VW Co: Losing Trust Over Business Ethics Issues - Essay Sample

Introduction

VW Company is marred with several ethical issues that the executive needs to look keenly. Business ethics is a very crucial element that all the businesses need to emphasize on to ensure that they comply with both the legal and ethical requirements of the business setting. However, from the issues outlined in the VW case, the company is seemingly losing the basic trust level between it and its consumers. The problem of diesel emission during the drive is a critical environmental concern that cannot be taken lightly by any state potentially affected by the same. It is indeed of great interest that the emission at test is hugely different from the discharge during drive after the purchase of the cars. The critical issue that makes this to be an ethical problem is that the company is intentionally responsible for such emissions of diesel (Siano, Vollero, Conte & Amabile, 2017). The use of defeat devices installed in their cars is a critical ethical question that needs to be addressed by the company. As a middle-level manager, I may not be in the position to directly address the issues stemming from the organizational management. But I believe this report to the senior management would bear some fruits.

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Looking at the explanation of the case below, it is clear why this should be explored as an ethical question. In 2009 and 2010, VW supposedly marketed clean turbocharged direct injection (TDI) diesel model of the Jetta and Golf, respectively, in the United States market (Bovens, 2016). They were doing this in response to the new Tier 2 emission standards required by the Environmental Protection Agency (EPA) of the U.S. for the diesel engines in passenger cars, the challenging parts were the strict new standards on nitrogen dioxides (NO2), and NOx, that is nitrogen oxide (NO) (Bovens, 2016). NOx is a significant contributor to smog. According to the company, their models did not need selective catalytic reduction (SCR) technology, which entails the use of AdBlue tank or urea to cut down on the emissions of NOx. They instead relied on the cheaper new lean NOx trap (LNT) technology (Bovens, 2016). The trap does not do much in reality, and the manufacturer knew this very well. The real ethical issue now comes in when VW decided to fit their cars with software that detected when they were being tested to reduce NOx under test conditions. However, NOx emissions on the road were far much incompliant with the Tier 2 standards (Blackwelder, Coleman, Colunga, Harrison & Wozniak, 2016).

The company should consider thinking about the role of business in society. VW needs to understand that it is mandated to produce goods and services that satisfy the needs and demands of the public. The aspect of "needs" should not be taken lightly by the company as they produce their products. The environment is a critical factor that needs to be protected through all means since everyone needs to stay in a clean and safe environment. Any business activity compromising the quality of the environment should be avoided at all costs by engaging in sustainable production. The company can achieve this by engaging in corporate social responsibility (CSR), which takes different forms, and protection of the environment is one of them.

The key stakeholders affected by the issue, in this case, are the VW employees, the customers, shareholders, suppliers, Managers, dealers, the environment, the government and its courts, and Volkswagen executives and board members (Blackwelder et al., 2016). The multitude to which all these stakeholders are affected varies, ranging from stock market changes, lost jobs, tarnished reputation, and environmental issues. However, the narrow pursuit of profit maximization and shareholder value has resulted in a troubled end, and the shareholders have suffered dramatically from this (Stern, 2015). The shareholders have suffered significantly from this compared to the rest of the stakeholders. VW cheated in-dash for profitability and more significant market share, and the shareholders have received undue attention at the expense of others. The environment has also suffered from emissions, and this is irreversible damage, which should be considered extremely severe.

Ethical choices can have significant impacts on companies, and there are many cases of companies that have suffered or benefited from their ethics. It does not need rocket science to understand the fact that the wrong ethical decision can affect the profitability of a company. Fraudulent corporate activities draining millions of dollars from firms have raised concerns over the quality of moral climate in the corporate world (Woodbine, Fan & See, 2014). Unethical decision making of a top manager is an issue that dominates most of the recent scandals. An excellent example of companies that collapsed due to weaknesses of corporate governance that are overlooked and encouraged by the top management unethical behaviour is Enron and HIH Insurance (Woodbine, Fan & See, 2014). According to Ethisphere Institute which is the global leader in advancing and defining the standards of ethical business practices, they listed some of the most ethical companies and related how ethics directly links to business success (Mandru, 2018). In the list were Ford Motor Company, Dell, Intel Corporation, L'Oreal, Marriott International, Levi Strauss & Company, Manpower Group, Starbucks, Royal Carribean Cruises, Marks & Spencer, and Xerox among many others. All these listed companies are unbeaten in their businesses, and this reveals the implicit connection between business success and ethics (Mandru, 2018).

The company now faces the problem of establishing credibility to its consumers and shareholders. When a company's reputation is damaged, there are no set guidelines to follow. However, there are three significant recommendations that I would give that could help in restoring the reputation of the company. The company should consider joining an independent verification agency, having the company start under a new name, or set up a bond (Zhou, 2016). To restore credibility to its company, Volkswagen should implement as many measures as possible. Failing to take any action would be the worst-case scenario as it may lead to a consumer boycott. The consumer boycott is a lethal action that would lead to a drastic drop in sales and a resultant collapse of the company (Zhou, 2016).

After restoring the company reputation, the management should now consider engaging in ethical practices to ensure that the products meet the various standards required by the government through its regulatory institutions. Employees should also be recruited based on their satisfaction of academic qualifications and their ability to meet the organization's culture, a history of good ethics, among many other factors. Another critical thing to recommend is that the company should critically view its role in society as a company that has gained popularity over several years due to its excellent products. This reputation should be protected by all means, and the management has to take action to ensure that ethics are maintained within the organization and all its processes.

Applying Two Ethical Theories to the Case Study

The two theories that would be applied in this case study are the utilitarian theory and the virtue theory. There are many ways in which these theories apply to the VW case. The utilitarian theory is an effort for providing the answer to the practical question of what a man ought to do. The answer to this question is that a man ought to act in a manner to produce the best possible consequences (Renouard, 2011). Talking about its effects, the utilitarian theory outlines both the bad and the functional consequences that result from the decision made by an individual. Such impacts could either arise after the act has been performed or during the process of the action. According to Miller, acts should be classified as morally wrong or right on if the consequences of such an act are so significant that you would wish to see the doer of the action compelled, and not merely exhorted and persuaded to act in an appropriate manner (Mihelic, Lipicnik & Tekavcic, 2010). On the other hand, virtue theory is one of the normative ethics approaches. It is more positive, attractive, comprehensive, unified, and practical than all the traditional approaches to business ethics. This is because it is concerned with the type of person that one needs to be and not the rules telling people how they should act.

Application of Utilitarian Theory to the Volkswagen Case

Utilitarian theory is a consequentialist theory that judges actions based on their consequences or outcomes and their aims to minimize happiness (Renouard, 2011). The meaning of this is that the approach aims at finding the activities that would generate the highest good for the most significant number. In the VW case, the dilemma is about whether it is ethically permissible installing the defeat devices. In this case, many stakeholders would be affected by the consequences of such ethical decisions. Some of those that would be affected include the manager, the general public, consumers, dealers, and the shareholders. There are both positive and negative impacts of the decision to the stakeholders. The positive consequences can be regarded as pleasures, and they include the following - the increased happiness resulting from the increased profitability brought by the defeat device. There is also a possible increase in happiness points for the manager from the perceived success resulting from the high sales of the cars. There were healthy sales of the Volkswagen cars, which increased the financial rewards and t...