Volkswagon Group Ethical Dilemma Analysis - 1375 Words

Volkswagon Group Ethical Dilemma Analysis (Research Paper Sample) Content: Volkswagen Group Ethical Dilemma Analysis Student's Name: Institution Affiliation: Volkswagen Group Ethical Dilemma Analysis Introduction Volkswagen (VW) Group is one of the most successful car manufacturing companies in the world, and their business has always expanded on a global scale. The company began its operations in Germany in as early as 1937 and had rapidly expanded to over 40 countries including America in 1955. Its subsidiary group in the United States is the leading manufacturer of affordable, attractive and safe cars. However, in the recent years, the company has faced controversial cases regarding its ethical responsibility. The company has been accused of taking part in unethical behavior on a massive scale. It was reported that the Volkswagen fitted its diesel engines with special devices that could falsify the emissions tests. This corporate misbehavior for a reputable company such as Volkswagen has received criticism from busines s leaders from all parts of the globe. Besides, it has been critiqued in almost all perspectives, that is, from business sustainability, finance, to corporate social responsibility. Main concerns on ethical problems in the organization One of their core values is to ensure that they have maintained safety that's why their cars have been designed with safety features. The company's stakeholders comprise of different individuals who determine and control their businesses. The possible cause of the unethical behavior could have been the adoption of a financial concept which claims that the primary goal of a company is to maximize the shareholders' value (Csizmazia, 2014). This notion supports the idea that shareholders should only care about the stock price, and not the implications on the society. The public reaction to the controversial news of unethical behavior in Volkswagen led to a massive drop in the share price which wiped billions from Volkswagen's stock price. Companies shoul d ensure that the balance their desires for maximizing their earnings at the same time looking after the interests of other stakeholders and respecting the environment (Gates, Ewing, & Russell, 2016). The emissions scandals have affected over 11 million consumers worldwide who use the Volkswagen vehicles. Apparently, this is out rightly considered as a mass business ethics failure about reputational and scale loss. Their act of misleading environmental regulators by falsifying the emissions scale of their engines was in the company's interests (Csizmazia, 2014). As a result of these fallacies, the company has continued to face trust and reputation crisis even after the release of their annual reports which has been termed as being hindsight and dubious. The emissions scandal faced by the company has extensively affected its corporate governance to the extent that the management has been at risk (Dans, 2016). Questionable business practices cannot be tolerated in the modern busine ss environments because the world has become extensively interconnected. The company should be held responsible for manipulating the software which has gone undetected for so many years now. However, the extent of damage caused to the environment and the public cannot be correctly measured. Causes of the ethical problems in the organization The main reason for VW ethical crisis is a three-pronged governance that has been associated with culture failure particularly in risk management, marketing and the internal controls (Choi, Ullah, & Kwak, 2015). The marketing approach has been considered as one of the leading factors in reputation loss for Volkswagen. This is because marketing is majorly based on driving sales and usually comprises of captivating messages on environmental friendliness of the products. As a result, many customers bought their cars since they were made to believe that they were environmental friendly. After the promises and marketing approaches had been found to be inappropriate, it triggered consumer mistrust and led to a loss of reputation for the company. Thus, it may involve a hard process and may take a long time for the business to build a lasting reputation. The Volkswagen Company lacked an effective risk management process which eventually contributed to the loss of reputation. The business needs to have management strategies that focus beyond financial and operational risks. In this case, the board of management was aware of the manipulative software that would give false information about the emissions released by their engines (Dans, 2016). As a result, the company increased its profitability due to high sales and revenue from the sales of their cars. It is clear that their incentives to exaggerate revenue and profits were as the failure of the internal control and audits to prevent this manipulation. The economic theory of individualism bases its argument on the notion that a company is only obligated to maximize its profits in a legal way. Besides, companies should be responsible for their actions. Hence, this theory implies that Volkswagen has done nothing wrong rather, they have met their obligation of maximizing their profits. In today's world, consumers can influence each other significantly in making purchase decisions since they can communicate with each other very easily (Eichler et al., 2016). This has contributed to the loss of reputation for the Volkswagen group since consumers paint a bad picture for the company. How the problems could have been avoided There is a need for multinational conglomerates such as Volkswagen Group to consider the potential risks that might affect their reputation. These risks are mainly associated with ethical concerns in social and environmental issues (Choi, Ullah, & Kwak, 2015). The primary consideration in risk management that organizations need to take into account is that the reputational threats should be integrated into the risk register. The role of the man agers would be to look at all the possible risks that could interfere with the corporation's balance sheet. Organizational behavior concept One of the organizational behavior concepts that could be applied in this case is the Corporate Social responsibility. Integrating Corporate Social Responsibility in business is crucial in maintaining the impact on reputation and trust. It is a determining factor in risk management, marketing and financial performance (Eichler et al., 2016). Also, it plays a significant role in ensuring that the company adopts an effective organizational behavior that prioritizes the interests of the society. The case of Volkswagen scandal indicates that there is still a gap in the board's competencies to uphold corporate social responsibility especially in accessing the risks and benefits. Sometimes implementation of sustainability and corporate social responsibility may not be an easy task for managers since managers are usually faced with a compromise betwe en short-term quarterly profits and long-term environmental impacts. These are some of the complexities of managerial decision making that the board of management in Volkswagen could have been possibly faced. Organizational behavior problems Organizational behavior is greatly influenced by the culture which is openly related to governance. The corporations should outline the crucial role that the independent directors plays on company boards. The VW scandal can be associated with leadership failures which can be blamed on character failure but not lack of commitment or competencies (Gates, Ewing, & Russell, 2016).The primary challenge that the Volkswagen group faces is that of establishing credibility to its stakeholders and consumers. What is of more concern is that the company's reputation has been adversely damaged and there may be no set guidelines to restore it. However, there may be other possible solutions that might help the company restore its reputation. One of the options would be for the Volkswagen group to restart under a new name. Also, the company should ensure that it establishes several measures for the purpose of restoring credibility to its company. The most severe case is the failure of the corporation to initiate an action that would assure the consumers of the reaction against the issue (Gallagher, 2016). This may result in consumer boycott and eventually lead to a drop in sales and ultimately the collapse of the company (Zhang et al., 2016). Repercussions of the unethical behavior The emission scandal had so many repercussions for Volkswagen to the extent that its cars became a target for regulatory investigations in different countries. One of the most adverse tra...