Business Ethics

As stated by Pearson (2017), business ethics is a type of applied ethics which checks the morality and ethical principles while working a business environment. The different aspects of conducting business are examined to identify the policies and actions that are not appropriate. There are different frameworks used by the organizations to develop ethical codes which guide them to stay ethically appropriate. In this context, Volkswagen emission scandal has been chosen as the case which will thoroughly be analyzed to identify the ethical issues and dilemmas faced by the parties involved.

            Volkswagen AG is one of the German automotive multinational companies which have its headquarters at Wolfsburg in Germany. The organization is known for designing, developing and selling commercial and passenger vehicles, engines, and motor cycles and offers other services such as fleet management, leasing and financing (Volkswagen.com 2018).  The organization has been the market leader in this industry till the year of 2016 and had taken over the current market leader Toyota. The company is listed among the top 10 companies in the fortune 500 and consists of premium brands such as Audi, Bugati, Bentley, Porsche, Lamborghini, SEAT, Volkswagen Marques and Skoda. The organization also sells motorcycles under the brand name of Ducati and sells commercial vehicles under the brand name of marques Man and Scania. The organization has been able to maintain their supremacy in Europe but the operating margin of their own brand is low.

            However, the organization was in the lime light for the wrong reason where the EPA (United States Environmental Protection Agency) found out the cheat device used by the organization and issued a violation against the German automotive company in respect to the Clean Air Act (Hotten 2015). The organization had used Turbocharged direct injection during the lab test to reduce the level of emission by activating the emission controls. This software was installed in all the cars that were sold worldwide. These defeat devices were developed in such a way during testing period it would automatically increase their level of performance. Volkswagen had a major push for selling cars in the United States market and their marketing campaign were developed highlighting the fact the diesel cars provided by the organization had low diesel emissions.

The findings of EPA shows that the 482,000 cars sold in the United States had defeat device installed in them. This consists of models such as Jetta, Golf, Beetle, Passat and Golf (kansascity 2016). Moreover, the organization sold more than 11 million worldwide with cheat devices installed in them.  Moreover, the organization was also accused on modifying the software in some of the Porsche models. The development these devices were deliberate which shows that the organization has spend huge sums of money on developing these software. However, on the other hand, this amount could have been spent effectively to actually reduce the emission (Cavico and Mujtaba 2016). These are one of the biggest scenarios of malpractices in the current times where the consumers bought inefficient system at premium prices which had more emission than the industry standard.

            This scandal has harmed both the surrounding environment and has cheated million of consumers. The organization sustainability report shows their efforts in protecting the surrounding environment but everything holds false in comparison to these case (Aurand et al. 2017). Moreover, the higher officials had full knowledge about this cheat device and still they allowed the organization to sell these cars in different countries. This scandal definitely poses amoral dilemma where the actions of the organization were illegal as they have not followed the industry regulations. However, the managers and the engineers could have protested and stopped these from happening by acting as a whistle blower.

            As stated by Endrikat, Hartmann and Schreck (2017), Utilitarian point view states that outcomes is the best judge of the actions and if the consequences are good then the action is right.  Moreover, it considers the action that brings happiness to large number of people are right but this contradicts this case totally. The cars developed with cheat device may have an enhanced performance which will bring happiness to majority of the consumers and the large number of employees, stakeholders and investors. However, the emission level of the devices in very high and it will degrade the condition of the atmosphere (Trevino and Nelson 2016). These mean that there are people that will suffer for breathing problems and respiratory diseases. Even though the organization has been able to explain their actions by using this concept of utilitarianism but morally and ethically it’s inappropriate to lie to so many people. The main value proposition for the company was to deliver cars with higher performance and lower level of emission. This theory is self contradicting where a set of people are getting benefitted from these actions whereas there are others that affected negatively.

            According to the virtue theory, it can be seen that the actions are ethical if it is consistent and provides benefits to the overall humanity (Endrikat, Hartmann and Schreck 2017). However, in this scenario, virtue ethics proves the actions to be unethical. This is the very reason that Volkswagen have to pay heavy fine and their prices in the stock market fell immediately. Moreover, the consumers lost their trust on the product sold by Volkswagen. Therefore, the organization lost their reputation in the market which made Toyota the global market leader.

            Business is a crucial aspect of organization values and beliefs which should be followed by organizations in order to make sure that they contribute socially through their activities. This case study has provided a deep insight of how organizational leader face dilemma where some practices may not illegal but they are highly unethical. Therefore, there is always a dilemma which the top level management have to deal with and with this scenario the ethical codes acts as guidance in keeping the organization in track so that they can positively impact the corresponding society.  Initially, I had considered ethics as a supporting tool but ethics formulates the basic values, beliefs and goals of the organization.

References

Aurand, T.W., Finley, W., Krishnan, V., Sullivan, U.Y., Bowen, J., Rackauskas, M., Thomas, R. and Willkomm, J., 2017. The VW Diesel Scandal: Engaging Students via Case Research, Analysis, Writing, and Presentation of Findings. Journal of Higher Education Theory and Practice, 17(7), pp.10-21.

Cavico, F.J. and Mujtaba, B.G., 2016. Volkswagen emissions scandal: a global case study of legal, ethical, and practical consequences and recommendations for sustainable management. Global Journal of Research in Business & Management, 4(2), pp.303-311.

Endrikat, J., Hartmann, F. and Schreck, P., 2017. Social and ethical issues in management accounting and control: an editorial.

Hotten, R., 2015. Volkswagen: The Scandal Explained. [online] BBC News. Available at: <http://www.bbc.com/news/business-34324772> [Accessed 13 April 2018].

kansascity, 2016. VW Scandal A Case Study In Bad Corporate Ethics. [online] kansascity. Available at: <http://www.kansascity.com/opinion/editorials/article87287037.html> [Accessed 13 April 2018].

Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the idea of dialogue. In Public relations theory (pp. 111-131). Routledge.

Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty. Organization Studies, 37(10), pp.1501-1518.

Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.

Volkswagen.com 2018. volkswagen.com. [online] Volkswagen.com. Available at: https://www.volkswagen.com/ [Accessed 13 Apr. 2018].