Audi were suspended. In order to cope with crisis, VW announced a reduction of bonus awarded to chief management (Rhodes 56). According to VW, the idea was to establish a balance between fair and rational solutions. As a result, this led to a reduction of different remuneration. On the other hand, this crisis went beyond the company’s scope of operations. The scandal led to awareness of the level of toxic gases emitted by many cars designed by various carmakers. A previous report indicated that the VW cars excess pollution contributed to 40% of respiratory and heart cases in US (Rhodes 67).
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The ethical issues emerging from this case include disclosure of corporate social responsibility (CSR). The CSR consist of critical review, which VW had issued in the past. For example, just, 11 days before the scandal Dow Jone Sustainability Index (DJSI) had declared VW as the world’s most sustainable car company (Schiermeier 34). Following the VW scandal, the determinants of CSR disclosure had to be debated. The case also shows critical gaps between disclosed contents and managerial actions and how the company communicates about the scandal. Another ethical issue is the company’s culture and policies. The effective application of compliance and ethics in organizations to eliminate deviant behavior remains a major challenge for both research and practice (Schiermeier 40). Looking at VW case, some of the question that could arise is why there was no compliance with internal guidelines and external regulations. How and to what extend was deviant behavior occurring at VW. Thus, issues relating to human agency play a significant role in understanding how actors involved in compliance and regulation actually work. Moreover, VW is a public listed company with its roots in Germany and therefore corporate governance play a key role in the control of company affairs (Rhodes 25). Unfortunately, in this case the VW had seen its long lasting relationship with their stakeholders as one key challenge for effective control of corporate governance.
Despite the fact that VW agreed to have cheated on US emission tests in 12million diesel cars, the CEO Mr. Mathias Muller is positive that the company is heading towards the right direction. In fact, in one of the press conferences he says ‘2016 will be a transitional year for Volkswagen that will see us fundamentally realign the group.’ However, environmental groups are ready to let VW off-the hook that easily (Mansouri 32). They demand that VW should issue a statement directing the removal of all their polluting cars on the road. Mrs. Kathryn Philips who is the Sierra club’s California director demands “compensation for the pollution the faulty cars created’
In my evaluation, it is clear that the structure and culture of the company is the root cause of unethical behavior. Moreover, pollution and emission are a major concern to EPA. Therefore, it is agreeable that the strict and new emission standards exert pressure to automobile industry. EPA plays a crucial role in reducing the pressure on automakers by offering R&D and technology. In the case of VW, the result was devastating, thus is important to provide R&D and technology as well as feasible emission standards to automakers to prevent such cases. Employees play vital role in failure or success of the company, therefore it is significant to improve their morale to accomplish tasks ethically.
- Mansouri, Nazanin. “A Case Study of Volkswagen Unethical Practice in Diesel Emission Test.” International Journal of Science and Engineering Applications, vol. 5, no. 4, 2016, pp. 211-216.
- Rhodes, C. “Democratic Business Ethics: Volkswagens Emissions Scandal and the Disruption of Corporate Sovereignty.” Organization Studies, vol. 37, no. 10, 2016, pp. 1501-1518.
- Schiermeier, Quirin. “The science behind the Volkswagen emissions scandal.” Nature, 2015.
- Stables, Kay, and Steve Keirl. Environment, Ethics and Cultures: Design and Technology Educationℓ́ℓs Contribution to Sustainable Global Futures. 2015