Summary of the Situation
On September 18, 2015, the U.S. Environmental Protection Agency made a notice of violation addressed to the company of Volkswagen (Environmental Protection Agency, “Notices of Violations: Volkswagen” par. 1). The Agency accused the German car manufacturer of breaking the American car emission standards. It was found out that the diesel vehicles produced by Volkswagen in 2009-2015 contained a certain piece of software that enabled these cars to enter a special “safe mode” when the program “suspected” that the car was being tested (Hotten par. 3-5). As a result of this “safe mode”, the cars’ engines stopped working at their full power, which caused a drop in performance and, accordingly, significantly lowered the emissions. EPA was able to find out that the noxious gas output of these cars under normal circumstances, in the road setting, was dangerously high; the output of nitrogen oxides (NOx) was approximately 40 times greater than the maximum quantity of these outputs allowed by the USA legislation (Environmental Protection Agency, “EPA Update on Recent Volkswagen Announcement” par. 4).
After the EPA’s actions, the “Volkswagen Group” leading officials admitted that the company indeed had devised a sophisticated piece of software and had been using it in order to cheat the emissions tests. The business was forced to recall nearly 500,000 cars in the United States only, which cost approximately €6.5 billion. It is also pointed out that the EPA is legally able to fine the car manufacturer additional $37,500 for every car that violates the emissions standards (Hotten par. 6-11). Notably, these are the consequences that occurred only in the US. Worldwide, the company’s vehicles are also being planned to be tested, and not only Volkswagen’s cars but also the vehicles made by other manufacturers.
Observations about the Leadership Decision that Caused the Problem
It is important to point out that the leadership decision to use the cheating software was egregiously negligent and wanton. The leaders of the company, as it often happens, completely disregarded the dire consequences caused by the harm done to the environment, all for the sake of additional profits. Besides, even if we do not mention the environmental issues, it is obvious that by this act of deceit the business treacherously let down virtually all the parties involved. The customers of the firm had their vehicles recalled in order to deal with the emissions issues they cause. Numerous company’s stockholders also lost, for the price of the company’s stocks plummeted down immediately after the malicious act was discovered. And, of course, the company has significantly harmed its own image, thus losing a large number of potential buyers. The only positive outcome of the scandal is the precedent; the controlling institutions will now pay more attention to the vehicles of other manufacturers as well, which is likely to lead to improved responsibility of those businesses.
The Importance of Business Ethics and Ethical Management
The Volkswagen scandal once again demonstrates how essential it is to adhere to the principles of ethics while managing a business and making decisions. A failure to comply with these principles leads to dire consequences for the enterprise’s customers, stock owners, other stakeholders, and, in fact, may harm the population of the whole planet (and often does if the company is large enough). On the other hand, it should also be remembered that most businesses will not follow ethical desiderata just because of somebody’s good will, for any commercial organization’s aim is, by definition, to make as much money as possible. The example of Volkswagen shows that firms may directly and secretly violate certain standards, at the same time boasting in the advertisement about how well these standards are being met. Therefore, any type of cheating must be met with penalties strict enough to make the additional profits made as a result of the cheating negligible in comparison to these penalties.
Environmental Protection Agency. EPA Update on Recent Volkswagen Announcement. 2015. Web.
Environmental Protection Agency. Notices of Violations: Volkswagen. n.d. Web.
Hotten, Russell. “Volkswagen: The Scandal Explained.” BBC News. BBC News. 2015. Web.