Sample Ethics Paper on Volkswagen Scandal: Business Ethics

Business scandals have been in existence for as long as the process of business transactions has been in existence. In the past, the world has become witness to such major scandals as the Enron scandal, the WorldCom scandal, the Bhopal and Chernobyl disasters to mentions but a few of the scandals that raised ethical questions in the manner in which business management teams make their decisions in a bid to maximize profits by disregarding various environmental and societal factors. Such scandals have also proved that unethical decisions adversely affect the companies in terms of massive loss of trust and confidence in the organization, as well as the loss of integrity. Presently, the business world has experienced another scandal, the Volkswagen scandal that further proves that although organizations have the obligations to seek strategies to maximize their value and profits, the subject of business ethics is still critical thus should be addressed in the value and profit maximization process.

The Volkswagen scandal came to light as a result of a group of researchers from West Virginia University winning a grant worth fifty thousand dollars from the international council on clean transportation. This grant was to enable the research team to carry out performance and emissions test on a variety of light duty clean diesel cars under every day or realistic conditions, conditions that varied from those in the lab environment, among which were the vehicles from the Volkswagen brand. In their tests, the researchers thus fitted the vehicles with a portable emissions measurement system that was to collects a constant flow of information and data over a variety of road types in the United States of America[1].

However, on carrying out the tests, the research team’s results varied significantly from those results presented by the Volkswagen Company. They found major discrepancies in that their results showed that various Volkswagen vehicles emitted thirty-five to forty percent more emissions than those dictated by the United States government. On discovering this, the research team suspected cheating by the company however they lacked the data to prove it. In presenting their results to the environmental protections agency, an investigation was launched into the Volkswagen emission tests[2]. Further tests by the California air resources board confirmed the discrepancies whereby Volkswagen was confronted; however, they insisted that the discrepancies were as a result of a technical fault as opposed to intentional cheating. Ultimately Volkswagen admitted to their deception when the environmental protection agency threatened not to approve further sales in the United States market.

Clearly, one of the major negative effects of the Volkswagen scandal is the immense negative effect to the environment. Were it not for a non-governmental organization carrying out the tests, the Volkswagen Company would not have rectified this “flaw” and would have carried on producing and selling their cars that were emitting harmful gasses above what was permitted by the government. This action, or lack of action, is by itself unethical as it is the responsibility of any organization to make sure that their products are safe and environmentally friendly, a responsibility that Volkswagen neglected. By releasing vast amounts of nitrogen oxides into the atmospheres and the environment, it led to the risk of the formation of smog, acidic rain and the formation of ground level ozone which has been associated with a myriad of health problems[3]. Furthermore, these nitrogen oxide gasses have also been known to cause damage to plants and vegetation. Thus, by intentionally employing unethical practices, the environmental damage that will result from the Volkswagen scandal is estimated to have far longer lasting and immense adverse effects on the ecosystem.

Moreover, in analyzing how Volkswagen violated business ethics, the deontological ethical view can be applied to better understand the case. Deontology in the field of ethics focuses on the action itself. Pertaining to Volkswagen, the action was equipping their cars with a cheat device. In order to pass various environmental tests so as to sell in specific markets such the United States, Volkswagen was fitting their cars with a cheat device. More precise, the cheat device was not hardware, rather it was software. Diesel cars are supposed to have software installed that is intended to clean the diesel exhaust. This software is intended to work throughout, however, in the case of Volkswagen; the software was only operational when the car was under test conditions. In normal conditions, the software would automatically shut off which resulted in the release of more emissions.

Thus, according to the ethical considerations of deontology, an individual, or in this case, an organization acts ethically only if they follow a categorical imperative. In the case of Volkswagen, the company, in making their choices, should have followed and acted according to the company’s values and objectives, that is, primarily maximizing value. Thus, according to the categorical imperative, the company should strive to produce and offer products that are environmentally sound and safe for their customers[4]. However, when taking into account the actions by Volkswagen, it is clear that their actions were unethical. In regards to the vehicles, the adoption of properly working exhaust emission software would not have any negative impact on the design of the vehicle or its safeness, therefore, had no ethical reason to forego installing it. However, intentionally adding a “cheat device” had significant negative effects to the environment which goes against the ethical view of providing safe and environmentally friendly products. Hence it is clear that Volkswagen intentionally violated environmental ethics by approving the installation of faulty software knowing fully that such an action would lead to the significant pollution of the environment.

Furthermore, it is clear that Volkswagen violated environmental ethics by going against the environmental rules and regulations set by the government meant to protect and preserve the environment. According to Bowie as stated by Hoffman, the social responsibility of any organization is to produce goods and services with the primary objective of making and maximizing profit. However, maximizing profit for the benefit of the shareholders should be accomplished within the rules of the market. Such rules and regulations are set by the government and include among others rules that seek to protect the environment. Additionally, Bowie goes to note that a business enterprise is not obligated to more than is required by the rules set by the government[5].However, in the contexts of the Volkswagen scandal, the implementation of the cheat software in their diesel cars was not in fact within the environmental rules set by the government. The Volkswagen management made the unethical decision to cheat the government as well as their consumers on the environmental friendliness of their vehicles.

Furthermore, although their actions did for a short time maximize profits for the shareholders, once the scandal became public knowledge, the company’s stock declined by about thirty six percent as well as a significant reduction of the company’s profits[6]. Hoffman further explains on this ethical view by stating that it is the ethical responsibility of any organization to be an active participant in the formulation of solutions dealing with social and environmental dilemmas[7]. In the present society, one of the major concerns is climate change which has been attributed to air pollution caused by such human activities as the burning of fossil fuels. Thus, for a company to knowingly install faulty software in their products is morally and ethically wrong. Companies, therefore, must develop an environmental conscience and not isolate themselves from the solution seeking process.

In evaluating the violation of the ethics, including the environmental ethics that Volkswagen violated as a result of their cheat software, one can base such analysis on the theory of utilitarianism as proposed by Mill. Utilitarianism in this regard is about what an activity fulfills and whether the consequences of such an activity are ultimately aimed at fulfilling the greater good. Utilitarianism is about amplifying joy, whereby one ought to dependably go for the choice that expands delight for the most people as possible under the circumstances. As per utilitarianism everything in life and each decision can be reduced to a score of joy or satisfaction, regardless of the possibility that there are lives in question. Utilitarianism in the context of the Volkswagen scandal includes the ethical violations pertaining to an assortment of stakeholders. These stakeholders include Volkswagen and its workers which include the company’s Chief Executive Officer, the clients, the environmental testing agency and also the indirect stakeholders which include the numerous people living in the areas where the Volkswagen diesel vehicles were sold and were directly or indirectly affected by the unethical actions of Volkswagen[8].

As per the theory of utilitarianism Volkswagen’s activities were neither ethical nor acceptable, given that their aim was not to maximize the greater good of any or all of the stakeholder involved. Especially taking into account that in the end, after the discrepancies were discovered and the unscrupulous activities of the company were made public, all of the stakeholders were adversely affected more so the environment. Since acceptability and goodness are recognized by value, it merits investigating the value for the Volkswagen case too. Volkswagen was culpable for their activities since they realized that what they were doing was not ethical, as they had created a software that had the ability to cheat and bypass the system. This may have, at the early stages, resulted in the creation of utility, yet this action did not strive towards the greater good for all the stakeholders involved[9].

For this situation, punishment would be ethically required for Volkswagen since as indicated by act utilitarianism punishment is acceptable when it would prompt more prominent utility. The punishment, in this case, would prevent or at least act as a warning to the car company to not engage in such unscrupulous activities in the future. The same goes for other car producers. In actuality, Volkswagen is at present experiencing punishment, by means of legal claims, a massive drop in profits and stock prices. Furthermore, as a result of their ethical violations, Volkswagen lost a major segment of their market share in the industry for diesel cars. Ultimately, a company’s decisions and action should be aimed at maximizing the greater good for all stakeholders while still remaining ethical[10]. In the case of Volkswagen however, the company did not aim for the greater good, rather it opted for unethical behaviors when it opted to cheat their way into bypassing environmental regulations in order to make more sales.

It is also important to note that in achieving their business goals and objectives, most organizations knowingly or unknowingly adopt an individualistic point of view in that the enterprise, as a foundation of its ethical decision making process, is solely concerned with the maximization of profits completely disregarding all other factors. In the context of Volkswagen, it is clear that their motivation in making the unethical decision of installing a “cheat device” was motivated by the goal of making as much profit as possible even by going to the extent of breaking the law. The company, in taking an individualistic approach also violated its corporate social responsibility in that it lied to its customers as well as the government about the quality of their product and their diesel engines. All these actions were made with the sole purpose of increasing sales in a stringent market so as to ultimately increase their profits. The company was so focused on the bottom line that for a company that for years prior to the scandal had a heavy presence of diesel fuel vehicles and was widely known for its green initiatives and production strategies, abandoned its other equally critical objectives for profit maximization through deceitful actions. It thus evident that the company was not concerned about the damage that their vehicles would have on the environment as well as the health of the population[11].

On the other hand, there are many that believe that consumers have the greater responsibility towards the protection of the environment. This as explained by Hoffman is due to the fact that if the consumers are willing and are readily purchasing products that are harmful to the environment, then the corporations only have to comply with the environmental laws thus do not have any ethical obligation more than expected in the protection of the environment[12].This notion is reinforced by Bowie in his argument that organizations should not involve themselves in solving societal and environmental issues if such interventions lead to the negative impact on the organization’s profit maximization objective[13]. However, these arguments fail to take into account the fact that as consumers, we are individualistic, that is, a consumer, in making purchase decisions, acts for his or her own good, without any concern for the greater population. Also, this argument assumes that the consumer has comprehensive knowledge of the product they are purchasing. However, this is not true for the Volkswagen scandal. For starters, the Volkswagen consumers did not have any knowledge of the faulty software in their vehicles. Although one cannot make the assumption that with this knowledge they would not have bought the vehicles in question, a safe assumption can be made that the sale vehicles would have been halted much earlier and the consequences would have been less severe.

However, it cannot be said that consumers do not have any responsibility to be ethical in their consumption behavior. They bear a significant responsibility for protecting and preserving the environment, a responsibility that they have not exercised to the full extent. That being said, decisions that have a significant environmental impact should not be solely left to the consumer, and such decisions also should not be based on what the customers know or are willing to tolerate and accept. Because by doing so, the society runs the risk of organizations, such as Volkswagen, incorporating unscrupulous strategies that are ethically wrong and are harmful to the environment simply for the sole purpose of creating and maximizing profits and value for the shareholders.

Furthermore, consumers are not responsible for the development of environmentally friendly products. As stated earlier, this is the function of the organization. Therefore, it is the ethical responsibility of the company to educate their consumers on environmentally responsible behavior while at the same time practicing such behavior in their own dealings, an ethical responsibility that Volkswagen failed at significantly[14].The management at Volkswagen did not have, in this context, a moral vision, courage, and commitment. This lack of morals and ethics is evident in the fact that even after the results proving discrepancies were presented to them, the management still denied knowledge of this default and it was only after being threatened by the environmental protection agency that they finally admitted to their mistakes.

The Volkswagen scandal, however, is not the only case of harmful emissions going beyond the permitted levels. Various studies have presented that several diesel-powered cars emit more nitrogen oxide in normal conditions as compared to those emitted in laboratory tests. Such revelations just go to show that the problem may not entirely be blamed on the unethical business practices of companies, but rather shortcoming on the reliability and validity procedures utilized to approve cars as worthy. Furthermore, many in the industry are of the idea that the cheat strategies are not unique to Volkswagen rather other companies may also be employing technology[15].In light of this car manufacturers, especially those in the diesel-powered vehicles, should thus take up the responsibility of scrutinizing their productions strategies in order to make sure their cars are compliant as the diesel-powered car has been attributed as a viable option towards mitigating the effects global warming as they leave a smaller carbon footprint as compared to their petrol-powered counterparts.

In conclusion, The Volkswagen case shows the failures of a compliance attitude that is present in a majority of businesses today. It demonstrates that ethics are ordinarily considered as practices that are only practiced within the context of certain external rules that the government among other regulatory bodies enforces. Organizations like the Environmental Protection Agency authorize rules and regulations and businesses carry on with the activities any manner they deem fit as long as they do not go against the laid-out industry standards. This way of thinking has over the years been led to the notion that as long as a business is not caught violating the set out environmental rules and regulations, there is no harm even though there is actual harm to the environment and the society. Such thinking has thus led to such actions as those observed in the Volkswagen scandal. Obviously, there is no single answer for such a profound systemic issue. To keep something like this from happening again would require an upgrade of the administrative structure, business morals and ethics, corporate culture, and furthermore the education of engineers.

Laws and the enforcement of such laws should be fixed so that individuals in the multinational companies have a reason to deter them from such unscrupulous business activities. Corporate and Business ethics projects could then more perceptibly put forth the potential consequences of the ethical violations. Presently, the penalties that such companies as Volkswagen faces are only limited to fines and not criminal charges of imprisonment for the parties responsible. Taking into account the significant adverse environmental and health effects that the Volkswagen scandal had, fines are not an enough incentive to prevent future companies from practicing such unethical strategies. Studies have shown that the Volkswagen scandal had cause death and contributed to the further degradation of the ozone layer[16]. Such effects cannot be reversed or amended by fining a multinational company that can easily pay such fines and carry on with its business operations.

The education system also has the responsibility to perform an exemplary task in teaching ethics in engineering courses. It should be noted that the subject of ethics has only been introduced in engineering courses in the last few decades. The requirement for engineering students in light of this is the graduates are only required to have a basic understanding the professional and ethical responsibility. However, the majority of engineering courses and institutions do not have ethics as a core requirement; rather ethics courses are typically selective options. This lack of emphasis on the importance of ethics course can also be attributed to the compliance mindset whereby the ethics course is just a course that most engineering students take in order to reach the degree requirements thus the value of such a course is extremely limited. In seeking to rectify and prevent cases such as the Volkswagen scandal, it is thus imperative that the education system moves away from the compliance mindset and properly integrate ethics in the curriculums. This strategy will move away from the present situations whereby consultants are occasionally brought in to teach ethics in engineering as the engineering professors are not encouraged nor are they expected to incorporate ethics into their curriculum.

Finally, as stated earlier business enterprises, more so multinational corporations, have the responsibility to be active participants in the formulation of solutions pertaining to environmental problems. This, as stated by Hoffman, is because large organizations have the special knowledge resources and expertise that are invaluable in dealing with a variety of environmental issues[17]. The present society needs ethical cooperation and vision among all its members so as to solve its most urgent issues, especially those pertaining to the protections and preservation of the environment. As such, business enterprises have to work in conjunction with the government to come up with better ethical and effective strategies that aimed at the preservation of the environment as opposed to the current situations whereby corporations are happy with doing the bare minimum in the context of environmental protection and preservation.

 

Bibliography

Hermans, Martijn, and Pedro da Cruz Caria. “‘The Volkswagen’ case; morally permissible?.” (2016).

Hoffman, W. Michael. “Business and environmental ethics.” Business Ethics Quarterly (1991): 169-184.

Lam, Bourree. “The Academic Paper That Broke the Volkswagen Scandal.” The Atlantic. September 25, 2015. Accessed April 10, 2017. https://www.theatlantic.com/business/archive/2015/09/volkswagen-scandal-cheating-emission-virginia-epa/407425/.

S.R.H. Barrett, R.L. Speth, S.D. Eastham, I.C. Dedoussi, A. Ashok, R. Malina, D.W. Keith. “Impact of the Volkswagen emissions control defeat device on US public health” Environmental Research Letters, 10 (2015), p. 114005.

Schiermeier, Quirin. “The Science Behind The Volkswagen Emissions Scandal” Nature: International Weekly Journal Of Science. Published 24/10/15.http://www.nature.com/new s/the-science-behind-the-volkswagen-emissions-scandal-1.18426

Volkswagen. 2017. Volkswagen. Accessed April 25, 2017. http://www.vw.com/.

Zhang, Sarah. “New Study Links VW’s Emissions Cheating to 60 Early Deaths.” Wired. October 30, 2015. Accessed April 10, 2017.https://www.wired.com/2015/10/new-study-links -vws-emissions-cheating-59-deaths/.

[1]Quirin Schiermeier, “The Science Behind the Volkswagen Emissions Scandal” Nature: International Weekly Journal of Science.

[2]Bourree Lam, “The Academic Paper That Broke the Volkswagen Scandal.” The Atlantic.

[3]Sarah Zhang, “New Study Links VW’s Emissions Cheating to 60 Early Deaths.”

[4]Martijn Hermans, and Pedro da Cruz Caria, “‘The Volkswagen’ case; morally permissible

[5]Michael W. Hoffman, “Business and environmental ethics.” Business Ethics Quarterly (1991), 171

[6]Volkswagen. 2017. Volkswagen. Accessed April 25, 2017. http://www.vw.com/.

[7]Michael W. Hoffman, “Business and environmental ethics.” 173

[8]Martijn Hermans, and Pedro da Cruz Caria, “‘The Volkswagen’ case; morally permissible?.”

[9]Martijn Hermans, and Pedro da Cruz Caria, “‘The Volkswagen’ case; morally permissible?.”

[10]Ibid

[11]Barrett S.R.H., Speth R.L., Eastham S.D., Dedoussi I.C., Ashok A., Malina R., Keith D.W., “Impact of the Volkswagen emissions control defeat device on US public health”

[12]Michael W. Hoffman, “Business and environmental ethics.” 173

[13]Ibid 171

[14]Michael W. Hoffman, “Business and environmental ethics” 174

[15]Quirin Schiermeier, “The Science Behind the Volkswagen Emissions Scandal”

[16]Barrett S.R.H., Speth R.L., Eastham S.D., Dedoussi I.C., Ashok A., Malina R., Keith D.W., “Impact of the Volkswagen emissions control defeat device on US public health”

[17]Michael W. Hoffman, “Business and environmental ethics.”  173