Busm3115: Could the Unethical Behavior in the Company be due to issue Intensity and Moral Framing: Ethics and Governance Report, GU, Singapore

Discuss: Could the unethical behavior in the company be due to issue intensity and moral framing? (case of Volkswagen emission test cheating) Counter argument: Issue intensity and moral framing (include language) (250 words) Analysis

A Case Study of Volkswagen Unethical Practice in Diesel Emission Test

1. INTRODUCTION

In recent decades conservation and sustainable environment are of great concern to the nations. Natural phenomena such as globalization and also environmental pollutions such as emissions have been considered by a great number of environmental protection agencies and United Nations agencies.

Noticeable attention to conservation and saving green have led Environmental Protection Agency (EPA) to tighten emission control because of the harmful and mortal effects of nitrogen oxide which is a pollutant found in car exhaust (Klier, & Linn, 2016).

Therefore, since the 1970s EPA has announced continuously more restrictions on the standard of emission for light-duty vehicles entailing small pickup trucks, automobiles, and sport-utility cars. The most stringent requirements for emission standards were for vehicle models of the year 2004 (Klier, & Linn, 2016).

Not only EPA but also federal agencies created significant diminution (94%) in the amount of emitted nitrogen oxide by vehicles tailpipe from 1.25 to 0.07 grams per mile (Klier, & Linn, 2016). Emitted nitrogen oxide endangers human lives and triggers diseases such as asthma, respiratory, cardiovascular, bronchitis, and premature death.

2. FINDINGS

3. There have been animated debates surrounding the Volkswagen diesel scandal to find out primary reasons that what factors paved the ground for such scandal to take place and also who was involved in this scandal. This scandal has been reported in a great number of media and news.

2.1. Participants in Volkswagen Emission

Test Scandal

Firstly, it was reported that nine (9) managers are suspended for being involved in the deception. It is stated by the Volkswagen chairman that one of the reasons the suspended group took this unethical scandal is because of the mindset in some departments of the company which fails to comply with the rules (Goodman, McGrath, & Leah, 2015).

2.2. Reasons for Rigging Emission Test

Martin Winterkorn Volkswagen CEO resigned in September and made the announcement to decline that he was aware of the diesel scandal. It is believed greatly by a great number of individuals that this unethical scandal occurred because of technology shortcoming prompted Volkswagen to cheat in emission tests (Boston, Varnholt, & Sloat, 2015).

In December Hans-Dieter Pötsch chairman of Volkswagen revealed to the public that a group of Volkswagen engineers made the decision to rig diesel emission test in 2005 when the United States EPA imposed the toughest emission standards on the automobile industry

3. ANALYSIS

The Volkswagen scandal has led to a devastating series of critical consequences to its direct and indirect stakeholders. This emission scandal is still under investigation by various authorities with the purpose of identifying actual impacts and coming out with a suitable solution to finalize the case.

3.1 Impact of Volkswagen Diesel Scandal

In the year 2014, Volkswagen was the world’s second-largest automaker in the automobile industry after Toyota Motor Corporation. In the year 2015, Volkswagen admitted rigging in diesel emission tests which caused the company to suffer from the huge amount of cost burden. Volkswagen has brought in three (3) public relations firms based in United States, Britain, and Germany to assist the company to cope with the crisis.

Failure of Ethical Compliance: The Case of Volkswagen

I. INTRODUCTION

The 1990s saw an accelerated development of formal business ethics in response to the emergence of multinational corporations with limited social responsibility (Jones, Parker & Bos, 2005). ‗Business ethics is rules, standards, codes, or principles which provide guidelines for morally right behavior and truthfulness in specific business situations‘ (Lewis, 1985, p. 381).

Crane and Matten (2016, p. 5) describe industry principles as a study of industry situation, behavior, and decision where issues of correct and incorrect are addressed‘.

Although common definitions emphasize the rightness or wrongness of behavior, scholars disagree on what is ethical or unethical (Lewis, 1985). Consequently, there is an absence of a generally recognized, specific definition of business ethics in literature (Sparks & Pan, 2009).

Volkswagen faces two allegations: air pollution and cheating on emissions tests (O‘Dwyer, 2016). This paper focuses on corporate fraud in the American market (Li et al., 2018). Kantian ethics and Utilitarianism will be used to argue that Volkswagen‘s rigging of emissions tests was unethical behavior on a massive scale (Warford, 2016). The assumptions and limitations of the theories are explored, followed by a discussion and conclusion.

II. CASE SUMMARY

The Volkswagen case highlights the failures of ethical compliance (Warford, 2016). The ethics scandal is about Volkswagen engineers altering engine operations to meet U.S. emissions testing standards (Rogerson, 2017). Volkswagen used defeat devices‘ which ensured that emissions control would only be activated during regulatory tests (Trope & Ressler, 2016).

Under normal driving conditions, exhaust emissions were forty times higher than the legal limit (VanSandt, 2016). This cheating continued for ten years until detected (Shepardson, 2017). The scandal started when Volkswagen was issued a notice by the U.S. Environmental Protection Agency (EPA) in 2015 for violating the Clean Air Act (Shepardson, 2017). The investigation found that 482,000 cars were using defeat devices (Plungis, 2016).

Volkswagen initially lied to the EPA and cited ‗technical problems‘ (Stoklosa, 2016). Eventually, Volkswagen pleaded guilty in 2017 and settled to a $4.3 billion agreement, the highest ever criminal fine imposed on a carmaker in America (Shepardson, 2017). Subsequently, Volkswagen issued a public apology and arranged to pay $22 billion to claimants including car owners, dealers, and regulators (Hotten, 2015).

Volkswagen lost more than one-third of its stock value, 500,000 cars were recalled, sales were stopped, six executives were charged and the chief executive officer for North America and other directors resigned (Singer, 2015). Volkswagen‘s actions are legal under European Union emissions regulations and only American customers are being compensated (O‘Dwyer, 2016).

Volkswagen‘s U.S. boss knew about the misconduct since early 2014, engineers rigged the tests due to pressure from management and executives kept all stakeholders in the dark (Rogerson, 2017; Zhou, 2016). Aggressive goals for the U.S. market, technical loopholes, fraudulent marketing, unethical governance, and management‘s justification of ethical violations have led to the cheating (Lynch, 2016). The ethics failure can be traced to Volkswagen‘s organizational culture, underlining the importance of proper board and management structure (Elson, Ferrere & Goossen, 2015).

However, it is beyond the scope of this paper to justify that made the decision; the fact is that an unethical choice was made (VanSandt, 2016). The Volkswagen emissions scandal represents the antithesis of ethical business conduct, having negative repercussions for both direct and indirect stakeholders (Mansouri, 2016).

The case is cautionary because the legendary German automaker was considered a globally dependable brand, having self-proclaimed to be ethical and ecological (Adams, 2015). Human resource policies, codes, and employee training were questioned as the world was shocked by Volkswagen‘s brazen disregard for business ethics and environmental regulations (Halfond, 2016).

Consequently, Volkswagen‘s ambitions of becoming the world‘s leading car manufacturer came crashing with its decades of reputation (Singer, 2015). Compliance-based ethics and regulations often have the reverse outcome (Mansouri, 2016). Accordingly, many authors propose a reformulation of the U.S. emissions standards to coordinate with automakers (Mansouri, 2016).

This section of the paper will examine Kantian ethics and Utilitarianism to discuss the ethical issues raised by the case. Kant is careful the most important creator of deontology and his firmly very important and universalistic divinity prescribe a rather fixed, positivistic duty-based saying that guide the actualization of altruism‘ (Teck, How, Karuppiah & Ho, 2018, p. 13).

The Kantian categorical imperative is a fundamental moral law that maintains that actions should be based on personal rules or maxims (Marques, 2015; Yang, 2006). One should only act according to the maxim that he is willing for everyone else to follow in the same situation (Weiss, 2009).

Hence, a maxim should only be considered permissible if it could become a universal law‘ (Marques 2015, p. 3). Unlike Utilitarianism, Kant‘s categorical imperative places the moral authority for action on duty towards others and humanity (Weiss, 2009). Kantianism further holds that people should be treated as ends and never purely as means to the ends of others‘ (Weiss, 2009, p. 107). Kant believes that in an ethical dilemma, everyone involved should be treated with respect, fairness, and honesty (Sandel, 2010).

IV. CASE ANALYSIS

The application of Kantian ethics and Utilitarianism to the Volkswagen ethics scandal involves several stakeholders (Trump & Newman, 2017). For the purpose of this paper, these include employees, management, shareholders, customers, regulators, and the American public (Caria & Hermans, 2016).

The Kantian view on the Volkswagen case will now be discussed (Caria & Hermans, 2016). Kantian approaches are useful when major corporations breach the minimum content of universal moral values leading to major social, political, and legal repercussions that force companies to observe absolute ethical standards (Teck et al., 2018).

The ethics failure highlights Volkswagen‘s lack of core moral values (Teck et al., 2018). Kantian ethics argue that motives for actions are of utmost importance and should involve a sense of duty (Beauchamp & Bowie, 2004). Kantianism protects employee value and focuses on ‗the moral action itself‘, the choice Volkswagen had (Caria & Hermans, 2016, p. 3). Volkswagen made choices that were immoral and illegal. Fraudulent advertising and claims disrespected potential customers by manipulating their selection (Beauchamp & Bowie, 2004).

Similarly, employees were treated as ‗means to the ends of others‘ (Beauchamp & Bowie, 2004, p. 22). Engineers were not allowed to work as rational, independent agents, their concerns were ignored and they had no freedom to act on their judgment (Beauchamp & Bowie, 2004). Hence, Volkswagen violated Kantian duty and respect by treating customers and employees like money-making commodities (Weiss, 2009).