Business Ethics is more than just the study of theory—it is the recognition that the day to day actions of business leaders have consequences. Identify a major corporation that was in the news over the past twelve months for a major ethical failure. Read several articles about both the rise and the fall of this company before undertaking the assignment below.
Ethical Issues at Volkswagen
Volkswagen is one of the leading car manufacturers that started in Germany and is the largest automaker worldwide. In 2015, a huge ethical conflict erupted within Volkswagen which resulted in a great amount of money lost, management level employees stepping down, and a tarnished reputation. Volkswagen had been cheating the emissions testing that was done to their cars by installing a defeat device, which was a device that could detect when tests were being conducted and would result in the car’s performance levels dropping so that the emissions levels were lower (Hotten, 2015). The company tampered with their vehicles to make sure that their cars passed the tests in order to show fake levels of emissions to push themselves in front of the competition.
The thing that intrigues me about this ethical failure was the fact that a company would do something so blatant such as tampering with emissions tests. These tests are done to test the levels of pollutants that come from the car emissions. The “defeat device” was made for one reason which was to mask the levels of emission, knowing that the levels were too high. I cannot believe that Volkswagen did not just make the change to the diesel engines. If they had fixed the problem instead of trying to cover the problem they would have saved more losses than what resulted in happening. Instead, they took a bigger loss as it resulted in the company having the first quarterly loss in the past 15 years” (Hotten, 2015).
Before this ethical failure, the company was known for making its German styled cars which were made very well. Volkswagen was one of the largest car manufacturers that would be many people’s preference knowing they were made well. However, now that the public knows Volkswagen was purposely being deceptive to the testing which could affect their outlook on Volkswagen. Volkswagen translates to the phrase “People’s auto,” but after this scandal, they have already found out that people view ethics as more important than the quality of the car, as I pointed out that they experienced a loss for the first time in 15 years.
Unfortunately, the culture of this company was perceived to be good as they were at the top of the car manufacturers. Before the scandal, the company’s culture was well regarded as they were successful in the international market and continuing to increase their manufacturing. However, this incident highlights the fact that the standards of the cars are less important than the money earned through manufacturing the cars. Much of the public will not support that culture as cars are a critical part to people’s everyday life, and their safety depends on them. Because of this reason, when I learned of this scandal I lost respect and trust for Volkswagen.
Before the scandal hit the news, Volkswagen had become the leading manufacturer in the world (Lingeman, 2016). They were continuously producing good quality cars that the public liked. They were passing leading car companies such as Toyota, Daimler, BMW, and General Motors (Murphy, 2015). Some of the articles that were published before the scandal show how difficult and detrimental scandals of this type can be to a company. Although, I thought a scandal of this magnitude would have hurt the company for a longer period of time. The company seems to have built serious momentum as they finished the 2014 year as the second leading car manufacturer and even passed Toyota in the first half of 2015 (Pai, 2015).
The articles that were released before the ethical failure that Volkswagen took part in also showed how vulnerable the testing protocol was for this type of problem. The “defeat device” is only activated when the car is put onto the stationary test rig, which hints at how intricate such a device would have been. This was a clear act of deception, and the management’s morals were not in line with those of the public. Despite this flaw in Volkswagen, it wasn’t as impactful as it could have been because of they decided to quickly release top employees who were assumed to be behind the scandal, including the former CEO Mark Winterkorn (Lingeman, 2016).
It was not a surprise that the former CEO was let go, though, as Lingeman noted that he was questioned before the scandal was even reported. There were many questions that were arising regarding the emissions testing but Winterkorn claimed that he had the situation under control, which was obviously not the case. This individual was the CEO of the leading car manufacturer and blatantly lied to the public trying to cover his blatant deception. Lingeman’s article in Autoweek also noted that there were documents that even indicated warning signs that were missed, which is a big reason as to why he was ultimately released.
The first signal of this scandal appeared a couple years before the 2015 results that found Volkswagen were using the “defeat devices.” Apparently, there were engineers in Detroit who tested and took a Volkswagen Jetta with a diesel engine apart in order to attempt to figure out how Volkswagen was meeting the U.S. environmental standards without a catalytic reduction system to help neutralize its emissions (Truett, 2015). Diesel engines normally produce much more pollutants than engines that use normal petroleum. The engineers sensed that something was going on as they could not get the same test results on the road. However, they did not continue investigating, which could have found the “defeat device” earlier.
There were a couple other signals that could have been spotted but were not looked into in detail. In 2007, the diesel cars release was delayed 6 months because of emissions compliance problems (Truett, 2015). After they finally released the car, all the other competitors struggled to get the same results as Volkswagen. This should have also been a red flag, as engineers can normally replicate things like this after trial and error. However, they continued trying to replicate the same results but continued to come up short. Lastly, the continued regression of the air quality could have also signaled that something with the Volkswagen diesel cars was tampered with. There were many plans in place to improve the air quality but it was continuing to decline. Places in Europe even placed bans on certain cars to try and improve the quality (Truett, 2015). All of these signals could have led to the scandal being discovered sooner than it was.
The type of cultures that tend to encounter problems similar to Volkswagen normally encounters people who do not carry good ethics. Good ethics relate to good business, and Volkswagen decided to place themselves at the top of their list of importance. Greed led to this ethical failure, and it was something that could have easily been avoided. Companies that place the customers first tend to avoid these problems, as things such as emissions testing and safety testing would be the company’s priority. What Volkswagen did was display a company culture that should be avoided by all companies.
At the end of the day business is business, and every company is run differently. The company needs to decide if they want to abide by good ethics or go for unethical business that may generate more money short-term. As companies rise quickly, it is easy to get greedy as money comes in which can affect the way management acts. One thing I learned in business classes, is that Top Quality Management is a successful method which businesses should attempt in order to avoid things like this. TQM requires all employee’s involvement but also benefits the employees by giving them all a voice in the decision-making process. This would possibly allow companies to fix things that could be turning towards the unethical side of things.