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.
The steps your group must take are listed below. See your textbook for additional ideas and thoughts on this topic:
- Identify a company that has had a recent ethical failure.
What intrigues you about this specific company? What was the company known for before the problem? How would you describe its culture? Was it generally well regarded?
- Example: Enron was known for hiring the “best and brightest” before it collapsed under systemic financial fraud. It had a culture of aggressive risk taking and was considered a complicated company with a difficult to understand financial model. It was envied by most of its competitors.
- Procedure: Decide on a topic you all find interesting.
- Product: You must write 1 page explaining the company you chose, its culture and how it was regarded before it had its ethical failure.
Review the literature.
Read 2-3 articles written before the scandal to give you a sense of how difficult it can be at times to see a cultural failure before it is exposed publically. Then read 2-3 articles written after the scandal to give you a sense of the full arc of the company’s rise and fall.
- Example: For example, there were several laudatory articles written about Enron right up until it collapsed. Many of these authors admitted that they did not exactly understand how Enron made money but they applauded the company nonetheless. The articles written after the company failed tried to identify why the company failed. Could an astute reader have picked up on any of these signals before the collapse?
- Procedure: The Potomac College Library provides access to over 3,400 periodical titles through its database. (Read your course syllabus or contact the library for more information.) Read at least 2 articles related to your topic from before the collapse of the company and one article from after the collapse.
- Product: You must write a 2-3-paragraph summary of each article your team reads. Your summary must tell what the article is about, convey its findings, and explain how the information relates to your topic.
- Identify 2-3 cultural “signals” that might have suggested such a collapse was possible.
Your group should discuss at length what clues or signals could have been identified by the business community about the company you chose to indicate that this company was at risk.
- Example: In the example of Enron, several authors and business leaders publically stated that they did not understand how Enron made money. Such comments are often signals from intelligent businesspeople that they have concerns about a given business model but aren’t certain how to articulate the concerns.
- Procedure: Identify what you learned in the journal articles you read. Identify 3-4 signals or clues that your company may have not been all it pretended to be.
- Product: You must write a 1-2 page description of these clues and signals.
- Using your textbook and considering your discussion of the corporate culture of your subject company, describe 3-4 types of cultures or companies that currently exist which have the potential to have a major ethical problems in the future.
Using the concepts learned in Chapters 1-5 from your book, identify potential future issues.
- Example: Companies which are very secretive about how they make money and create their products could have the potential to be the next Enron. Secretive upper management could be signaling that all is not as it seems.
- Procedure: What types of companies and corporate cultures may contribute to corporate ethical lapses.
- Product: You must submit 1 page of your findings.
SUMMARY: Midterm Project Requirements
- 1 page about your corporate topic;
- 2-3 paragraphs per article describing your findings;
- 1-2 page description of the clues and signals you found; and
- 1-page on what types of cultures breed ethical lapses.
- APA format (including bibliography)
Introduction to Volkswagen
Volkswagen is a German Automobile company founded in 1937. The meaning of the word “Volkswagen” translated from German is “people’s automobile”. For sure it has been people’s automobile for a long time and ruled the automobile world for decades in Germany and around Europe till the recent ethical failures that were pointed out in its emission systems. The third-generation car introduced by Volkswagen was declared the European Car of the Year by the Car of The Year European Chapter (“Reviews & Awards: Golf: Volkswagen UK”, 2016). In the recent times, Volkswagen expanded and presented many models that became popular among automobile users. For example, the models VW Golf, VW Jetta, VW Scirocco and SEAT manufactured in the first decade of the current century won Volkswagen recognition among an overwhelming number of automobile users in Europe and around the world. In North America alone, Volkswagen recorded a 4.9% sales increase in 2005 by selling 224,195 automobiles.
Volkswagen has been successful in establishing manufacturing plants around the world in different countries including US, Slovakia, China, India, Indonesia, Russia and many more other countries. Due to a dynamic approach in localization of its cars by building manufacturing plants around the world, Volkswagen has been successful to increase its sale from 6.2 million automobiles in 2007to 9.7 million automobiles in 2013 (Intell Reports, 2016).
Before the revelations of the ethical failures regarding emissions, Volksvagen had been regarded as a friendly place to work at where ethical standards have been followed to the letter and spirit. According to the Volkswagen itself, they lead by example and ensure active involvement of their employees and their customers (Group, 2016). Volkswagen was regarded as a corporation that believed in the high standards of social responsibility until it was discovered that they have been developing the software that can trick environmental safety procedures and instead of being emitting above the guidelines for vehicle emissions, there vehicle seemed to be under emitting when assessed.
Wilhelm, B. (1997). Platform and modular concepts at Volkswagen—their effects on the assembly process. In Transforming automobile assembly (pp. 146-156). Springer Berlin Heidelberg.
This article explains the different strategies used by Volkswagen when developing their automobiles. In this article the researchers have identified the two-core phenomenon used to produce automobiles that will give their customers a great experience when they buy it. Volkswagen has been praised to employ a platform strategy in which they work on the overall making of the invisible machinery and structures of all the models of the car. All the models are looked from a single lens when it comes to developing the invisible parts. The second part of the platform strategy is to consider the visible parts of all the models separately and develop them.
The concept of Modular is divide each automobile into different module and assign teams to work on these different modules. This is where the article becomes more relevant to this paper. The main scandal that rose against Volkswagen was that the team responsible for the software module related to the emission system had developed a software that was able to trick the emission assessment system.
Jürgens, U. (2002). Corporate governance, innovation, and economic performance: a case study on volkswagen (No. FS II 02-205). Social Science Research Center Berlin (WZB).
This case study sheds light on the strong governance system that has been employed by Volkswagen which ensures that they are leading in the right directions. The stakeholders with even greater share of more than 20% do not have special voting powers. To make a new plant, or relocate an existing plant, two-third majority vote of the supervisor comity is required.
What this case study tells us that it would not be easy to make a decision that does not enjoy the agreement of the majority of the stakeholders and the supervisory committee. The question that it raises for this paper is how was the decision to develop a software for the emission system to trick assessment reached? Did it have the agreement between the majority of the concerned people or not?
Barrett, S. R., Speth, R. L., Eastham, S. D., Dedoussi, I. C., Ashok, A., Malina, R., & Keith, D. W. (2015). Impact of the Volkswagen emissions control defeat device on US public health. Environmental Research Letters,10(11), 114005.
This article aims at pointing out the ethical and legal breaches made by Volkswagen and its health implications for the general public. The article suggests that according to US Environmental Protection Agency (EPA), Volkswagen has violated the Clean Air Act (CAA) in its 2009-2015 models by developing a software that shows less emission exhausted by the car than what it actually exhausts.
The research suggests that the emission of gases by automobiles in access of what they are allowed can cause serious health issues among the general public. These gases could even cause premature mortality and morbidity of non-fatal outcomes.
Signals and Clues
There are some cues that can be viewed as the early signs suggesting that Volkswagen might be cheating or planning to cheat. For example, in 2007, Volkswagen suddenly stopped the production of diesel engine automobiles due to emission problems. They said that they have found a fix to the problem but did not start to produce cars till last quarter of 2008. This is what gives us a cue that they were up to something that they did not want others to know about. They never brought to the notice of general public what fixes they applied.
In 2007 to 2009, other car manufacturing companies like Honda, Nissan and GM tried to launch their diesel automobiles but they were not successful. They had issues with keeping the emission within limits within the price range the cars were to be sold. On the other hand, Volkswagen did not had any problems because, in my opinion they had found a “way around it”.
In the same time when other car manufacturing companies were struggling with developing a fuel-efficient diesel engine, Volkswagen customers were reporting fuel economy on Fueleconomy.gov website which was unusual at that time. That is where experts should have given it a thought about what is going on with the diesel engines that they have lower emissions and high fuel economy. In my opinion Volkswagen wanted to be a leader in the diesel engine automobile market therefore, they did not think of the ethical or legal implication and just did what they considered was the best for the interests of the company and their stakeholders.
Ethical Issues in the Future
When we look around we do not have to go far to see which countries might have ethical issues in the near future. For example, we can see that Chinese economy is growing rapidly and therefore, they have been growing industry in China at a greater speed. This would definitely be an issue for Chinese culture as there would reach a point where their carbon emission would become an issue for them and other countries of the world. Both China and America had issue reaching a deal on the climate change agreement for decades and it has only been a few months they signed the agreement in Paris.
Another example is India. India is growing economically at a greater rate. One of the side effects of the rapid economic growth is that it brings legal an ethical issue that if not addressed on time, would bring future problems. For example, Indian government has raised the minimum wage to a level which companies believe to be more than what they can afford to pay their employees (Forbes, 2016). The decision seems to be political in nature. The employees consider it a violation of their rights when not paid what the government has standardized. In short and long run, this will become an issue for the government to inforce their decisions related to minimum wages and a social unrest could be resulted.
If we look at the around us, we see each and every person looking at their mobile phones and other smart devices. I believe that the time has come to look at how ethical is the production of addictive mobile applications? Application developers must argue that each consumer has a choice to opt the time they want to spend on a specific game. What these consumers do is use consumer psychology researches and adopt to practices that would help them get their consumers addicted to their applications which in my opinion is unethical.
Desjardins, J. (2014). An Introduction to Business Ethics, 5th Edition. New York, NY: McGraw Hill Companies.
Forbes Welcome. (2016). Forbes.com. Retrieved 22 September 2018, from
Group, V. (2016). Volkswagen Group Basic Principles. Volkswagenag.com. Retrieved 22 September 2018, from http://www.volkswagenag.com/content/vwcorp/content/en/human_resources/basic_princi%20ples.html
Intell Reports. (2016). Retrieved 22 September 2018, from http://www.intellreports.com/w/LIBRARY/100057/
Reviews & Awards: Golf : Volkswagen UK. (2016). Volkswagen.co.uk. Retrieved 22 September 2018, from http://www.volkswagen.co.uk/new/golf-vii/explore/reviews-and-awards
Truett, R. (2016). Were there signs that VW was cheating?. Automotive News. Retrieved 22 September 2018, from http://www.autonews.com/article/20150928/OEM11/309289959/were-there-signs-that-%20vw-was-cheating?