Analysis of Volkswagen Emission Scandal Using Ethical Principles - Case Study Example

Analysis of Volkswagen Emission Scandal using Ethical Principles Name Institution Course Date Analysis of Volkswagen Emission Scandal using Ethical Principles Introduction Volkswagen (VW) is one of the leading and most successful automakers in the world. The company opened its doors in 1937 in Germany but has since expanded to become a global brand with its cars found almost in every road in the world (Cavico and Mujtaba 2016, p. 303). At present, the company has three of its car models that are ranked in top ten best-selling vehicles. The brands are Passat, Golf and Beetle. The success of VW has been attributed mainly to the good reputation that the company has built for close to a century now as an ethical automaker. However, Gates, Ewing, Russell and Watkins reports on the New York Times of July 19 2016 that Volkswagen suffered reputation damage in 2010 after it was found to have been engaging in diesel emission cheating. This report begins by providing a brief summary of the article and will proceed to analyze the emission scandal using Kantianism and utilitarianism ethical principles. Article Summary In this New York Times article, Gates, Ewing, Russell and Watkins reports of the 2015 Volkswagen emission scandal that involve about 11 million of the VW’s cars. According to Gates et al. (2016), the executives of Volkswagen colluded with engineers to cheat on emission from its diesel-engine by fitting the cars with software termed ‘defeat device” that was capable of sensing when the engines were being tested for nitrogen and speedily reduces the amount of emission from the car engines. Gates et al. (2016) reports that, once the test was over, different software was used to revert the process and increase the acceleration and torque, as well as ensured fuel economy. Using such dubious tactics, Volkswagen cars were able to pass all the emission tests. In total, about 11 million cars were affected while in the United States alone, more than 600,000 VW vehicles were involved in the cheat. This emission scandal involved all the Volkswagen vehicles, including Passat, Beetle, Golf, Jetta, A3, and Toureg. The scandal has proved very costly to Volkswagen as Gates et al. (2016) report that VW has accepted to pay about $15 billion in fines in the United States. Additionally, the company has been forced to recall all the vehicles that were involved in the cheat so that they can they can be redesigned to conform to the emission standards. This is very costly for a company that struggles to keep up with the stiff competition in the automaker. Besides the cost of the scandal, article reveals that the Volkswagen has also suffered serious reputation damage that will take it years to rebuild as most customers and investors have lost confidence on the company since the scandal was unearthed (Gates et al. 2016). Additionally, the fear is that the large amount of gas produced by the VW cars as a result of the “defeat device” not only put the population at risk of developing serious respiratory diseases, but also linked to 23,500 premature deaths in Britain every year (Cavico and Mujtaba 2016, p. 308). What caught the attention of critics more is the fact that the management of Volkswagen argued that there is nothing wrong they did under the European Union (EU) laws, where emission laws are not as stringent as in the United States. The Volkswagen emission scandal raises a lot of fundamental legal and ethical questions. Ethically speaking, many would argue that VW acted unethically first because it severely polluted the environment and second because it lied about it. According to the corporate social responsibility principle, Volkswagen owes its stakeholders a duty to provide environmentally friendly measure that protects the public against harmful emissions from its car engines, as well as to act in an honest, transparent and truthful manner (Carroll 2004, p. 115; Lamberti and Lettieri 2009, p. 157; Jennings 2015, p. 31). However, it was only after pressure was put on the management that Michael Horn, the former VW boss in America admitted that he was aware of the “defeat device” from as early as September 2014. However, as Gates et al. (2016) reports, VW has blamed Winterkorn pressure for the emission cheat. Analysis of the Scandal Using Kantianism and Utilitarianism Ethical Principles The question that puzzles many pertains to whether Volkswagen’s decision to cheat about its emission by installing the “defeat device” was ethical or not. This question can be answered by applying various ethical principles, such as utilitarianism, deontological and virtue ethics. Utilitarianism is an ethical theory proposed by John S. Miller and colleagues that maintains that an action is moral when it produces the greatest good for the majority (Kahane et al. 2015, p. 193; Jacobson 2008, p. 160). In other words, utilitarian believes that an action would only be considered ethical when it either produce the greatest benefits or minimizes the harm to the greatest number. As such, this theory looks at the consequences of an action not the intention when judging whether an action is moral or immoral (Schulze, Schöler and Skiera 2014, p. 14). Therefore, when deciding on the morality of Volkswagen emission scandal, utilitarianism will try to reconcile between the benefits and the cost/harm caused by the cheating. For instance, the harms, such as customer dissatisfaction, reputation damage, and the legal costs will be weighed against the profits that the company generated as a result of the cheating to see if the actions of VW to install the defeat device can be considered immoral or not. However, as presented in the New York Times article, because the negative consequences of the scandal far outweigh the benefits to the greatest number, utilitarianism would consider VW’s actions immoral, notes Crane and Matten (2007, p. 99). From the article, it becomes clear that the scandal not only damaged the reputation of Volkswagen as a brand, but also its stakeholders, such as customers, investors, managers and employees (Branco, and Rodrigues 2007, p. 5). For instance, the scandal forced the former CEO of the company in the U.S. to resign while a large number of Volkswagen customers have left the brand because of dissatisfaction following the scandal. To the members of the public, the scandal exposed millions of people at risk of developing respiratory health problem and even premature deaths considering that such emissions kill at least 23,500 Britons every year (Cavico and Mujtaba 2016, p. 311). Besides, VW will have to pay more than $15 billion as fine to the affected, which hurts not just the company but its investors that expected higher returns on their investments (Gates et al. 2016). The only advantage of the emission cheating to Volkswagen is that the installation of the “defeat device” enables the company to bypass the tests, which cheated authorities and customers of the efficiency of the cars, resulting in huge sales. However, comparatively the cost of the emission scandal far outweighed the benefits, thus immoral from the utilitarianism point of view (Hurtado 2005, p. 4). The VW emission scandal can also be addressed using Immanuel Kant’s deontological theory. Kant’s deontological theory is based on four fundamental principles that must be analyzed to see if an action is moral or not. The principles include acting rationally, assisting others in making rational decisions, respecting the needs and individual differences, as well as doing only that which is right because it is the right thing to do while avoiding doing that which is wrong because it is wrong to do it (Rivera 2006, p. 78; Shaw et al. 2013, p. 9). In other words, Kant suggests that a business has the obligation to ensure that customers are provided with products that meets their needs. At the same time, Kant’s theory proposes that consumers should be provided with all the relevant information that they might need in order to make rational and well-informed buying decisions and that businesses should only do the right thing not to earn profit, but because it is right to do it (Conway and Gawronski 2013, p. 218). Therefore, from Kantianism point of view, Volkswagen’s actions were immoral. Deceiving customers and the public that VW cars meet the emission standard for purposes of generating high profits was wrong thing to do from the point of view of Kantianism. Besides, the German automaker has continued to deceive the public by providing falls information in their promotion by telling customers and the public that VW cars are safe and reliable. This is notwithstanding the fact that VW continues with recall of its affected cars. Whether or not VW is knowingly providing the public with falls information is up for debate. However, the fact that the falls information that the company provides the public makes it difficult for customers to make a rational purchasing decision, thus unethical in Kantianism viewpoint notes Shaw and Barry (2015, p. 23). Conclusion Volkswagen has been one of the most respected automakers in the world until recently when the company engaged in emission cheats. As described above, the emission scandal has made the German leading automaker suffer serious reputation damage and heavy fines that have affected the company’s performance in recent years. Although VW defended itself citing that its actions was legal under the EU laws, the analysis shows that its actions was unethical from the point of view of both utilitarianism and Kantianism. References Branco, M. C., &Rodrigues, L. L 2007, “Positioning stakeholder theory within the debate on corporate social responsibility,” Electronic Journal of Business Ethics and Organizational Studies, vol. 12, no. 1, pp. 5. Carroll, A. B 2004, “Managing ethically with global stakeholders: A present and future challenge,” Academy of Management Executive, vol. 19, no. 2, pp. 114-120. Cavico, F. J., & 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, vol. 4, no. 2, pp. 303-311. Conway, P., & Gawronski, B 2013, “Deontological and utilitarian inclinations in moral decision making: A process dissociation approach,” Journal of Personality and Social Psychology, Vol. 104, no. 2, pp. 216-235. http://dx.doi.org/10.1037/a0031021 Crane, A., & Matten, D 2007, Evaluating business ethics: normative ethical theories. In A. Crane & D. Matten (Eds.), Business Ethics (pp. 86-115). New York: Oxford University Press. Gates, G., Ewing, J., Russell, K., & Watkins, D. 2016, Explaining Volkswagen’s emissions scandal. The New York Times 19 July 2016, viewed 16 August 2016 http://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html?_r=1 Hurtado, Jimena (2005) “The utilitarian foundations of the economic approach to human behavior", Documento CEDE, vol. 27, pp. 1–31. Lamberti, L., &Lettieri, E 2009, “CSR practices and corporate strategy: evidence from a longitudinal case study,” Journal of Business Ethics, vol. 87, pp. 153-168. Jacobson, D 2008, “Utilitarianism without Consequentialism: The Case of John Stuart Mill,” Philosophical Review, vol. 117, no. 2, pp. 159-191. Jennings, M. M 2015, Business ethics – Case studies and selected readings eighth edition. Cengage Learning, Stamford, USA. Kahane, G., Everett, J. A. C., Earp, B. 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