Ethical Challenges at Volkswagen Company, Free Essay Sample

Published: 2022-02-18
Ethical Challenges at Volkswagen Company, Free Essay Sample
Type of paper:  Essay
Categories:  Volkswagen Business ethics Social responsibility
Pages: 7
Wordcount: 1678 words
14 min read

Industrialization, especially in the wake of globalization, has changed the landscape of modern businesses. This situation has influenced corporate strategies that companies use to generate their revenues. With globalization, the social impacts of business activities on the environment is taking new dimensions. However, organizations ought to implement socially acceptable practices despite numerous challenges in the business environment. Corporate Social Responsibility (CSR), in this perspective, is critical for the success of business concerns. Companies contribute to the social well-being of society by promoting sustainability. Participating in CSR enhances brand awareness, which ultimately translates to higher profitability. This paper critically evaluates CSR challenges that Volkswagen is facing as it strives to place itself in the global automotive industry. Besides, it assesses the strategies that the company has implemented to deal with corporate social responsibility challenges. The paper also evaluates the alternative approach that would have helped Volkswagen Company (VW) to address the problem. Volkswagen, however, should integrate social responsibility programs into its business model to attract positive publicity, retain the best talents, and improve relationships between the company, the customers, and the community.

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Organizational Information

Volkswagen Group is a car-manufacturing company that was established in 1937 (Volkswagen Company, 2016). Currently, the corporation has its headquarters in Wolfsburg but also has significant subsidiaries in the United States, Canada, and Australia, among other developed countries. The parent organizations for the Volkswagen Group are Qatar Investment Authority and Porsche SE. The latter is the largest shareholder, considering that it is holding about 31% of the company's shares (Volkswagen Company, 2016). Porsche SE controls 50.7% of Volkswagen Group's voting rights (Volkswagen Company, 2016). The other shares are under individual and corporate investors in different parts of the world. However, the corporation has various subsidiaries, which includes Porsche, Volkswagen, SEAT, Auto, Audi, and Skoda.

Notably, VW has various stakeholders that include government agencies, political groups, suppliers, non-governmental organizations (NGOs), customers, shareholders, creditors, and so on. In 2015, VW was ranked as the leading car manufacturer in the world automotive industry (Volkswagen Company, 2016). The company's annual reports indicate that VW has more than 370,000 employees in its workforce (Volkswagen Company, 2016). The workers play essential roles since they are engaged in the production and assembling of automobiles. As parts of expansion strategies, VW has established significant production plants in America, Asia, and Africa, besides similar segments in 15 European countries (Volkswagen Company, 2016).

Mission Statement

The company's mission statement is to be the world best automotive company by providing customers with attractive and safe vehicles (Volkswagen Company, 2016).VW is also committed to setting standards through the production of quality vehicles that meet customer needs in an increasingly competitive industry. This mission statement is in line with the company's business strategies and objectives. It is essential since it gives VW a sense of direction by outlining the purpose and goals of the company in the world automotive industry.

Vision Statement

The company's vision statement is to pursue perfection and innovation by building a responsive approach that will enable VW to be the most competitive automaker (Volkswagen Company, 2016). The organization's vision statement is essential since it is the basis of strategic planning. Thus, it enables the managers to set priorities, especially in the allocation of resources to critical investments. Vision statements are also essential since it unites all the stakeholders towards the achievement of shared goals and objectives.

Code of Ethics

VW has a code of ethics that encompasses guidelines and principles that guide the organization's stakeholders, particularly the employees. The purpose of these components is to enhance regulatory compliance and adherence to internal rules, policies, and procedures that govern the VW's internal stakeholders. In this perspective, the company's categories of the code of ethics consist of environmental protection, respect for human rights, conflicts of interest, and ethical communication (Volkswagen Company, 2016). Also, it encompasses equal opportunities and treatment at the workplace, commitment to free and fair competition, and IT security.

Organizational Challenge

The challenge facing the VW is the participation in unethical practices through the violation of environmental protection laws. The reports of the US Environmental Protection Agency (EPA) in 2015 indicated that VW's automobiles were releasing harmful emissions that would cause serious health issues (Mansouri, 2016). Volkswagen, in this case, failed to comply with ethical standards, which led to the violation of the Clean Air Act (Mansouri, 2016). EPA noted that the organization's engineers engaged in unethical practices by programming diesel engines that would pass laboratory tests yet it could release harmful emissions. This intentional programming of the automobiles exposed VW's leadership that had failed to set ethical standards for its employees. Precisely, the managers were unable to oversee the work of its technical teams engaged in the assembling of diesel engines. The practices of VW, to be specific, failed the meet regulatory standards on minimum emission of nitrogen oxide among other harmful pollutants.

EPA's findings on intentional programming of diesel engines were similar to the reports of the international council, whose mandate was to enhance clean transportation. However, audit on VW automobiles indicated that there were significant discrepancies in the quality of diesel engines between the European and US vehicles. The council, in collaboration with other regulatory agencies, launched investigations in other parts of the world. The study, according to Mansouri, (2016), shows that VW's automobiles were emitting harmful fumes beyond the acceptable limits. These emissions are not only dangerous to human life but also the sustainability of the environment.

The challenge in Volkswagen shows the failure of the organization's leadership strategies. It is no doubt that managers were focusing on business expansion without concentrating on the effects of its business practices in the environment. Arguably, effective leaders ought to ensure that all corporate activities comply with the existing regulations besides promoting environmental sustainability. Also, they should ensure that the company achieves its objectives through socially-acceptable approaches. It is no doubt that VW was trying to outdo other competitors in the automobile industry without employing sound strategies.

The challenge facing Volkswagen suggests that effective leadership should promote business goals without sacrificing ethical principles. Also, this scenario shows that strict laws and regulations are necessary to prevent multinationals from engaging in socially unacceptable practices as they struggle to overcome competition. The company's code of conduct besides the mission and vision statements points out the needs for effective leadership to steer VW in the world automobile market. The aspirations of Volkswagen, in this case, is to establish a reputable brand. It achieves this goal through compliance with the principles of ethical behavior. The managers failed to implement sound leadership that would enable the company to achieve this goal. As a result, the issue negatively impacted on the brand's reputation and its position in the industry.

According to Freeman, Harrison, Wicks, Parmar, and DeColle (2010), leaders should apply the best practices in managing their organizations. They ought to remain faithful to the terms that underpin their leadership besides upholding organization's ethical values to protect the reputation of their organizations. In connection, Volkswagen's managers failed to provide guidance that would ensure the business is socially responsible. By cooperating with the organization's engineers to program diesel engines intentionally, the leaders failed to safeguard the social responsibility of the company in its subsidiaries. This practice adversely impacted on the ability of the company to develop a sustainable business environment. Also, the mess affected the customers and individuals who had invested in Volkswagen's shares (Mansouri, 2016). The issue points out the needs to integrate social and environmental sustainability goals to the overall economic objectives and strategies.

The challenge had significant impacts on the stakeholders of the Volkswagen Group. It is no doubt that the issue came with direct consequences that threatened the reputation of the managers besides the stability of VW in the world automobile market. An immediate effect was a decline in the value of the entity's stock, which means the value of the company was declining. However, Volkswagen's leaders did not address the problem immediately upon exposure. Instead, the shareholders later overhauled the entire corporate leadership for the mess that was threatening the going concerns of the company.

How Volkswagen's Managers Approached the Challenge

The management changed the company's leadership as a strategy to restore the image of VW (Mansouri, 2016). The then chief executive officer ultimately resigned after numerous sanctions from the shareholders. Also, the managers suspended the directors in charge of research besides the people in charge of brand development. This situation, in essence, was a complete overhaul of the leaders that contributed to the mess in VW.

The managers, however, were aware of the challenges that the company was to face for engaging in unethical business practices. Suchman (2000) argued that organizations that fail to comply with corporate ethical principles are likely to record significant problems in the market owing to negative perception from its customers. Suchman (2000) further argued that such companies experience a significant shift in customer base since many people strive to avoid adverse impacts of the mess. VW, in this connection, initiated numerous plans to enable the company to take a robust take off in the automobile-manufacturing company.

Mansouri (2016) noted that VW incurred high costs to rectify the issue, which resulted from the company's ineffective leadership. The new management also initiated plans to refit all the vehicles that VW had sold to the customers. The approach seemingly was undertaken to win back the customers that were affected by the scandal. Also, it was a highly strategic move that the managers implemented to re-establish their connections with the customers besides the relationship with the stakeholders. Successful organizations, according to Suchman (2000), establish strong relationships with its stakeholders by implementing business strategies that make them believe that the company exists to serve their needs. This assertion supports the strategic plans in VW, although the managers apologized to all the stakeholders for their ineffective leadership. Precisely, their approaches threatened the survival and competitiveness of VW.

Another strategic plan that Volkswagen initiated to rectify the issue was carrying out a public relations campaign. The purpose of this strategy was to restore the glory of Volkswagen. It entails persuading the population that the problem was under the control of the management and thus would not negatively affect the efficacy, safet...

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