In 2015, Volkswagen, one of the world?s largest auto manufacturer, became a case study in corporate fraud and institut

Discussion Post 1:

Introduction

     In 2015, Volkswagen, one of the world’s largest auto manufacturer, became a case study in corporate fraud and institutional failure. The car company was caught falsifying data to give the illusion that their diesel-powered cars emitted a level of pollutants that was permissible under the US regulations. In reality, the Volkswagen engineers installed a “defeat device” in the vehicles, which falsified the results of emissions tests. When the device was turned off and the car was driving under normal conditions, the car would discharge pollutants that were significantly over the US limit. When the company was caught doing this, the results were catastrophic. Volkswagen lost billions of dollars in penalties, recalls, and personnel changes. Public trust in Volkswagen was also lost, as the stock price plummeted, and sales immediately fell (Blackwelder,2016).

     In the investigations that followed the scandal, it became clear that this plot to defraud the public was not only due to the wrongful actions of the engineers that enacted that plan. However, some of the responsibility can also be given to the legal team and top executives within Volkswagen, due to their lack of control and or visibility into the daily operations of the engineering department. Unfortunately for Volkswagen, if the people within the engineering or legal departments would have had the courage to speak up about the “defeat device” or been thorough enough to detect the wrongful doings of the engineering team, this scandal could have been completely avoided or substantially mitigated.

Preventative Measures

     Considering the expansive size of Volkswagen’s operations, it can be difficult for a company with that many employees and projects to successfully oversee the daily decisions and operations of its employees. However, if there are malicious practices by a few employees, the consequences can be detrimental for the entire company. Therefore, it is imperative that the employees that are present for the injustice must report the issues to the proper authority. Unfortunately, the term “whistleblower” may have a negative connotation within the corporate setting, as those who report the wrongdoings of their peers or colleagues risk their reputation or even their position if the right leadership is not in place. However, there are government regulations such as the Whistleblower Protection Act and Sarbanes-Oxley Act that protect whistleblowers’ identity and security. Therefore, if proper notice is not given in a timely matter, the issue typically escalates, and the consequences will become more severe as more time passes (Van Rooij, 2019).

     Ephesians 5:11 says, “Take no part in the unfruitful works of darkness, but instead expose them.” If the engineers of Volkswagen would have exposed the wrongful actions of implanting the “defeat device” in the vehicles in a timely matter, it could have saved Volkswagen millions of dollars and the reputation of the company. In this specific case, Volkswagen may not have met their corporate goals or sales target if the plan was thwarted. Additionally, some staff members may have lost their jobs due to the incapability of the company to produce the right product. However, those consequences are minimal in comparison to the damages that Volkswagen had to remedy. Therefore, it was not only the obligation for the engineers to report the wrongdoing of their colleagues to the authorities, but it was also the responsibility for them to do so.

     In addition to witnesses having responsibility report wrongdoing, the legal team of Volkswagen also has a responsibility to ensure the ethical operations of the company as a whole. A legal team cannot wait for the company to get into legal trouble to attempt to mitigate damage. The legal management must utilize preventative strategies in order to maintain the ethics of the business. Some of these strategies would include equipping a governance team to oversee the daily operations of the employees, performing regular audits of the operations and staff, and providing services that ensure the security of an employee that would like to report misconduct. According to Deuteronomy 16:20, “Follow justice and justice alone, so that you may live and possess the land the LORD your God is giving you.” Therefore, it should be the main priority of the legal management to ensure the lawful practices of the company (Lippe, 2015).

     Unfortunately, legal team of Volkswagen did not do enough to prevent the damage done by the engineers. Whether the lawyers were unaware of what the engineering team was doing, unaware that the engineers’ actions were illegal, or party and participants to the crime in its entirety; the legal team must take some responsibility for the matter. At best, the Volkswagen lawyers were negligent in preventing an unlawful vehicle from being released to the market, and their lack of foresight into the operations of their company resulted in major harm for the company publicly and financially (Bachmann, 2017).

Executive Response

     When the employees of a company are caught operating illegally on behalf of the firm, it becomes the responsibility of the CEO, executive staff, and board of directors to manage the subsequent fallout. They must make very costly decisions to quickly remedy the situation and mitigate the potential damage to the company’s public image and financial loss.  The decisions would have to include launching or cooperating with an investigation, and then firing and replacing often valuable employees that are integral to operations. These actions can include a corporate restructure and the employment of much stricter preventative measures. The executives will also have to work to repair damages done by the employees and pay fines or penalties, either on their own or by order of the court (Caine, 2017).

     In the case of Volkswagen, repairing damages included issuing a full recall of the affected vehicles and even a refund of purchase to some of the owners. The company also had to pay fines as restitution for the damages done to the environment. The final, monumental task of the executive board is reparation of the broken public image of the company to regulate sales, stock price, and the firm’s financial stability. In doing so, the company will have to provide public statements of responsibility and remorse, possibly aligning with a cause financially to remedy their impact on the environment, and even rebranding the entire company to communicate a fresh start. Proverbs 28: 13 says, “Whoever conceals his transgressions will not prosper, but he who confesses and forsakes them will obtain mercy.” This must be the response from the executive team, as any effort to further conceal the issue would only result in harsher consequences (Bachmann, 2017).

Conclusion

     In conclusion, the Volkswagen emissions scandal was an organizational failure of the employees to protect the company and prevent criminal activity. The large scale of the damages is representative of the lack responsibility of the engineers to report the issue and legal team to detect the issue. This malicious act to mislead the public not only resulted in harmful effects for the environment and the Volkswagen customers, but it severely impacted the stability of the company. As the consequences brutally effected Volkswagen’s sales, public image, and corporate structure, the automotive and trade industries witnessed the importance of ensuring ethical practice.

Sources

Bachmann, R., Ehrlich, G., & Ruzic, D. (2017). Firms and collective reputation: The Volkswagen emission scandal as a case study (No. 6805). CESifo Working Paper.

Caine, C. A. (2017). “Dieselgate” and Consumer Law: Repercussions of the Volkswagen scandal in the United Kingdom. Journal of European Consumer and Market Law, 6(2).

Van Rooij, B., & Fine, A. D. (2019). Preventing corporate crime from within: Compliance management, whistleblowing, and internal monitoring. The Handbook of White‐Collar Crime, 229-245.

Blackwelder, B., Coleman, K., Colunga-Santoyo, S., Harrison, J. S., & Wozniak, D. (2016). The Volkswagen Scandal.

Lippe, P. (2015, October 13). Volkswagen: Where were the lawyers? ABA Journal. http://www.abajournal.com/legalrebels/article/volkswagen_where_were_the_lawyers/

Discussion Post 2

Discussion Board Week 2 – Business Ethics

As an employee or a manager in either the legal office or the engineering department, how would you have prevented this incident?

As an employee in the engineering department, asked to implement a cheat device in the diesel engines, I would question my supervisors on the legality of such actions.  As a manager in the engineering department, I would ask my superiors about the lawfulness and repercussions of such an implementation.  I would also recommend that we try and find a way to produce a cleaner running engine instead of cheating the system and lying to the consumers.  Leviticus 19:11 states: “You shall not steal; you shall not deal falsely; you shall not lie to one another” (OpenBible, EVS, 2001).  According to Crete, a driving factor in Volkswagen’s deception was their ambitious target of the U.S. car market, along with the budget and time constraints necessary for reaching such a target (2016).  Within Volkswagen, top executives ignored their social responsibility and instead focused on profits.  Prosecutors in the scandal stated that executives at VW tried to hide the imminent scandal so that stock prices would not be affected (Boston, 2019). 

Volkswagen committed a crime when they decided to implement the cheat device.  According to Kippenhan et al., the essential elements of a crime are actus reus and mens rea, or a guilty act and knowing it’s a wrongful act (2019).  As an employee within the engineering department, I would document all correspondence with superiors regarding the concerns of wrongdoings.  Currently, there are 47 states with whistleblower protection laws, so some research would be necessary to follow proper procedures of reporting if I decided to take that route. 

As the CEO of the diesel division of Volkswagen, how would you have responded when the situation became public? How would this response prevent future incidents?

As the CEO of the diesel division, I would admit the wrongdoings of Volkswagen.  In September of 2015, when the news broke of the utilization of emissions cheat technology in diesel cars, there was published proof that VW implemented such technologies, and it is absurd to deny it any longer (Painter & Martins, 2017).  “Speak the truth to one another; render in your gates judgments that are true and make for peace” (OpenBible, EVS, 2001, Zechariah 8:16).

Organizational communication management is critical, especially when dealing with a crisis.  Studies show that about 29% of organizations wait until a situation arises to devise a response plan. At that time, the focus should be on crisis management and limiting damages. 

In order to prevent another situation like “emissiongate,” the corporate climate needs to change at VW.  A corporate culture of honesty and integrity is essential.  A process of checks and balances amongst departments and executives is a must so that a decision, such as the use of cheat technology, cannot slip by unchallenged.  The legitimacy of Volkswagen was damaged due to the lack of adherence to social system norms, values, and beliefs. (Florio & Sproviero, 2021),

References:

Boston, W. (2019). Volkswagen CEO Faces Charges From Scandal. Wall Street Journal http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fnewspapers%2Fvolkswagen-ceo-faces-charges-scandal%2Fdocview%2F2296520342%2Fse-2%3Faccountid%3D12085

Crête, R. (2016). The Volkswagen Scandal from the Viewpoint of Corporate Governance. European Journal of Risk Regulation : EJRR, 7(1), 25-31. http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fvolkswagen-scandal-viewpoint-corporate-governance%2Fdocview%2F1781761944%2Fse-2%3Faccountid%3D12085

Florio, C., & Sproviero, A. F.(2021). Repairing legitimacy through discourses: insights from the Volkswagen’s 2015 diesel scandal. Meditari Accountancy Research, 29(3), 524-542. https://10.1108/MEDAR-08-2019-0547

Kippenhan, N, Kubasek, N., Brawne, M. N., Herron, D., Dhooge, L. & Barkacs L. (2019). Biblical Worldview Edition of Dynamic Business Law. https://prod.reader-ui.prod.mheducation.com/epub/sn_f466/data-uuid-4dbad573132c487da20e87cfe89a80d9. McGraw-Hill Education LLC.

Open Bible. (2001). English Standard Version. https://www.openbible.info/topics/

Painter, C., & Martins, J. T. (2017). Organisational communication management during the Volkswagen diesel emissions scandal: A hermeneutic study in attribution, crisis management, and information orientation. Knowledge and Process Management, 24(3), 204-218. https://10.1002/kpm.1544