Business Ethics Crisis Essay

Total Length: 1909 words ( 6 double-spaced pages)

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What are the essential details of the event, and what do you see as the causes of the crisis and/or negative impact to society?

Essential Details

The scandal chosen is the Volkswagen emission scandal. The essential details of the scandal encompass the fact that Volkswagen ultimately admitted that roughly 11 million of its manufactured vehicles were fitted out with software that was employed to falsify emission tests. Specifically, the fitted out software detected when the car was being tested and then activated apparatus that decreased emissions. Another essential detail of the scandal is that during the course of regular driving, the software somewhat muted the device, which in sequence brought about an increase in emissions that were exceptionally past the legal confines. This was, it would seem, with the key purpose of attaining fuel savings or to supplement the rotating force and acceleration of the car (Gates et al., 2017).

The company made an admission of guilt to multiple criminal charges in the United States and has reserved more than $20 billion for expenses associated with the scandal, with the payments with American regulators and vehicle owners. The people considered accountable for the scandal comprised of both employees and executives. Above all, engineers have taken liability for the unethical behavior. Furthermore, six company employees are at the moment facing criminal charges in the United States and an executive arrested, who was accountable for supervising compliance in emissions. Moreover, the chief executive officer (CEO) of the company, Martin Winterkorn, accompanied by the head of operations in the United States stepped down and Volkswagen also suspended numerous high-ranking executives (Gates et al., 2017).

Causes of the Crisis

Owing to competition, Volkswagen endeavored to come up with a competitive edge over its rivals. However, the technology used at the time was not cutting-edge enough. The key reason behind the Volkswagen scandal goes down to the fact that the company created software that altered to adjust constituents within the vehicle, for instance catalytic converters as well as valves employed to recycle exhaust gases. This software to some extent sensed vehicle testing and triggered the equipment to decrease emissions. Subsequent to this, it put off the equipment in the course of regular driving thereby increasing emissions produced (Gates et al., 2017).

Negative Impact to Society

The actions of the employees of Volkswagen not only had, but would excessively have had an adverse impact on the society. This is with respect to the health and well-being of the general public. This takes into account the fact that the vehicles manufactured and sold produced emissions that were beyond the legal limit, specifically almost 40 times the sanctioned levels of nitrogen oxide. This contaminant can cause bronchitis, emphysema and other respiratory illnesses (Gates et al., 2017).
This would have adversely impacted the health of the general public by giving rise to severe health illnesses. Another negative impact of the actions undertaken in the Volkswagen scandal encompasses the negative impact on the environment. The results of the tests indicated, when tested on the road, a number of cars emitted just about 40 times the legal levels of nitrogen oxides (Gates et al., 2017). These emissions have a negative impact on the environment as they adversely hamper the air and the troposphere.

Where do you see failures in corporate governance?
The Volkswagen Emissions Scandal is a good example that is indicative of failures in corporate governance. Corporate governance can be delineated as the overall system of guidelines, regulations, practices, and processes by which an organization is directed and controlled. First, the executive leadership of Volkswagen was ineffective and futile, and the actions of the scandal are evident. In particular, Martin Winterkorn, the CEO of the company, was an arduous superior who loathed and did not accept failure. Former company executives defined his style of management as dictatorial and focused at fostering a climate of fear. Furthermore, the CEO set pushy objectives for public growth, made up of growing into the biggest car manufacturer in the world. Nevertheless, accomplishing this key objective came at a huge cost, which at the end of the day, comprised of a notice of violation from the EPA, a criminal probe by the U.S. Department of Justice and several class-action legal suits against the company (Glazer, 2016).

Another aspect of failure in corporate governance encompasses the poor organizational structure of Volkswagen. In definition, the organization's structure takes into account the officially set system of job and authority associations that controls the way in which personnel are to work in tandem and make the most of resources to achieve organization's objectives. Volkswagen had a tainted top down organizational structure where decision making was reliant on a strong leader and very few executives as key advisers. These individuals had excessive power on the operation and direction of the company. This kind of organizational structure not only makes the company sluggish to respond to changes taking place in the market, but it also leaves it with palpable flaws (Ferrazzi, 2015). This methodology to organizational culture is out-of-date, obsolete and indecisive as it leaves a great deal of workers not part of the functioning decisions, unappreciated and not dependable. This causes employees not to be contented in articulating their apprehensions and organizational features to their supervisors, therefore are not stimulated to place the company's well-being first. This can be perceived….....

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Bass, B. M. (1990). From transactional to transformational leadership: Learning to share the vision. Organizational dynamics, 18(3), 19-31.

Ferrazzi, K. (2015). Volkswagen's Fatal Flaw: Its Corporate Structure. LinkedIn. Retrieved from:

Gates, G., Ewing, J., Russell, K., Watkins, D. (2017). How Volkswagen Has Grappled With Its Diesel Scandal. The New York Times. Retrieved from:

Glazer, B. (2016). The Biggest Lesson from Volkswagen: Culture Dictates Behavior. Entrepreneur. Retrieved from:

Patel, P. (2015). Engineers, Ethics, and the VW Scandal. IEEE Spectrum. Retrieved from:

Schein, E. H. (2006). Organizational culture and leadership (Vol. 356). Hoboken: John Wiley & Sons.

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