AWB Scandal, Volkswagen Emission Scandal - Case Study Example

Ethics By: Institution: Course: Instructor: Date of submission: AWB scandal also referred to as AWB oil-for-wheat scandal enrolls kickback payment to the Saddam Hussein Regime that contravened Oil-for-Food Humanitarian Program of United Nations. AWB is one of the chief marketers of grain located in Australia. For the better part of 20th as well as 21 century, the organization was the only wheat exporter in Australia. The company made these payments to win the lucrative contract of wheat, and this contradicted the sanctions made by the UN against the regime. Before the questioning of the practice in 2005, AWB used to supply 90% of wheat in Iraq market. Through the UN investigator, Paul Volcker, it was found out that AWB acted as the largest kickback source to the Regime of Iraq. After making a sale of approximately 6.8 million wheat tons to Iraq from 1996 to 2003, the company was awarded a total of $2.3 specifically from the BNP account (Overington 2016, p. 23). In return, an illicit fee of approximately $221.7 million was paid to Iraq, and this was about 14% of the paid kickbacks during the OFFP. IGB (Iraq Grain Board) had the responsibility of ensuring the transportation of the humanitarian supplies for AWB from 1997 to 1999, but this was amended in 1999 after AWB changed its name to AWB Limited. The new contract required that AWB Limited was to make some payment for inland wheat transportation after it was delivered in the ports of Iraq. Since it lacked its fleet of the track, the company under the IGB's instruction contracted Alia, a transportation company based in Jordan that made an agreement to ensure the servicing of the requirements of AWB. The initial agreed trucking fee was $12 in every ton of wheat, and this was the case until the middle of 2000 when this price was raised to $15 in every ton (Bartos 2016, p. 27). This fee rose to between $45-56 in every ton standing 2001, and the sharp upsurge was attributed by the memoranda that the officials of Iraq issued demanding that the tracking fee transfer would attract a 10% ASSF (after-service- sales fee) (Volcker, 2005). AWB paid a consistent monitoring fee of $25 in every ton and the average of $20-31 of ASSF per every ton. However, the reality is that Ali the Iraqi Transportation Ministry partly owned Alia. The Iraq government was not directly paid via the supply under the OFFP because all the exchanges of money went into the escrow account of BNP. However, AWB failed to arrange payments made to Alia to go via the escrow account of BNP, consequently making the payments directly to the government of Iraq. Apart from that, the management of the wheat transportation was by the employees of Iraq Government, as there was no utilization of a third party company of transportation (Bartos 2016, p. 35). The current condition set by the Iraq Government was that there would be no acceptance of the wheat if AWB Limited failed to pay the tracking fee and this was a demonstration of the Iraq government's unwillingness to carrying out business without the improper fee payment as well as the initial hesitation of AWB in making the payment. This was a demonstration of how the kickbacks were bribes. In the Scandal of AWB, the Government of Iraq offered bribe by providing AWB with a large contract of wheat provided that the organization was willing to make the payment of ASSF and trucking fee to Alia. On its part, AWB committed an inappropriate act by breaching the sanctions of OFFP as well as making the payment an illicit fees payment to the Government of Iraqi through Alia (Overington 2016, p. 27). The advent of globalization has led to the intertwining of diverse cultures as many businesses are making an attempt to ensure an adaptation to the borderless world. Subsequently, cases of white-collar crimes have been reported across the borders and between countries, and this can impede global development as well as growth. Although the government of Australia was not majorly the only entity which was involved in the scandal, the incidence earned a place in the political consciousness of Australia. In 1939, there was the establishment of the Australian Wheat Board, and its privatization occurred in 1999 leading to the renaming of the company to AWB Limited. The company was enjoying the monopoly, being the only company that could export wheat in the whole of Australia and the attainment of this was via the utilization of the regime of single buyer whereby the growers of wheat could ensure that their product was sold via single desk. The purpose of doing this was to make sure that the farmers were not undercutting one another on pricing, ensuring that Australian wheat was attracting the highest price. Since 1948, AWB has been selling wheat to Iraq and during the program of Oil-for-Food; the organization was the largest humanitarian goods supplier. Following this scandal, the company began losing in profitability, and this trend continues up to date (Overington 2016, p. 29). The Volkswagen Emission Scandal occurred on 18th September 2015 following the declaration by the United States EPA (Environmental Protection Agency) that the Germany Car makers had violated the Clean Air Act after the agency ascertained that Volkswagen had deliberately programmed TDI (turbocharged direct injection) to ensure the activation of individual controls of emissions only when the laboratory testing of emissions occurred. The agency reported that the VW vehicles that were being sold in the US contained ‘defeat software or device' within their diesel engines ensuring the changing of the performance to ensure the improvement of the results (Swinburne University of Technology & Kantoor, & Angela 2016, p. 17). VW had substantially pushed to ensure the selling of their vehicles in the US market, and this was backed by a huge campaign of marketing, depicting that their vehicles had the capacity to have a low emission. The finding by the EPA covered a total of 482,000 vehicles present in the market with the, US only and among these include VW models Jetta, VW manufactured Audi 3, Passat, and Beetle. VW further revealed that approximately 11 million of its vehicle sold across the globe was having the "defeat device." EPA also accused the company of ensuring the modification of the software on the diesel engines that were fitted to some VW, Audi and Porsche models (Arbour 2016, p. 1). This claim was denied by the company and this affected not less than 10,000 vehicles. In November last year, the company indicated that it has identified "irregularities" when it comes to the tests to ensure the measuring of the emission levels of carbon dioxide that had the capacity to affect approximately 800,000 vehicles within Europe. However, the company made an establishment that the number of vehicles affected by this annually stood at 36,000. According to EPA, it is clear that these cars' engine were had software installations that had the capacity to sense the scenarios of testing by ensuring the monitoring of speed air pressure, engine operation, as well as the steering wheel's position. When the operation of the car was under the controlled conditions of the lab which mainly involved placing them on a stationary rig of the test, the device seems to place the vehicle somehow in safety mode whereby the engine gained the capacity to ensure the running below the regular performance and power. Once these vehicles hit the road, the engine switched from test mode to normal mode resulting in the emission of pollutants of nitrogen oxide at a level of 40 times about the recommended US level. Through its then boss Michael Horn, the company admitted that it had the company was completely screwed up. The company's CEO indicated that the firm had broken public and customer trust and as a result, he resigned from his position. He was replaced by Porsche's former boss Matthias Muller, who upon his appointment indicated that he was on the track of winning back the trust that the customer had built with the public as well as customers. There was the launching of the internal inquiry. The two cases are similar in a way in that they the top management were either forced out or resigned. Apart from that, both the AWB Limited and VW Volkswagen registered a massive loss that is still felt up to date. The stakeholders involved in the VW Volkswagen scandal included the workers, the general population, the employees, and the EPA. Excessive inhalation of nitrogen dioxide increases the chances of acquiring respiratory Problems. This gas also can inflame the lung's inner lining and at the same time lead to a reduction of immunity leading to the infection of the lung, and this eventually leads to various problems including coughing, flu, bronchitis, and wheezing. Therefore, the action taken by EPA was for the interest of the American citizens who were likely to suffer from the emission. On its part, the stakeholders of the AWB scandal included the wheat farmers in Australia, the top management of the firm, the government of Iraqi, the UN, the Iraqi Government, Alia, and the consumer (Bartos 2016, p. 25). The legal involvements present in this scandal include the seeking of the proper evidence of any item, person, or content that took part in the provision of illicit service, ensure the delivery of benefit out of the intended purpose, as well as acting as a complaint of the bride. The legal issue revolves around the tender request by IGB with the inclusion of illicit fee, contract that existed between the AWB and IGB and this included the illegal fee, and finally the request to ensure the payment of additional fee that was outside the OFFP and the compliance of AWB to ensure the payment of this fee. It is thus clear that the AWB was a motivated offender because it involved itself in the payment of the illicit fee. The corruption allegation made against AWB made the company to seek assistance from Arthur Andersen to identify whether there was a failure of the control systems that were in place or the existence of any illegal or unethical behavior within the company (Bartos 2016, p. 33). It was found that the firm's management was under intense pressure to ensure the achievement of sales. Apart from that, the company also found to have committed acts that could damage its reputation by hiding the payments of a truck fee, as well as the trepidations that surrounded the excessive trucking fees increase. An investigation into the matter was conducted. Since the discovery of the payment, there has been a major restructuring in the organization with the replacement of the board with new one. A new team of management was selected altogether. On its Part, the major investigation was conducted the EPA of US and that led to the unveiling of the scandal. Numerous countries including Canada, the UK, Germany, and Italy, France, and South Korea have also conducted an investigation into the matter. Globally, environmental groups, politicians, as well as regulators are questioning the legitimacy of the emission testing of VW. In both cases, there has been the contravention of ethics. VW Volkswagen, like OWB, cheated its way to increase sales. They did so by indicating that the vehicles did not emit nitrogen oxide yet the levels were very high. In both cases, there was no maximization of the value of the shareholders since the two companies registered a massive loss following the scandals (Swinburne University of Technology & Kantoor, & Angela 2016, p. 14). It is evident that the Scandal by VW Volkswagen is worse compared to that of American Energy Giant, Enron. The majority of the corporate scandals emanate from failure to come out clean regarding corporate wrongdoing or negligence. Other reasons to back this claim are the fact that: Higher pollution of air lead to adverse health problems and loss of life VW has been at the forefront of ensuring push for diesel throughout Europe, seeking for governments approval them via policy (Arbour 2016, p. 1) The lawsuit, as well as the fine for VW Volkswagen, has a high likelihood of being larger compared to that of Enron Although Enron experienced massive losses, Volkswagen is likely to be wiped out despite the company being financially healthy. The image of Germany, as well as that of its other automakers, is being damaged by this scandal. AWB scandal is not as high as Enron scandal regarding magnitude. It is nowhere close to the Enron scandal. Whereas Enron scandal led to the bankruptcy of the company, leaving many workers with stocks that were worthless in their pension, The AWB scandal only involved illegal payment. Apart from the replacement of the top management, the rest of the company's operations went generally Despite registering some loss. However, the two scandals are similar since the top managements were being replaced with a new management team. Another area in which the two are similar is the fact that some level of investigations were carried out to determine their cause. Improvement and Changes Overview of ethical theories Ethics entails a philosophy branch whose aim is to determine how actions by human beings can be judged as either wrong or right. Utilitarianism theory indicates that the extent of suffering or happiness generated by an action of an individual is what actually matters. Therefore, acting rightly entails ensuring the maximization of happiness and minimization of suffering around an individual. The theory of deontology calls for the need to perform an act because it (the act) is characterized by universality. It entails the formal rules utilized for passing judgment about the wrongness and the rightness of an act. This theoretical position indicates that the wrongness and the rightness of some acts exist independent of the costs that it produces. Virtual ethics theory indicates that character is what matters most above all things. Leading a life of ethics requires one to develop or demonstrate virtues of compassion, courage, temperament, and wisdom. On the other hand, the contact theory provides a proposal of having a thought about ethics on the basis of agreements that occur between people. Both VW Volkswagen and AWB Limited should ensure the creation of a transparent environment which will make sure that the employees are reporting incidences, improper conduct, risks, as well as construct controls that will assist in deterring as well as controlling improper or illegal conduct. Apart from that, the two corporations should think of the way they can educate their employees with the aim of preventing the occurrence of such incidence. It is essential to ensure that the employees especially those cheating as well as engaging themselves in illegal bribery be educated regarding the adverse effects of such action. VW Volkswagen, for instance, ruined its reputation as being the world's best manufacturer of the vehicle (Arbour 2016, p. 1). Although the two corporations wanted to make a lot of profits, it is essential that the two should have used legal and ethical way as this will not only make them remain reputable but also profitable. The staff members of both companies must be informed of the consequences of using lies as a means of making the profit. In all circumstances, lying is emphatically wrong. Responsibility allocation, as well as communication, should be critical when it comes to conducting international business. There occur differences in business processes, and this may result in dispute as well as misunderstanding. The urge to remain profitable can contribute to cheating. It is, therefore, important for the company to provide a clear framework on the effects of cheating. Instead of cheating, it would have been better for Volkswagen to incur an extra cost of 200 pounds per engine that can ensure the cleaning of the exhaust fumes. In future, it is important for the bosses to consider the environmental monitoring of practices related to automobile industry as this can prevent similar incidence from occurring (Marcel becker 2015, p. 14). Despite being costly, regulations of environmental monitoring have the capacity to prevent the occurrence of future similar incidences. On the part of AWB Limited, it is important for the corporation to ensure compliance with the obligations of human rights (Bartos 2016, p. 35). Apart from that, it is essential for the top management of the two companies to enhance the corporate culture. Bibliographies Arbour, M.-E. 2016. Mini-symposium on the VW scandal. Bartos, S. 2016. Against the grain: the AWB scandal and why it happened. Sydney, UNSW Press. Marcel becker. 2015. Virtue Ethics, Applied Ethics and Rationality twenty-three years after "After Virtue". South African Journal of Philosophy; Vol 23, No 3 (2004); 267-281. South African Journal of Philosophy. http://ajol.info/index.php/sajpem/article/view/31397. Overington, C. 2016. Kickback: inside the Australian Wheat Board scandal. Crows Nest, N.S.W., Allen & Unwin. Swinburne University of Technology, & Kantoor, Angela. 2016. Volkswagen (VW) group emission scandal: implications on corporate social responsibility and the environment. Federation University Business School. http://hdl.handle.net/1959.3/429042. Ward, C. 2013. The Australian Wheat Board Limited: Lessons from corporate responsibilities. Sydney. Read More