Corporate Ethics and Volkswagen Emission Scandal - Coursework Example

Corporate Ethics and Volkswagen Emission Scandal

Ethics encompasses the acceptable code of behaviour. Corporate ethics is the acceptable code of conduct for a business. These principles lay down the norms and values in which an organisation’s behaviours are supposed to follow. These theories induce clarity and precision of an argument based on ethics or morality. They are also based on the ethical principles and help companies facing ethical dilemmas to make the most acceptable and moral decision. An example of an ethical issue faced by an organisation is that of Volkswagen emission scandal case and this paper will delve into this issue.

Triple Bottom Line theory assumes that every business venture is a member of the social community and has some responsibilities to the society. These responsibilities are aligned on sustainability and are weighed on the scales of environment, social and economic sustainability. Environmental sustainability is aimed at the protection of the environment. It stipulates that every organisation must play as far as environmental sustainability is concerned (Garriga, and Melé, 2004). Environmental sustainability is whereby the business’ actions consider the effects they might have on the environment in the future and how it affects the future generations. Businesses should not cause harm people or the environment. They should instead protect the environment by utilising the limited natural resources responsibly (Coombs, 2007). The Volkswagen’s defeat device did not consider this bottom line as it was responsible for emitting nitrogen oxide. This was not an ethical decision on the part of Mr. Lang as the device he engineered had such a serious negative effect on the environment.

The economic sustainability bottom line stipulates that an organisation should consider the economic effects of a decision in the long run. The decisions of the organisation should not only be focused on the short-term but also the long term. An organisation that focuses on improving the economic position of the community around it has a high probability of success as it will have a favourable climate to operate (Boatright, 2000). The for-profit organisations are under pressure to perform; this puts them in a dilemma when it comes to ethics verses financial gains. The Volkswagen emission case is an example of such a dilemma as the director, Mr. Horn, was focused on financial success which had catastrophic effects on the environment (Goodman, McGrath, and Leah 2015). The economic effects caused by the decision to install that software were not sustainable as the firm could lose excess of 8 billion. They simply concentrated on the short-term success ignoring the impact the decision had on their future economic position.

The social sustainability line is aimed at controlling the competitive field between various organisations. Despite the fact that business is all about competition, these firms are also supposed to maintain a bottom line in social terms. This line considers the position of the organisation in the society regarding fairness, community involvement, and protection as well as exercising beneficial labour (Bose, 2011). The organisation should protect the society as well as its consumers from activities that would harm them. For example, the Volkswagen (VW) Company should have protected their consumers by eliminating the defeat device since they had discovered its effects long before the emission occurred. The society was affected, and the company lost the society and community trust as a result of this decision. This decision focused on the immediate success failing to consider the effect it had on the organisation in the future.

In conclusion, the triple bottom line theory focuses on finding a level ground between the community and a company. The actions taken by the firm should factor out the effects they have on the society as well as the organisation. The organisation must protect the future of the community regarding environment, economic and social sustainability. The Volkswagen management violated all of the three as the decision of including secret defeat software led to environmental pollution, losses regarding finances and affected the society regarding environmental pollution which made them billions for neglecting the societal interests.

Ethical Corporate Culture

Corporate culture is the organisation’s way of thinking and doing things. The way one organisation conducts its activities is different when compared to another organisation. Different cultures bring this difference. Culture is how the employees from a specific organisation behave. An excellent culture encourages ethical decisions and behaviours (Morrison, Brown, and Smith, 2008). In the contemporary markets, the consumers are beginning to get interested in finding out the company’s cultural norms and values. This behaviour is different from what the firms in the 20th centuries used to experience. The management is therefore forced to develop a perfect culture to send a good image to the society (Morrison, Brown, and Smith, 2008). The integrity of the organisation is best illustrated in their culture and way of doing things. The ethics in an organisation are also engrained in its cultural norms and values. Nonetheless, regardless of the cultural foundation and norms, organisations still find themselves fighting some unethical decisions or decision that do not reflect the organisation's cultural elements. Most of the organisations to blame for most of the egregious acts of malfeasance are those with elaborate ethical corporate culture and a good compliance record. The problem arises when a leader decides not to follow the ethical norms and culture and operates outside the stipulated guidelines. This is as a result of its values and norms.

Culture is about norms and values. The organisational norms and values should focus on abiding by the fair and legal principles of business ethics (Garriga, and Melé, 2004). The top management should preach commitment to integrity as well as legal and statutory compliance. Another norm that defines the organisational culture and principles is whereby the leadership and the management team in the business venture strictly adhere to accountability standards and adherence to the laid down or stipulated organisational guidelines. The society expects a good culture and behaviour from the firm and the leaders should focus on nothing less. Culture is developed through training. The human resource department also has a hand to play in maintaining culture as they are responsible for the hiring process. The people they should be able to contribute to the process of creating and maintaining cultural norms and ethics. Values and norms must be based on integrity and accountability.

Volkswagen is one of the oldest and most influential companies in the automobile industry. For an organisation to survive this long, it must have a systematic and elaborate culture with integrity ingrained in its core. It is known for its adherence and dedication to quality products (Reiger, 2010). Nevertheless, they were involved in a gas emission scandal that led to the resignation of its American leader and jailing of an engineer, Mr. Lang; this is a case of a bad element in a good culture as it appears in most organisations (Goodman, McGrath, and Leah 2015). Also, studies reveal that its culture is focused on wealth creation and not about social responsibilities. Therefore, the employees had no option other than to stick to the culture as it is stipulated and presented to them by the management. Also, they have an autocratic culture which is not democratic and is accused of discouraging free communication. The human resources department is also tasked with firing the employees who disagree with the firms' norms or underperform. Therefore, the employees are forced to do anything possible to maintain their jobs which resulted in the development of the cheat device.

Moral Theories

The moral decision making theories talk about the principles and guidelines that govern corporate decisions. The ideal corporate decision should be moral and just. Despite the fact that decisions should be moral or rather morally acceptable, the people's idea of morals is different, and their opinions vary as well. Therefore, various scholars have come up with various moral theories and philosophies that explain moral decisions. These theories are Kant’s consequentialism, normative, descriptive, utilitarianism, egoism, cultural relativism, social accounting, social conscience and deontological ethical theories. The normative ethical theories are those theories that represent the moral and ethical decisions or phenomena. These normative moral theorists argue that the individual's motive, intention, and character should be considered (Bose, 2011). Also, the action and its consequences carry less weight as compared to the intention and motive.

Immanuel Kant introduced the Kant consequentialism theory, and it argues that the moral impact of a particular decision is based on its consequences. A decision is right as long as the positive outcomes are more than the negative ones. The Volkswagen management considered this theory by deciding to lie about their software to improve their sales. The utilitarian theory is an example of a normative ethical theory. It uses cost-benefit analysis to justify an action as wrong or right (Hasnas, 1998). When faced by an ethical dilemma ton chose between the cost of environmental pollution and the cost of correcting all the defects in the car system, Volkswagen management used cost-benefit analysis and decided against recalling all their cars as it was costly.

Henry Sidgwick introduced the egoism theory of ethicsSidgwick, and it focuses on chasing after self-interests before the interests of others. The Volkswagen department used this rule to decide upon recalling their million cars and suffer the losses or benefit by lying about them (Goodman, McGrath, and Leah 2015). The social accounting theory is said to have been introduced by Free Spreckely. According to this approach, one is supposed to report the organisation's behaviour that contradicts with the acceptable code of conduct. The Volkswagen management, especially Mr. Horn, breached this theory by denying the fact that the company was engaged in illegal activities. Since James Lang assisted the state with uncovering these deals, he can be said to have obliged with the social accounting theory. Deontologism theory argues that an action should be judged as per the rules or obligation of the perpetrator. The rules bide an individual on duty and obligations, Mr. Lang was bound to act in the best interest of the company even if it required him to lie about the defeat device. The cultural relativism theory argues that the theories concerning the wrong or right vary from one cultural context to another and therefore depends on the society's perception of the decision (Healy, 2007). The social conscience theory stipulates that the actions of an individual or organisation should be conscious of their effects on the society and community to which it belongs.

Corporate Recovery from Scandal

Every member of the organisation is aware of how important reputation is its success. The modern businesses get into scandals more often than before. The main reason for this trend is because of the changing policies and scrutiny of the companies form the media and other organisations. The media is a strong weapon to have, and the business executives should know how to use it to their benefit. Therefore, to remain in good books with the media, they should strain to have an excellent reputation. The importance of reputation to any organisation is undeniable as it contributes to the way the society views the firm (Fortunato, 2008). Reputation is also responsible for hunting for shareholders and investors as they need to be sure about their resources and that their investments are in safe hands. An organisation with a good reputation is responsible for a firm's high earnings as well as low capital costs. All this is because reputation offers the possibility of future market growth as the community has faith in it. Nonetheless, maintaining a good reputation is not a simple task and firms are required to come up with ways of corporate recovery from scandal.

After being hit by a corporate scandal, a corporation is required to act fast in its recovery process to protect itself from the challenges involved with a bad reputation. They should also admit that there is a problem in the firm and act fast in correcting it. Also, the company should not consider hiding or deny the issue as it would be uncovered; this would put the firm in a very compromising situation with the public. To avoid scandals in the future, the firm should reconstruct its structure and develop another culture; this can also be aimed at regaining the society's trust (Coombs, 2007). Unneeded corporate decisions need to be eliminated; this is because they have the possibility of halting their strategic decision-making process. Fast and strategic decisions are vital as the organisation recovers from a scandal.

Volkswagen was involved in a scandal of nitrogen gas emission to the environment. The firm was accused of fixing a device, which tracked diesel consumption rates, in its cars but failed to inform the public about the effects this device had on the environment (Elson, Ferrere, and Goossen, 2015). These devices were fixed secretly and contributed to the emission of the nitrogen oxide gas to the environment. The firm obviously knew that there was such software in its system and its effects but still chose to go on with their plan. This is ignorance of ethics and their moral responsibilities. Nonetheless, the firm is making fast steps in recovering from the scandal as they have admitted of the existence of a problem in their organisation. They have also recalled 36000 of their cars and also set aside some money to compensate the affected people (Volkswagen, 2014). Also, the firm should reconstruct its culture and put stern measures towards such actions in the future.

Minimalism and Maximalism

The minimalist ethical theory is based on John Stuart Mill’s principle that an individual can live their life as they wish just that they should avoid hurting or causing harm to the other individuals. The decisions or behaviours of the individuals should also be judged on their effects on other people or parties (Portmore, 2016). The decisions that do not cause any harm to other people are what the minimalism theory defines as ethical decisions. Simply, the approach is focused on the simplest way of life in which one can live without causing harm to the others. The today's world is struggling with what is ethically right or wrong. Therefore, they easily get comfortable in discussing what is accepted as right or wrong since it does not harm anyone. They rarely challenge the views of others as they are afraid of offending them. This is the same case that happened at Volkswagen as the engineer must have known that the software or the device installed in the vehicle system had impacts on the environment, but because he did not want to offend the board or his boss, he chose to keep quiet (Page, 2015). Other than Mr Lang, other employees were working with the engineering department, but they also kept quiet for fear of offending the people around their bosses. The society is so focused on being right and offending fewer people such that they forgot about sticking with what is right and wrong. This theory is relative though as what one person considers to be harmless might be harmful to another person. In other words, what one person considers being right can be deemed to be wrong by another person. For example, Mr. Horn must have thought that he was acting in the best interest of the board of directors and the shareholders. However, he did not know that is actions had some consequences to the public or financial consequences to the board.

The maximalism theory is about coming up with the least bad decision with good consequences. This decision carries more good effects than the negative or bad effects. It is a form of the utilitarianism. According to the maximalism ethics, a right action is defined as that that might have both bad consequences, but they are overwhelmed by the good consequences (Haldane, 2008). This theory or principle was not considered in the Volkswagen case. Neither the management board nor the engineering department considered the effects their decisions could have on the general population. It is true that the organisation and the society somehow benefitted from the device, but its consequences overshadowed the effects or the benefits of the device. These consequences including the emission of the nitrogen oxide gas at levels that were forty times more than the acceptable levels hence affecting the environment.