Business Ethics Assignment: Case Study Analysis Of Volkswagen Group
Business Values & Ethics
A number of vehicle manufacturers have been found guilty of falsifying their data on car emissions in order to make the vehicle appear to meet vehicle emission standards set by their governments. This means that the cars were emitting more pollutants that are damaging to the environment than scientists had previously thought.
Using the VW case study from the recommended textbook and/or the related documentary Hard NOx (Dirty Money), answer the following questions:
Questions to be answered in this business ethics assignment:
1. Outline the main points of the emissions scandal. What role moral intensity have played in the decision making that led to the scandal?
2. Analyze, using Rest’s four stage model of ethical decision-making, at what stage VW deviated from the model in its decision-making processes regarding the attempted cover-up.
3. What context-related factors could have influenced executives and engineers at VW not to whistle blow on the fraudulent activities?
4. Do you think that VW’s senior management handled the scandal well? Could earlier admission of the fraudulent activities have reduced the negative impact on the firm?
5. How can the theories of Utilitarianism (Jeremy Bentham) and moral duties (Immanuel Kant) be applied to this case?
6. How could VW seek to improve their approach to ethics management in the future? Can claims that the firm has so quickly changed its culture stand up to scrutiny?
The question outlines the emissions scandal scenario of Volkswagen Group in 2015. Throughout this question of business ethics assignment, the discussion presents to elaborate on the key points of the happening emissions scandal. Besides, the moral intensity role regarding the decision-making process of the scandal concept will be going to also evaluated.
Prime points of the emission scandal
The US EPA provided an NOV (Notice of Violation) against Volkswagen Group on 18th September 2015. The issue was that around 480,000 Audi A3 automobiles and Volkswagen were equipped with around 2 litre TDI engines. These kinds of vehicles were also sold in the U.S in 2009-2015, resulting in the presence of emissions-compliance “Defeat Device” . The new generation of vehicles at VW did not meet the revised environmental legislation and legal provisions. In the early stage in 2014, the transport campaigners John German and Peter Mock initiated a program to prove that Europe has clean diesel vehicles. In this context, an approximately 1,300 miles test journey was accomplished between Seattle and San Diego to prove their clean emission concepts. In the result declaration time frame, VW Group was delivered some unusual findings, indicating the emission of harmful levels of toxic substances. Some of the toxin substances also crossed the legal limit 35 times. In this context, the EPA introduced an investigation concept in May 2014.
After the repetitive testing, it has been revealed that the result was visualizing the legit limits due to the appearance of minor software issues. Another reason for the emission scandal of VW Group is the presence of the diesel issue. According to the statement of senior management of VW, it has been disclosed that there was a huge discrepancy relevant to the NOx emission index and types EA 189 four-cylinder diesel engines . Simultaneously, the scandal was also made due to the absence of adequate evidence regarding the percentage of NOx, CO2, and diesel type. From thorough investigation, Lynch narrated that the appearance of three elements such as opportunity, rationalization, and pressure has created the wider scope of the “fraud triangle” by VW engineers. The engineers already knew that the installed defeat devices will surely explore the cheating concepts on revised enacted emissions standardization protocols and can get a $120,000 fine.
Role of moral intensity in the decision-making process
Morale intensity generally influences the individual’s judgmental attitudes towards the ethical issues happening in the workplace. Considering the scandal case scenario of VW Group, it has been outlined that the investigations were done by German Authorities to identify the exact root cause of scandal occurrences. The report has exposed that an agreed statement between VW Group and the U.S Department of Justice was structured in 2017 by addressing that the conspiracy was initiated at the very early stage of 2006. On the other hand, VW framed a task force to manage the official’s inquiries which was developed and designed to create cooperation while obfuscating the appearance of defeat devices. In 2014-2015, the engaged VW Engineers and Executives continually misled the data relevant to the vehicle emission index. On the other hand, the VW Engineers were also reluctant regarding the software update concept, resulting in the presence of wrongful data regarding vehicle emission index and ratings for all the cars in VW Group.
After happening the scandal incident, the German police arrested six former executives at VW for prosecution in 2017 as they were alleged in key conspirators and deliberately misleading the U.S Government during the investigation. On the other hand, the CEO’s decision-making skill and observation power were in a questioning position as he was completely unaware of the duties and role-play of VW Engineers while they were showing their reluctant attitudes towards software updates. In 2014, it was also revealed during the presentation delivered by Dr. Winterkom that CW diesel is continually producing a wider range of emissions on-road and henceforth, it will surely break the Environmental Protection Act and Clean Air Act. In 2017, auto components maker, Robert Bosch has to pay $327.5 million as compensation for supplying cheating software, despite having a direct wrongdoing contribution of him.
Finally, it can be concluded that the VW CEO and Senior Management should have detailed eyesight regarding the employee activities and performance to reduce the scope of the unethical decision-making process. As much as the top management will be able to critically monitor and interpret each one’s activities, the chances of scandal and other business-relevant issues will be minimized.
The second question discusses the ideologies of ethical decision-making with the implication of the REST four-stage model. From this understanding, the ethical decision-making process of VW Group for addressing the scandal issue will be critically evaluated. The ethical decision-making process will be helpful to execute valid and significant decisions for immediate mitigation of the existing issues.
Using REST model identifying the stage VW deviated from the decision-making processes for covering-up
REST Model is considered as the conceptualization of ethical decision-making in practical and theoretical perspectives. The key purpose of using this model is to critically assess the subjective behavioural patterns of various contexts. Rest developed this model by comprising four stages such as moral sensitivity, moral judgment, moral motivation, and moral character.
Moral sensitivity: In this stage, the happened events are analyzed and interpreted with a specified course of actions that can determine the effectiveness and impact of the events upon the individual and firm. Considering the 2015 scandal scenario of VW Group, it has been disclosed that the Company experienced an ethical dilemma claiming that the automobile supplier and manufacturer cheated on the air pollution testing in the United States.
Moral judgment: In this stage, the individuals can deliver a significant judgmental attitude based on their experiences. They also deliver their thoughts and perceptions to identify whether the necessary actions are right or wrong and whether the decisions will b able to address the experienced obstacles or not. Considering the scandal case scenario of VW Group, the CEO of the Company should have a more ethical decision-making attitude regarding the getting of fines from the automobile components maker without properly investigating the exact root cause of software up-gradation type .
Moral motivation: In this stage, the individuals can be able to accept the significant action plans to achieve the estimated results on a priority basis. The implementation pathway to motivate the individuals to achieve the desired deliverables is the appearance of pushing back by others and understanding the root cause of the problem. Considering the scandal case scenario of VW Group, it can be evaluated that the morale motivation has to spread among the VW Engineers and Executives to not to disclose the confidential and sensitive business data in front of the competitor and similar external organizations. At the same time, the Senior Management of the organization should have a detailed focus on the employee’s performance, workplace behavioural attitudes, and also read each employee’s minds during weekly meet-ups to spread moral intensity and motivation among them. As a result, it can eventually debar them to become involved in cheating and fraudulent activities.
Moral character: In this stage of the REST Model, the individuals must have adequate courage to follow his/her intentions and perspectives. That is why the individual’s moral characteristics completely rely on internal strategic thinking level and decision-making capabilities. Considering the case scenario of the VW scandal, it can be suggested that the employee motivation in the VW Workplace is highly required to change their negative moral characters that may accelerate the opportunity of emission scandal and software cheating.
By making alignment between the REST Model and VW case scenario, it has been profound that the CEO, Senior Executives, bottom-line employees, Engineers, and Senior Managers should have to build morale, self-actualization, and trustworthiness to avoid the scope of such an emission control in the future . Before making any ethical decisions, a proper meeting has to arrange by calling all the involved senior personnel to extract the most authentic and validated decisions for existing issues resolving.
Finally, it can be acclaimed that the four-staged model in ethical decision-making has a significant contribution to cover up the emission scandal-relevant issues. The decisions that have been made by the CEO of VW were unethical as the CEO did not support the Senior Management, Engineers, and Executives while they were being arrested by German Police. In order to make more ethical decisions, the CEO should implement the REST Model to spread higher morale intensity among the subordinates.
The question outlines the context-relevant elements stimulating the engineers and executives of VW for preventing themselves to do whistle-blowing on fraudulent actions. A whistle-blower in a fraud commitment is considered as an individual who is involved in sharing confidential and sequential information with the external competitive public and private organizations. The question presents the identification of context-relevant factors that motivate the VW bottom-line, as well as senior employees to prevent them from committing unethical and illegal activities by decreasing the company’s image and reputation.
Context-related factors influencing VW’s engineers and executives for preventing whistle-blowing in fraudulent commitment The context-related factors that have a prime influence in preventing whistle-blowing concepts are considered organizational commitment, cash reward, philosophical values, and ethical climate. Considering the first factor, the CEO of VW Group should have a legal organizational commitment for each employee so that the breaking of commitment by sharing confidential and sensitive business data and organizational information with similar external and competitive firms. As a result, the employees will be fearful to break the promises and commitment as they will be automatically entitled to legal provisions against the fraudulent activities. This type of strict protocol and organizational commitment could prevent the executives and engineers at VW to become acting as whistle-blowers. Considering the second factor, the cash reward could stimulate VW’s seniors and subordinate employees to ignore becoming whistle-blowers . Through this factor, the well-organized and dedicated team players are always appreciated, recognized, and rewards in monetary patterns in a form of bonuses, performance appraisals, and salary hiking processes.
It could stimulate and trigger the employees to become deeply involved in their workplaces and also enhance their morale power for not disclosing sensitive business information in front of rival and competitive firms. As much as this type of motivational strategy could be properly implemented, the employees could rethink before role-playing as a whistle-blower. Considering the third factor, the philosophical viewpoints of each employee can be accelerated with the conduction of interpersonal skill development programs and sessions by VW CEO. The philosophical understanding of executives and engineers at VW could motivate them not to engage themselves in whistle-blowing and fraudulent activities. Considering the fourth factor, the ethical climate at VW could have a tremendously positive influence to prevent the internal stakeholders to commit fraud . In order to minimize the chances of ethical issues and ethical dilemmas at the VW workplace, the CEO could focus on the revision of existing organizational protocols, legal policies relevant to anti-discrimination, zero cultural issues, employee rights, and gender equality. All these factors could prevent the executives and employees at VW to commit fraud dwarf and fraud triangle .
The employees at the VW workplace have experienced cultural issues and ethical complexities that trigger them to become involved in fraud dwarf. The continuous discrimination, poor organizational commitment, absence of proper ethical principles, and zero scopes of cash rewarding demotivates the bottom-line employees and gradually pushed them to disclose sensitive organizational data to get monetary rewards.
The question represents the critical assessment of VW’s Senior Manager’s role-play regarding the handling of the 2015 emission scandal and identification whether it has been a positive contribution or negative contribution to the company. On the other hand, the question also outlines whether the earlier precautions have been able to decrease the rate of fraud dwarfs or not.
Perspectives regarding the scandal handling process of VW’s senior management
After the happening of 2015 emission scandal, the CEO of the Company was at first have no control to handle the entire negative impact on the organizational revenue and profit structure at both the domestic and international levels. Due to the irregularities of software installation and up-gradation procedure in the diesel engines, the CEO has to pay approximately €16.2 billion as a penalty charge . At the same time, the CEO was also unable to handle the legal issues during the post-scandal phase. The legal provision that has been considered in this context was €7.0 billion for the substantial risk estimation. At the same time, different types of legal complexities such as product-relevant lawsuits, and criminal proceedings are violated as the emission rate is violating the environmental protection act. The overall impact of the emission scandal upon the VW Group is the downgrading of the financial performance of the Company from A3 to A1. After the emission scandal scenario, the Company’s around 800,000 petrol cars are also affected by exploring reliability issues regarding emission rates among the global community. After the investigations from the US regulators, it has been also revealed that the emission scandal was not only appeared due to the fault of software engineers but also there was a presence of huge conspiracy among the Senior Managers. During the post-scandal period, the employee numbers in VW Group were gradually decreasing, and the vehicle cost was also degraded, indicating the lower profitability and in-stabilization in sustainability in the competitive dynamic marketplaces. Simultaneously, the CEO was also unable to mitigate the fraud dwarf that resulted in 526k tonnes of NOx, emitting beyond the limitations . Henceforth, the poor management was entitled to VW Group who was unable to handle the scenario during the post-scandal phase by immediate recovery of the lost reliability and transparency regarding products between VW Group and targeted domestic, as well as a global community.
Analyzing whether earlier checking of fraudulent minimizing the negative effectiveness
It can be articulated that earlier checking of fraudulent commitment from the VW employees can reduce the negative effect of scandal emission upon the Company. In case the CEO of the Company could provide detailed attention to monitor each bottom-line and upper-line employee’s performance then the employees could have zero courage to share the confidential information with the rival and competitive firms . Besides, the strict organizational commitment and legal provision adhering could reduce the chances of whistle-blowing and fraudulent activities among the senior executives and software engineers. In this case scenario, the CEO of the Company could have to adopt a “cash rewarding” strategy and implement a “positive ethical culture” to reduce or permanently eliminate the fraud activities at the very early stage.
It can be acclaimed that CEO at VW Group could a detailed monitoring and interpreting capabilities to avoid the chances of whistle-blowing concepts and fraud dwarfs among the bottom-line and upper-line employees. The earlier detection could also fully eliminate the chances of emission scandal. In this context, strict regulations regarding employment termination, wage-cutting, and dismissal were required to prevent the employees to become involved in fraud activities.
The question outlines the application of ethical theories such as Utilitarianism along with moral duties based on Immanuel Kant in the given 2015 scandal case scenario of Volkswagen Group. With the help of this ideology, the prime deliverables regarding ethical considerations and moral intensity of the case in profit-making elaborate.
Application of moral duties of Immanuel Kant and Utilitarianism theory in the case scenario
According to Jeremy Bentham’s Utilitarianism theory, it has been articulated that the actions will be considered as a right one in case the outcomes of the proposed or implemented action bring happiness, pleasure, and positive vibes. The prime principles of this ethical theory are to provide intrinsic values relevant to happiness and pleasure, offer equal happiness for all, and consider the actions as insofar. Considering the case examples of the 2015 VW Group emission scandal, the incident was violating the basic principles and procedures of the Utilitarianism theory. The impact of the scandal was not in pleasure condition as the Company’s car sales growth, brand recognition, and image reputation, overall revenue and profit score, and customer’s reliability concept were in a degraded situation. In order to generate happiness in the VW workplace with the implication of this ethical theory, the CEO could have detailed eyesight on minor and major changes and performance evaluation of each employee to avoid the whistle-blowing and fraudulent commitment. With this theoretical approach, VW Group could reconcile the organizational culture, values, vibes, and processes through which the annual sales index and revenue could be skyrocketed.
On the other hand, Kant’s moral duty concept emphasizes the ideologies of moral characteristics and morale intensity through which the individual’s motive can be determined by self-principles rather than emotional feelings or desired consequences . One of the fundamental ideologies of this concept is to deliver a perfect duty through which the gradual enhancement of self-actualization and responsibility to aid others are preceding. The theoretical concept has aligned with the 2015 emission scandal VW Group case to determine how the duty of breaching has been applied and how the Company has been fully unable to apply this theoretical ideology in the business operations. The Senior Executives and Software Engineers in the Company were not performing the perfect duty and role-play, resulting in the emergence of whistle-blowing, fraudulent activities. The improper duties of both upper-line and bottom-line employees of the Company generated emissions scandal, violation of Environmental Protection Law and Clean Air act, degradation of worldwide sales density, maximization of employee turnover, and loss of customer’s trust.
Finally, it can be concluded that the question introduces how the scandal case scenario has violated both Utilitarianism theories and moral duties concepts with proper justifications. Based on the interpretations, it can be suggested that the Company could retain its profit score and sustainability standards in the competitive era by adopting the inner ideologies of these theoretical concepts.
The question outlines the ethics management and implementation path of VW Group for further enhancement in the business profit in the competitive markets. Besides, the study also addresses that the Group has promptly amended its organizational culture and structure to revive its profit scale and revenue status.
Seeking improved future ethics management at VW
VW Group could seek different ethics management protocols and principles to accelerate the ethical culture at the internal place of the Company. In this context, the Company could have detailed eyesight on the implication of seven code-of-principles to maintain a well-structured and positive work culture. Besides, the CEO, as well as the Senior Manager of the VW Group could promote ethical behavioural ambiance at the workplace to make the employees ethically acknowledgeable for betterment in the employee performance and operational efficiency. Simultaneously, the Group could arrange the in-house training sessions on ethical behavioural pattern acquisition to establish a good ethical management structure in the VW workplace. The prime impact of this ethics management in the future would be the maximization of profit scale, expansion of the business network, enhancement of brand recognition, and maximization of customer’s reliability in the global aspects.
Checking the claim on quick cultural amendments in standing up the scrutiny
VW Group is trying to swiftly make amendments in their organizational culture to maximize productivity and operational efficiency for business sustenance in the competitive marketplace. The CEO of the Group is focusing on ongoing surveillance and multipronged transformation long for business network expansion . The Group is also conducting the “Whistle-Blowing program” to spread awareness to fully eliminate the scope of fraud dwarfs by the employees. The Company is also launching the “Mentorship Program” to upgrade its work culture. With the increase of the employee training session, road-show presentations, and question-answer sessions, the Company is trying to modify its culture by staying transparent and trustable towards the employees.
At last, it can be claimed that business ethics management is playing a significant role for VW Group to accelerate its employee trust and transparency, indicating the enhancement of employee productivity and performance rate for better profitability and sustainability.
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