Volkswagen Scandal as One of the Auto Industry’s Biggest Scandals

Business ethics means applying or implementing set of appropriate business policies even if difficult obstacle comes in between for example obstacles like without bridging government laws, refraining from corrupt practices and other illegal practices. Ethics plays an important role in individual judgment and decision which lead to downfall or profit in businesses. When thinking about ethics, it consists of all the ingredient like integrity, honor, fairness, honesty, principles, moral, value, conscience, right and responsibility which made up the principles of ethics. We become moral individuals by practicing good at being truthful by habitually telling the truth and becoming honest by trying always not to be dishonest. It is similar with the business ethics where individual play at organisational level. It is simply another level where business man or woman takes decision on bigger picture. For example, if managers conduct his business with his ego of profit maximisation and sheer believe on dominance then they will take all the decisions accordingly with his temperamental and ego. If, on the other hand, they are aware of moral values and social policies that affect their own societies and the wider world, then they will be likely to make a judgment purely weighing based on cause and effect to their society.

Social responsibility means the obligation a business assumes to have for society. They have to be socially responsible for maximising positive effects and minimising negative effects on society. The economic responsibilities of a business are to produce goods and services that meet the needs and wants of society at a price that can perpetuate the business while also satisfy the needs of the investors. Ethics plays vital role in shaping society we live now, for instance if the country is led by the leaders who are all corrupt then eventually all the employees will follow the lead and imagine how the society will suffer with this consequences of these corrupt individuals. Connecting with the Volkswagen scandal, one of the notorious examples of how corporations can shape the ethical and political issues of the environment. Their deceitful action was not discovered for so long year and just imagine how much it would have done harm to environment, small growing business, competitors and loyal customers who had full trust in the brand. The Volkswagen Group which is headquartered in Wolfsburg, Germany owns many range auto company brand like Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, and Skoda. Volkswagen is one of the gigantic auto manufacturing companies which were widely appreciated and trusted brand up until this scandal was unfolded. When this scandal was unfolded it made headlines not because of the legal and financial repercussions or profit they made different countries, but because of the lasting damage caused on society and the environment which cannot be claimed back by their money or any product.

When conducted a test, they rigged eleven million car carbon emission tests which is estimated to have emitted at least one million tons of carbon each year leading to permanent damage to our environment. Each year different government comes together to talk about the climate change and one of the ways to reduce carbon emission is to go green or electric car by the auto manufacturing industries. Exemplifying particular country, Bhutanese government have promised to maintain sixty percent of their landmass with forest cover and every year they introduce to electric cars and taxis. In 2016 country announced that they are not only carbon neutral but also carbon negative which means they emit lowest carbon compare to any country. While some other country like China and India which are the highest polluted country are promising to reduce fossil fuel consumption and substituting it to renewable power sources, Volkswagen the one of the prominent auto manufacturing company just set aside their principles, laws of ethics and compromising the environmental and climate change challenges in order to maximise profit and become one of the top companies in the world.

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Volkswagen previously had a goal of becoming the world’s largest automaker by 2018, but the scandal caused the company to lose one third of the company’s market capital. In an attempt to compensate for the emissions violations, Volkswagen ordered a voluntary recall, issued a public apology, and the CEO along with other directors of the firm resigned. The company is also facing lawsuits and criminal charges and the future of the company looks grim. In order to analyze how such a global company could commit fraud for so long on such a big scale, it is beneficial to view this case as a problem of regulatory capture involving information asymmetry, issues with oversight, and private governance. This analysis attempts to examine the problems of social concern presented by the behavior of Volkswagen in the international economy and provide some recommendations to increase the system of accountability within the global auto industry. The International Council on Clean Transportation suspected that Volkswagen had installed a defeat device because many testing were done but each time result of carbon nitro oxide came different. In the initial test none of the researcher doubt that one of the biggest auto manufacturing company would have taken this step but eventually after carefully examining the default they found programmer writes the code that tells the computer it is on the official test cycle and allows for changes in how the emissions control system. In this case they can manipulate the how much carbon emission the car emits by just installing the devices. They have broken the ethical principle of the any Organisation by doing it, in short they have cheated the whole world, and they have cheated the customers, dealers, and other competing auto manufacturer and so on.

Volkswagen was soon investigated by any other countries suing them. Prosecutors from the United States, South Korea, France, Italy, Canada, Germany, and the UK tried to find out how many people knew of the deceit that occurred within the corporation. One German newspaper even labeled this scandal as the “most expensive act of stupidity in the history of the car industry”. As news of the scandal began to leak, Volkswagen’s stock price immediately began to fall. Volkswagen admitted that 11 million cars worldwide had been fitted with the defeat device. Then on November 2, 2015, it was also found that the same device were used on additional Volkswagen, Audi, and even Porsche models. However, the biggest tragedy of this entire scandal is the release of enormous amounts of nitrogen oxide into the atmosphere. This gases cause smog, acid rain, and the formation of the ground level ozone which are associated with adverse health effects such as inflammation of the airways and respiratory problems including asthma, bronchitis, emphysema, etc. High levels of these harmful gases also cause damage to vegetation including reduced growth. The European Union also published an inventory report in 2011 that stated the majority of nitrogen oxide emissions come from the road transport sector at 40%. It is important to realize that the environmental damage of this scandal will have a far more lasting and immeasurable impact on the ecosystem. Their ambition to become top auto manufacturing companies might have caused huge damage to our ecosystem which may take thousand years to recover.

Aside from public apologies, Volkswagen announced a voluntary recall of all the vehicles, The CEO had to immediately resigned and Volkswagen’s top US executive also stepped down. Head of other brand like Audi, Porsche were also suspended which were also leveled as way of rectifying their mistakes. The Volkswagen head office in Wolfsburg and other offices were raided for investigation purposes. It is impossible to fathom that only a handful of people were involved in the master plan of the manipulation software. Perhaps the company made the wrong decisions and followed a wrong strategy, but this scandal was way too big to be an accident. It was one of the auto industry’s biggest scandals proving dishonesty in conducting a business. Firms have an obligation to be open and honest to owners and managers should be held accountable to stakeholders. However, this was more than just a problem of simple deceit. This case involved more complex theories that deal with the theory of regulatory capture. The main issue here is how manipulation software went undetected for so many years other than Volkswagen should be held as per their actions. If it were not for the existence of non-governmental Organisation, this scandal may have never been uncovered and Volkswagen would have proceeded to emit harmful gases above permitted levels. Environmental groups had previously warned national car approval authorities and the European Commission that diesel cars emitted much less Nitrogen Oxides in official laboratory tests than on the roads. Many also knew that this was due to tricks used by manufacturers, but regulators did not take urgent measures.

These cases have questioned the trust worthiness and importance of ethics of any Organisation. It also proves how easily people are being deceived by the big Organisation in order to maximise their profit and increase their market value setting aside the basic ethical values.