The Development of Ethical Awareness and Reasoning through an Annotated Portfolio of Evidence - Essay Example

Business Ethics Name Institution Course Date Business Ethics Introduction The last few decades has seen an increased focus on the area of business ethics (Jennings, 2015). This follows the increased involvement of business executives in unethical business conducts that places companies at risk of suffering loses and reputation damage. In the early 2000s, America recorded several corporate scandals (Enron, WorldCom, and Adelphia Communications) that raised a lot of ethical questions (Fluker, 2009). Although most companies enhanced their corporate governance and ethical codes following the lesions learned from these American companies that collapsed as a result of engaging in unethical business conducts, Volkswagen, which is German’s largest automaker found itself in an ethical conduct that has taken the industry by shock (Shaw et al., 2013). This essay begins by describing the ethical dilemma associated with Volkswagen emission scandal while part two of the easy as provided in the appendix will provide a portfolio of evidence with regards to seminar lesson. Ethical Dilemma Description Volkswagen (VW) is one of the world’s leading automakers. The company’s growth has been driven mainly by the reputation that the automaker has built over the years. However, recently in 2015, VW found itself in an ethical dilemma that has taken the industry by surprise. This follows the involvement of the company executives and employees in an emission scandal that affected more than 11 million cars. Reports indicate that the executives of the company colluded with the engineers to rig on emission from its cars so as to bypass higher demands of the American Clean Air Act (Gates et al., 2016). To cheat on emission from VW cars, the executives working with the company engineers reportedly installed a software termed ‘defeat device’ into all the cars that detected when a test was to be carried out for emission and performed better at that time by emitting less nitrogen but reverted to high emission immediately the test was over (Hotten, 2015). Using this tactics, VW cars were able to pass the tough American emission standards despite emitting more than the threshold set under the Clean Air Act. The scandal was detected years later following an investigation conducted by the American Environmental Protection Agency (EPA) that found that VW indeed was cheating on its emission so as to allow its cars to pass the testing without being detected. In total, more than 11 million VW cars were affected by the scandal and had to be recalled by the company from the market. This scandal has since proven costly for the company as it has not only suffered reputation damage, but has had to pay a fine to the tune of $15 billion. It is believed that it will take VW several years to recover from this unethical behavior by has dented the company’s image. Why This Was an Ethical Dilemma in Business Situation In order to understand why the VW scandal involved an ethical dilemma, it is important to begin by defining an ethical dilemma. An ethical dilemma results where an individual is faced with difficult choices that have to be made neither of which address a situation in an ethically acceptable manner (Carroll, 2004). The Volkswagen scandal presents a classical case of an ethical dilemma that managers and employees face in the modern day business environment. In VW case, the executive of the company faced an ethical dilemma as they had to decide whether to pursue higher profits for stakeholders by dodging on its emission and protecting the environment from pollution (Cavico & Mujtaba, 2016). The way in which the scandal unfolded indicates that the executives and the engineers of the company faced serious ethical dilemma in arriving at the decision to cheat on the car emissions. In a company, the executives of a company have the responsibility to ensure that the interest of the investors is catered for by seeking to maximize their wealth. The same applies to Volkswagen whose managers have a responsibility to ensure that shareholder wealth is maximized by reducing cost and optimizing profits. Therefore, in this case, the executives of the company led by CEO Michael Horn in America appears to have been forced to cheat on emission produced by Volkswagen cars so as to avoid incurring cost associated with developing emission efficient cars and to generate more profits so that the investors and the executives can earn high returns from the company. Indeed, the fact that customers were made to believe that VW cars were fuel efficient and environment friendly resulted in the company selling more than 11 million cars that resulted in high revenue and high profits. Even as the executives of VK were interested in making high profits, the company was in a dilemma because it chose this at the expense of the environmental destruction. VW has a responsibility for its stakeholders to provide environmentally friendly cars that protect the members of the public from harmful emissions from its cars in addition to acting honestly, truthfully and in a transparent manner. Unfortunately, the executives of VW chose to cheat in order to maximize sales and profits. In fact, the case indicates that the VW engineers installed the defeat software with the knowledge and under direct supervision of the company executives. Although the CEO of the company initially denied knowledge of the defeat software, he was later to accept that the device was installed under the direction of the executives of the company that were concerned that it would be cheaper for the company to install the defeat software than to comply with the Clean Air Act. For this reason, it emerges this was an ethical dilemma in business in the sense that the executives of VW had to make tough choices of whether to maximize profits in the interest of the investors and the executives and destroying the environment by installing the defeat device. Ethical Solution The ethical dilemma faced by VW executives of the company can be resolved with the application of ethical theories. There are a number of ethical theories and principles that have been proposed that apply to VW ethical dilemma, which include deontological, utilitarianism, and virtue ethics. Utilitarianism is an ethical principle that states that an action is only right when it generates the greatest benefits to the majority (Hurtado, 2005). From the utilitarianism point of view, the move by the VW executives to cheat on its emission was immoral because it does not produce the greatest good to the majority of the stakeholders of the company. Analysis of the consequences of VW actions indicate that it had more negative impacts on the company and its stakeholders than the benefits it generated to the stakeholders. For example, following the company’s involvement in the scandal, VW has been forced to pay a fine of $15 billion, which had badly affected the company’s financial position and investors’ returns (Gates et al., 2017). The company’s executives were also forced to resign, while the engineers who aided the scandal have also had their jobs put at stake. Moreover, the company has been struggling to repair its damaged reputation in the eyes of stakeholders as a significant number of loyal customers have sins abandoned VW since the company engaged in this scandal. Analysis of the ethical dilemma at VW using Kantian deontological theory also shows that it was immoral for the executives of the company to cheat on its emission. Kantian deontological theory is based on rational decision making (Conway & Gawronski, 2013). Kantian theory proposes doing that which is right because it is the right thing to do without necessarily looking at the consequences of the actions. Therefore, from Kantian point of view, cheating customers that VW cars were in compliance with the emission standards set under the Clean Air Act in order to generate high profits was wrong, thus immoral. Moreover, even after the company had accepted cheating on its emission, VW continued to promote its cars as efficient and reliable, which is not true and is meant to deceive customers and other key stakeholders and this is immoral from Kantian point of view (Rivera, 2006). Therefore, based on utilitarianism and Kantian deontological theories, the best solution to the ethical dilemma faced by Volkswagen executives would be to ensure that all the vehicles are in compliance with the environmental laws and regulations as this would ensure the greatest good for all the stakeholders from utilitarianism point of view. Complying with Clean Air Act will ensure that the company does not cause environmental degradation, which ensures the good of everyone on planet, including plants and animals. Moreover, as much as complying with the Clean Air Act would be costly to the company in the short-term, it would be the right thing to do because it would not only portray the good corporate image of the company, but also avoid litigations that results in heavy fines that proves counterproductive for the company and investors. Conclusion The Volkswagen scandal is one of the high profile cases involving ethical dilemma. The executive of the company faced an ethical dilemma as they had to choose between maximizing profits and allowing its cars to cause environmental degradation by cheating on its emission. However, the actions taken by the executives of VW of cheating on emission to maximize profits for the company at the expense of environmental degradation was immoral from utilitarianism and Kantianism point of view. Therefore, the appropriate solution to this ethical dilemma was for the executives of the company to abide by the environmental regulations and laws as spelt out under the Clean Air Act as this was not only the right thing to do, according to Kantianism, but would also have ensured the greatest benefits for the majority in line with utilitarianism. 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, 12(1), 5. Carroll, A. B. (2004). Managing ethically with global stakeholders: A present and future challenge. Academy of Management Executive, 19(2), 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, 4(2), 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, 104(2), 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. New York: Oxford University Press. Fluker, W. E. (2009). Ethical leadership: The quest for character, civility, and community. New York, NY: Fortress Press. Gates, G., Ewing, J., Russell, K., & Watkins, D. (2016). Explaining Volkswagen’s emissions scandal. The New York Times 19 July 2016, p. 1 http://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html?_r=1 Gates, G., Ewing, J., Russell, K., & Watkins, D. (2017). How Volkswagen’s ‘Defeat Devices’ Worked. The New York Times, 16 March https://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html Hotten, R. (2015). Volkswagen: The scandal explained. BBC 10 Dec. p. 1A http://www.bbc.com/news/business-34324772 Hurtado, J. (2005). The utilitarian foundations of the economic approach to human behavior. Documento CEDE, 27, 1–31. Lamberti, L., & Lettieri, E. (2009). CSR practices and corporate strategy: evidence from a longitudinal case study. Journal of Business Ethics, 87, 153-168. Langlois, L. (2011). The anatomy of ethical leadership: To lead our organizations in a conscientious and authentic manner. Oxford, NY: Athabasca University Press. Jacobson, D. (2008). Utilitarianism without consequentialism: The case of John Stuart Mill,” Philosophical Review, 117(2), 159-191. Jennings, M. M. (2015). Business ethics – Case studies and selected readings eighth edition. Stamford, USA: Cengage Learning. Kahane, G., Everett, J. A. C., Earp, B. D., Farias, M., & Savulescu, J. (2015). Utilitarian’ judgments in sacrificial moral dilemmas do not reflect impartial concern for the greater good. Cognition, 134. 193–209. Doi: 10.1016/j.cognition.2014.10.005 Rivera, F. (2006). Kantian ethical duties. Kantian Review, 11, 78-101. DOI: http://dx.doi.org/10.1017/S1369415400002259 Schulze, C., Schöler, L., & Skiera, B. (2014). Not all fun and games: viral marketing for utilitarian products. Journal of Marketing, 78(1), 1-19. Shaw, W.H., & Barry, V. (2015). Moral issues in business. Sidney: Cengage Learning. Shaw, W.H, Barry, V., Issa, T., & Catley, B. (2013). Moral issues in business, 2nd Asia Pacific edition. Victoria, Australia: Cengage Learning. Wrolstad , J. (2017). Ethical Behavior Starts at the Top. Retrieved from https://www.johnson.cornell.edu/CornellEnterprise/Article/ArticleId/46994/Ethical-Behavior-Starts-at-the-Top Appendices Part B: Portfolio of Evidence Contents Appendix A The Ethical Leadership Debate Ethical leadership is important for the success of an organization (Crane & Matten, 2007). After reading Mike Gustavsson arguments regarding ethical leadership, there are certain aspects of his arguments that I strongly agree with and those that I do not agree. I agree with Mike Gustavsson argument when he says that ethical behavior in an organization is created at the top of the corporation to the extent that if a company is led by ethical leaders, who make good decisions and follow the rules, then this will translate to ethical behaviors in a company. Shaw and Barry (2015) argue that top leadership plays a critical role in ensuring the development of an ethical culture. A research conducted by Linda Treviño of Shoemaker Program in Business Ethics at the Smeal College of Business at Pennsylvania State University found that executives at the top play a critical role in creating an ethical culture at their companies (Wrolstad , 2017). In her study, Treviño found that when top level managers behave ethically and follow the rules, this will result in the establishment of an ethical organization because most people are followers when it comes to ethics (Wrolstad , 2017). In this respect, people employees often look at leaders as their role models rather than their personal values. Accordingly, this implies that, to create an ethical company, this must start with the leaders at the top by creating the ethical culture that employees follow. However, I disagree with the Gustavsson’s notion that having good governance guidelines results in the establishment of an ethical organization. Kahane et al. (2015) show that, not unless the corporate and ethical guidelines are taken seriously in an organization, then they just remain as such on paper and does not help in the establishment of an ethical company. For instance, there are many companies that have collapsed as a result of engaging in unethical behaviors, such as Enron, WorldCom, Adelphia and recently Volkswagen despite having some of the best corporate guidelines and ethical codes of conduct on paper. This has also been confirmed at Alfaraft AB, in the character profile, where employees, including Gustavsson’s daughter are engaging in unethical behavior despite having a good corporate governance guideline. These evidences suggest that top leadership plays a critical role in establishing ethical culture in an organization. Jan Edwards, on the other hand bases his arguments on the importance of social responsibility and ethical leadership. I agree with Edwards on his views of social responsibility. In the modern world, a company needs to not only focus on wealth maximization, but also have a responsibility to ensure that it gives back to the society by engaging in social responsibility programs (Branco &Rodrigues, 2007). Although Freidman argued that the only responsibility of a company is to focus on maximization of shareholder wealth, the trends in the world indicate that engaging in social responsibility is important for organizational success as it enhances the reputation of a company by making the society see a company as that which is responsible and cares for the well-being of the people (Langlois, 2011). The need to participate in social responsibility is supported by Freeman who argued that that a company has the responsibility to not only maximize wealth for the consumers, but also needs to go beyond by promoting corporate responsibility as is the case at Clean Solutions Inc (Lamberti & Lettieri, 2009). Unfortunately, it is true that most young graduates of today are more focused on wealth maximization and this exposes them to the risk of engaging in unethical behaviors. Therefore, as the leaders at Clean Solutions Inc., Edwards has a responsibility to promote ethics and corporate responsibility culture in the company so that followers can emulate. Mei-Hua Felung, however, argues that companies are using charities they engage in developing countries as a marketing strategy. This argument is true because companies have recognized that engaging in philanthropic programs is one way that companies are increasingly using as a strategy for marketing their brands. However, I disagree with Felung when he says that the creation of a strong ethical code of conduct and professional code of behavior result in more ethical business. Evidence from Enron and other companies have shown that merely having strong ethical codes of conduct is not enough to create an ethical business. Instead, the commitment of top leadership in instilling the values is what is key to the creation of an ethical business (Rivera, 2006). Additionally, I disagree with Felung when he says that there is nothing wrong with a company engaging in tax avoidance. Although transfer pricing is ethical by law, an ethical company needs to needs not to engage in tax avoidance because it makes the government lose a lot of money, which can be used for the development of a country. Deshi Chen’s view on the importance of ethical leadership appears misplaced. Deshi claims that he does not see the importance of Business Ethics. Deshi even claims that he does not see the point of Business Ethics being included in school curriculum. However, this argument is misplaced because having good knowledge of business ethics and applying it at work is important for the success of an organization. For instance, most companies, such as Adelphia communication collapsed because of unethical behaviors of its leaders. I also disagree with Deshi when he suggests that the ethics is only concerned with profit creation and business success. Evidences have indicated that companies that are only driven by need to create huge profits and ensure business growth are often driven by greed that results in unethical business conducts, as was the case at Volkswagen as revealed in its recent emission scandal. Appendix B: The Seminar Case Ethical Dilemma in the Case The case presented in Seminar 1 and 5 presents an ethical dilemma that Borries, an Accounts Executive at a German advertising agency finds himself. According to the case, Borries faces the ethical dilemma of having to choose whether to take a short holiday to allow him to travel to Hong Kong to visit his fiancée Swee Lan and her parents and cancelling this important holiday so as to attend to a launch of client product at the company. The case shows that this is a difficult decision that Borries has to make because her fiancé is supposed to travel back to Germany for her studies immediately after the holiday, whereas Borries also need to work on a client product launch project during the same period that he is to take a holiday. Nonetheless, from the case, it emerged that Borries decided to cancel the holiday to attend to work duties. The other ethical dilemma concerns whether or not Borrie’ manager should punish Borries in case he does not attend to work despite having an important holiday to attend. According to the case, the manager does not mention whether he has the plans to sanction Borries, but it is evident that he is in an ethical dilemma as to whether or not this would be necessary. Analysis of Borries’ Ethical Dilemma The ethical dilemma faced by Borries can be analyzed using normative ethical theories. The first normative ethical theory is the utilitarianism theory proposed by John S. Miller and colleagues that states that an action is only ethical if its produces the greatest good for the majority (Jacobson, 2008). In other words, utilitarianism is concerned more with the consequences of the actions (Schulze et al., 2014). Accordingly, from Borries’ ethical dilemma, utilitarianism would consider Borries’s move to cancel the holiday unethical because his action does not produce the greatest benefits to the greatest number. For instance, whereas it was only the company and the client that benefited from his cancellation of the contact, the move produced negative outcome not only to himself, but also to his fiancé, and parents, as well as friends. The other normative ethical principle that applies to this case is the Aristotelian virtue ethics. Aristotelian virtue ethics is divided into two parts. According to Aristotle, personal happiness needs to be the ultimate goal that people should promote (Crane & Matten, 2007). The other part states that people need to demonstrate behaviors and habits that advance personal happiness. Again, based on Aristotelian virtue ethics, it can be said that Borries’ actions were unethical because the cancelation of the holiday did not promote his personal happiness. Borries would have promoted his personal happiness by taking a holiday to meet his fiancé and her parents something that he had longed according to the case study. Therefore, based on the two normative ethical theories, namely utilitarianism and Aristotelian virtue ethics, it can be concluded that, despite Borries’ cancelation of the holiday for the benefit of the company and the client, it was unethical as it did not produce the greatest benefits for the majority not did it promote personal happiness. Appendix C: Interpersonal and Team-working skills The model has been quite engaging and I wish to state that the model has taught me a lot about business ethics and leadership. It has exposed me to a number of ethical issues that employees and managers encounter in the workplace and the ethical principles and theories that can be applied as a guide in resolving the ethical dilemmas. I wish to state that, throughout the course, I have applied both my strong interpersonal and team-working skills to ensure the success of the projects that we were assigned as a team. For instance, I wish to state that my team building skills played a key role during seminar 1 project where we were assigned Ethical Leadership and Debate. During the seminar, I contributed greatly to the debate about Ethical Leadership by expressing my views and listening to my colleagues’ views as well. Accordingly, the fact that I have strong social and team building skills enabled us to work cohesively throughout the seminar and this explains the reasons for the success of our project. Because the team was made of people from different backgrounds and cultures, disagreements sometimes emerged among the members of the team. However, as the leader of the team, I was able to reconcile the disagreements and bring all the members of the team to work together as a team to ensure the achievement of a common goal for the team. Read More

In total, more than 11 million VW cars were affected by the scandal and had to be recalled by the company from the market. This scandal has since proven costly for the company as it has not only suffered reputation damage, but has had to pay a fine to the tune of $15 billion. It is believed that it will take VW several years to recover from this unethical behavior by has dented the company’s image. Why This Was an Ethical Dilemma in Business Situation In order to understand why the VW scandal involved an ethical dilemma, it is important to begin by defining an ethical dilemma.

An ethical dilemma results where an individual is faced with difficult choices that have to be made neither of which address a situation in an ethically acceptable manner (Carroll, 2004). The Volkswagen scandal presents a classical case of an ethical dilemma that managers and employees face in the modern day business environment. In VW case, the executive of the company faced an ethical dilemma as they had to decide whether to pursue higher profits for stakeholders by dodging on its emission and protecting the environment from pollution (Cavico & Mujtaba, 2016).

The way in which the scandal unfolded indicates that the executives and the engineers of the company faced serious ethical dilemma in arriving at the decision to cheat on the car emissions. In a company, the executives of a company have the responsibility to ensure that the interest of the investors is catered for by seeking to maximize their wealth. The same applies to Volkswagen whose managers have a responsibility to ensure that shareholder wealth is maximized by reducing cost and optimizing profits.

Therefore, in this case, the executives of the company led by CEO Michael Horn in America appears to have been forced to cheat on emission produced by Volkswagen cars so as to avoid incurring cost associated with developing emission efficient cars and to generate more profits so that the investors and the executives can earn high returns from the company. Indeed, the fact that customers were made to believe that VW cars were fuel efficient and environment friendly resulted in the company selling more than 11 million cars that resulted in high revenue and high profits.

Even as the executives of VK were interested in making high profits, the company was in a dilemma because it chose this at the expense of the environmental destruction. VW has a responsibility for its stakeholders to provide environmentally friendly cars that protect the members of the public from harmful emissions from its cars in addition to acting honestly, truthfully and in a transparent manner. Unfortunately, the executives of VW chose to cheat in order to maximize sales and profits. In fact, the case indicates that the VW engineers installed the defeat software with the knowledge and under direct supervision of the company executives.

Although the CEO of the company initially denied knowledge of the defeat software, he was later to accept that the device was installed under the direction of the executives of the company that were concerned that it would be cheaper for the company to install the defeat software than to comply with the Clean Air Act. For this reason, it emerges this was an ethical dilemma in business in the sense that the executives of VW had to make tough choices of whether to maximize profits in the interest of the investors and the executives and destroying the environment by installing the defeat device.

Ethical Solution The ethical dilemma faced by VW executives of the company can be resolved with the application of ethical theories. There are a number of ethical theories and principles that have been proposed that apply to VW ethical dilemma, which include deontological, utilitarianism, and virtue ethics. Utilitarianism is an ethical principle that states that an action is only right when it generates the greatest benefits to the majority (Hurtado, 2005). From the utilitarianism point of view, the move by the VW executives to cheat on its emission was immoral because it does not produce the greatest good to the majority of the stakeholders of the company.

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