Emission Scandal in Volkswagen Company - Case Study Example

Emission Scandal in Volkswagen Company

Introduction

Substantial suggestions are emerging demonstrating ethics as a strategic aspect for organizations to triumph in the modern marketplace. Apart from the constraint 8that company's operations must be conducted in the most effective, efficient and economical manner possible for their performances to increase, in the modern era, there is a growing persistence on the necessity for corporations to follow ethical standards as well. Beauchamp, Bowie, and Arnold (2004, p. 42) describe business ethics as the organizational, economic and ethical dimensions on the intra-organizational and systematic levels. It is typically fixated on what is right, wrong and good in a specific economic event, where a company involves in assessment and moral evaluation of those economic practices and activities. There has been increasing wake of concerns about issues regarding environmental sustainability and several corporate scandals in today's business age. Therefore, the paper aims to analyze a recent business scandal of Volkswagen Company and people involved. It will also evaluate the primary situational factors that possibly influenced the behaviors of people involved. Besides, the paper will include theoretical analysis and critical discussion of situational factors and individuals who primarily caused the scandal.

Emission Scandal in Volkswagen

In September 2015, the agency that is concerned with environmental protection found that many of Volkswagen cars in the American market were installed with software (defeat device) in diesel engines that were used to detect and alter performance in the vehicle when they were being tested. After this discovery, the company pleaded guilty in the United States for cheating in the emission tests. Over 482,000 cars manufactured by the company in the United States including Audi A3, Volkswagen models Beetle, Passat, Golf, and Jetta were fitted with this defeat device (Ewing and Hiroko 2016, p. 1). Besides, the company confirmed that approximately 11 million cars across the globe, with 8 million sold in Europe market were also installed with the software.

In response to this scandal, the company argued that after realizing their cars satisfied the mpg and performance requirements and still could not pass the emission test they chose to install defeat devices. This decision was considered because alteration of the after-treatment system could have raised the car price hence affecting their sales (Ewing Hiroko 2016, p. 1). The finding that Volkswagen falsified emission tests through rigged disease engine was a major scandal. This company's misconduct is unacceptable from what markets and finance, business leadership or corporate social and business sustainability responsibility teach. Ewing and Hiroko (2016, p. 1) assert that the Volkswagen company case affected its social responsibility (regulation manipulation, broken public and customers' trust and had a social influence on workers). Besides, it negatively affected its economic responsibility (fall of price value of stocks, reduced sales figures) and environmental responsibility (influence on public health, neglect of emission standards, pollution).

Analysis

Organizations engage in economic events where they use their resources to produce services and products through internal business practices. The services and products produced are then sold to customers in the market. During business transactions, the company products are required to meet standard outlined by the regulating body as well as behave ethically. The corporate economic activities are needed to achieve a common good for all stakeholders including customers and the society (Beauchamp et al. 2004, p. 544).

The Volkswagen company activities that resulted in the scandal ignored the set of rules that describe wrong, right and guide individuals’ moral principles. As Desjardins (2009, p. 120) explains, moral principles define the behavior's impartial general rules that are of significance to society. The use of defeat device in the Volkswagen cars was a selfish action that aimed at satisfying the interests of the key stakeholder of the company while causing harm to communities via environmental pollution. Studies demonstrate that the global health impact of Volkswagen emission scandal including misconduct of other companies is vast. According to Ewing and Hiroko (2016, p. 1), annually over 38,000 people die due to the failure by vehicle companies to adhere to set emission regulations.

Theoretical Perspective

Several theories are used to address business ethical issues. The Volkswagen scandal can be evaluated using the ethical hypotheses of ethical egoism, psychological egoism, universal ethical egoism, cultural relativism, Kantian ethics, utilitarian ethics, act utilitarianism and rule utilitarianism.

Ethical Egoism

Ethical egoism argues that the actions and motivation of a person should be based on self-interest. Desjardins (2011, p. 115) affirms that an individual should at all times decide for their own benefits because sharing and caring is not suitable for a human being since altruism demeans one-self and thus people become more dependent on actions of another. In the case of Volkswagen Company, individualism was used as the bases of their decision to use defeat device in their cars. Ethical egoism justifies that the only and ultimate goal for Volkswagen was to maximize return on investment for their crucial stakeholder (shareholders and owners) at the expense of environment and health of the society.

It can also be argued that the use of defeat devices on diesel engines was an individualistic ethical decision to satisfy self-interest of the company senior managers as well as the chief executive officer. They wanted to make the company more competitive in the motor industry and increase their market share through reducing prices. Manipulating emission result was a more straightforward solution to reducing the production cost of the car. Volkswagen cheated on the government and its customers about the regulation of emission in their vehicles and that they were installing the defeat devices to increase the sales. Due to their high market share in the United States, adhering to the regulations of EPA would have increased production cost. Besides, it disregarded its environmental responsibilities.

For many years, Volkswagen was recognized worldwide as a sustainable and environmental-friendly corporation. However, the deceitful actions show that Volkswagen was more focused on their self-interest of increasing profits. As explained by Beauchamp et al. (2004, p. 22), ethical egoism debate that individual interests are paramount since they are essential to that of other people. Accordingly, the motives and actions of a company should be aimed at satisfying their interest and not the goal of the society or government regulations. Profit is the primary objective of economic activities, and thus, all decisions should be directed at achieving them (De George 2011, p. 162).

Psychological Egoism

Desjardins (2011, p. 120) discusses that psychological egoism involves acting on individual self-interest without putting into consideration the concern of others and thus, every decision and action should be self-centered as it was with Volkswagen scandal when the company neglected emission rules and its environmental responsibilities. For that reason, it is theoretically inappropriate to claim that Volkswagen actions were right based on psychological, ethical egoism since it posits that on the perspective of tautology, nothing is unselfish and every motivation is selfish-centered. Individual ethical egoism can explain the actions of the senior managers and company executive of Volkswagen to influence engineers and other employees to work towards their interest. Ferrell and Fraedrich (2015, p. 45) assert that this approach hypothesizes that people have the power to influence others to do their work. As the Volkswagen scandal exemplifies, the problem of individual ethical egoism is that the company was never honest about their agenda and thus, they had to lie by using defeat device to prevent EPA from identifying the high emission percentages from their cars so that they could continue making more sales.

Utilitarianism Ethics

Another ethical theory that that can explain the Volkswagen scandal is utilitarianism. As illustrated by Hayry (2013, p. 23) this approach underlines the utmost outcome concerning an action to satisfy the largest percentage of the population. Utilitarianism is defined by the limits of consensual ethics, which outlines that evaluating if or not an event is deliberated wrong or good directly correlates to its aftereffects (Ferrell and Fraedrich 2015, p. 47). This ethical approach focuses on the actions that can be considered harmful or beneficial. Therefore, ethical activities are concerned with ensuring the highest percentage of individuals are happy. Based on this hypothesis explanation, Volkswagen conduct is moderately conflicting with the utilitarian beliefs.

Over the entire period of this scandal, nothing good that was attained. The consequences of this action were negative including increased environmental pollution. As a result, the pollution-related deaths have been recorded. Additionally, the company suffered a loss in customer trust as well as it had to pay about 15.3 billion dollars for civil settlements (Ewing and Hiroko 2016, p. 1). Therefore, the consequences of the decision to dodge clean-air regulation through fitting cars with defeat devices made the majority of the people unhappy. Most Volkswagen clients who had purchased the cars are now contemplating on where they should take the defective vehicles. In addition, most workers have lost jobs because the company is spending a significant amount of funds to rectify problems that could have been avoided if only the EPA regulations were adhered to during the manufacturing process.

The only benefits that could be obtained from the scandal are in the future. The company disaster could assist in reinforcing the significance of risk management and compliance with set rules. According to Hayry (2013, p. 15), to measure what minimize suffering and maximizes pleasure as rule of utilitarianism outlines, people should deeply evaluate institutions and societal practices.

Kantian Ethics

Kantianism is an approach founded on ethics perspective. Beauchamp et al. (2004, p. 170) describe Kantian ethics as the responsibility to treat individual equally and with respect. In all parts of the world what is wrong and right is the same, and thus all people should possess the same logical view as well as fundamental principles. As Wood (2007, p. 12) explains, individuals are typically the same in any situation. By arguing from the side of employees, dealers, suppliers, consumers, and shareholders, Volkswagen acted exceptionally immorally according to Kantian approach.

The company did not grant these key stakeholders the opportunity to understand what they were involved in. Nevertheless, they made these groups have confidence in the image of the company objectives that were based on environmental responsibility. The dishonesty of Volkswagen kept shareholders buying their stocks and customers purchasing the company cars. Additionally, staffs continued working for the company whereas assisting in manufacturing these faulty vehicles. Volkswagen took advantage of all its stakeholders without taking into considerations that they also had the liberty to decide individually.

Ethical Evaluation and Justification

Entirely the Volkswagen actions are less reasonable. Ethically, the company could have avoided the scandal by only investing more time and funds in inventing an appropriate diesel engine. The corporation sacrificed the company integrity and image for the wrong course. Not only did Volkswagen lose stakeholders and customers but also the investors and government's trust. The individuals who were most important in causing the scandal include engineers, company chief executive officers, and senior managers. Additionally, institutional factors such as market Compton motivate the actions of Volkswagen.

Recommendation

To avoid similar situation better regulation that not only holds an organization accountable for emission but also engineers and senior employees involved in making the decision should be enforced. Besides, looking at why and how the company committed the fraud, the government and consumers share a few complicity to the deception. Additionally, testing under real-life condition unlike in laboratory environment can help avoid a repeat of this scandal.

Conclusion

In conclusion, the Volkswagen actions involving the manipulation of diesel engines of their cars were unethical. The sacrifice of the company's environmental and social responsibilities at the expense of reducing the cost of production affected many stakeholders. However, these actions are justified by the ethical egoism perspective on focusing more on self-interest rather than acting to please other individuals. For that reason, Volkswagen action was aimed at achieving their interest of increasing profits. Nevertheless, utilitarianism approach does not support such efforts given that the act did not benefit a majority of the people.

The Volkswagen company activities that resulted in the scandal ignored the set of rules that describe wrong, right and guide individuals’ moral principles. As Desjardins (2009, p. 120) explains, moral principles define the behavior's impartial general rules that are of significance to society. The use of defeat device in the Volkswagen cars was a selfish action that aimed at satisfying the interests of the key stakeholder of the company while causing harm to communities via environmental pollution. Studies demonstrate that the global health impact of Volkswagen emission scandal including misconduct of other companies is vast. According to Ewing and Hiroko (2016, p. 1), annually over 38,000 people die due to the failure by vehicle companies to adhere to set emission regulations.

Theoretical Perspective

Several theories are used to address business ethical issues. The Volkswagen scandal can be evaluated using the ethical hypotheses of ethical egoism, psychological egoism, universal ethical egoism, cultural relativism, Kantian ethics, utilitarian ethics, act utilitarianism and rule utilitarianism.

Ethical Egoism

Ethical egoism argues that the actions and motivation of a person should be based on self-interest. Desjardins (2011, p. 115) affirms that an individual should at all times decide for their own benefits because sharing and caring is not suitable for a human being since altruism demeans one-self and thus people become more dependent on actions of another. In the case of Volkswagen Company, individualism was used as the bases of their decision to use defeat device in their cars. Ethical egoism justifies that the only and ultimate goal for Volkswagen was to maximize return on investment for their crucial stakeholder (shareholders and owners) at the expense of environment and health of the society.

It can also be argued that the use of defeat devices on diesel engines was an individualistic ethical decision to satisfy self-interest of the company senior managers as well as the chief executive officer. They wanted to make the company more competitive in the motor industry and increase their market share through reducing prices. Manipulating emission result was a more straightforward solution to reducing the production cost of the car. Volkswagen cheated on the government and its customers about the regulation of emission in their vehicles and that they were installing the defeat devices to increase the sales. Due to their high market share in the United States, adhering to the regulations of EPA would have increased production cost. Besides, it disregarded its environmental responsibilities.

For many years, Volkswagen was recognized worldwide as a sustainable and environmental-friendly corporation. However, the deceitful actions show that Volkswagen was more focused on their self-interest of increasing profits. As explained by Beauchamp et al. (2004, p. 22), ethical egoism debate that individual interests are paramount since they are essential to that of other people. Accordingly, the motives and actions of a company should be aimed at satisfying their interest and not the goal of the society or government regulations. Profit is the primary objective of economic activities, and thus, all decisions should be directed at achieving them (De George 2011, p. 162).

Psychological Egoism

Desjardins (2011, p. 120) discusses that psychological egoism involves acting on individual self-interest without putting into consideration the concern of others and thus, every decision and action should be self-centered as it was with Volkswagen scandal when the company neglected emission rules and its environmental responsibilities. Read More