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In September 2015, the U.S. Environmental Protection Agency or EPA made public that the German automaker Volkswagen had engaged in carbon-emissions testing fraud in about 600,000 diesel-powered vehicles. For more than five years, Volkswagen engineers had installed “defeat devices” in vehicles with software that masked the level of nitrogen oxides the engines were emitting. Soon attorneys and U.S. government officials were calling for inquiries (Ewing, J., 2015). The company and stakeholders found themselves in a public relations and ethical crisis.
According to a Fortune Magaine website article “Hoaxwagen”, Volkswagen began to take action when the scandal went public.
CEO Martin Winterkorn resigned and an American law firm was contacted to perform an internal investigation (Parloff, R., & Smith, G., 2016). For years Volkswagen had run advertising campaigns promoting their vehicles’ eco-friendly features. Yet the revelations shared by researchers and the EPA showed Volkswagen was in a scandal with legal implications. The diesel vehicles still produced as much as 40 times the allowed amount of nitrogen oxide (Ewing, J., 2015).
The emissions scandal was dubbed dieselgate, and the company’s initial response was not inspiring.
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Before resigning, CEO Martin Winterkorn blamed “the mistakes of only a few” and downplayed company responsibility. Winterkorn was indicted in Detroit for having misled the U.S. over the cheating (Walt, V., 2018). In October 2015, the CEO of Volkswagen’s U.S. operation, Michael Horn apologized to U.S. Congress, but said the emissions devices were not installed by the company board or executives but by a couple of rogue software engineers (Chapppell, B. 2015, October 8).
In 2016, Volkswagen Group of America announced the departure of Michael Horn, who was replaced by Hinrich J. Woebcken as head of the North American region and chairman of Volkswagen Group of America.
CEO Matthias Müller in an interview with National Public Radio said a technical issue based on interpretation of the American law (Glinton, S. 2016, January 11). Since the scandal, former staff have said Volkswagen's demand for success, and deep political influence lead to a company culture which permitted compromise (Parloff, R., & Smith, G., 2016). The scandal triggered penalties exceeding $30 billion as well as criminal charges for executives, including CEO of Volkswagen luxury brand Audi, Rupert Stadler (Bomey, N., 2018, October 02).
As details on the scheme to deceive regulators and consumers continue to unfold, it remains curious how a global company would enter into white collar crime, a financially motivated, non-violent crime by business and government professionals. The Fraud triangle, a framework identified by sociologist Donald Cressey, explains the reasoning behind a worker's decision to commit workplace fraud. The three stages can be summarized as pressure, opportunity and rationalization. When all the factors are present, employees may be influenced to act unethically.
The U.S. announced stricter emission rules for 2009, and VW had licensed technology made by DaimlerChrysler, but then did not use it. “What occurred was the combination of some bad people and a bad culture,” says Larry D. Thompson, a former deputy U.S. attorney general, (Walt, V., 2018).
Immediately after the scandal was made public, the company had to deal with fallout. VW posted its first quarterly loss in more than 15 years, and its stock plummeted. Shares lost $38.5 billion and in the ensuing months, the total decline came to about €55.6 billion ($66 billion) (Parloff, 2018). Top executives like Winterkorn were replaced, and VW abandoned its goal of becoming the world's largest automaker.
By November, 2017, Volkswagen was still working through the impact of the diesel scandal. According to a 2017 New York Times article, Volkswagen agreed to pay $22 billion in settlements and fines, including $4.3 billion to settle a case brought by the Justice Department (Neal Boudette, 2017). The U.S. prosecutors gave the company credit for cooperation, slicing 20% from its criminal fine. Volkswagen also paid compensation in countries including Canada, and South Korea.
The company had to make efforts to regain its credibility, and moved into new projects the board once rejected, such as electric cars and self driving vehicles. The scandal showed a culture that protected the diesel car industry, despite health risks associated with NOx emissions.
From a spiritual perspective, the Bible is clear that lying or deception is an ethical boundary, a transgression. Writings in the book of Proverbs share the dangers of deception. “The getting of treasures by a lying tongue is a fleeting vapor and a snare of death” (Proverbs 21:6, ESV). The verse contains allegory, but the obtaining of wealth or money by means of lying leads to a negative consequence. Also in Proverbs 11:1, it is written, “A false balance is an abomination to the LORD, but a just weight is his delight” (ESV). In addition there is the Proverbs 20:23 verse, “Unequal weights are an abomination to the LORD, and false scales are not good” (ESV). Merchants cannot defraud customers with standards that let them sell less of a product then the buyers think they are obtaining. God is concerned with truthfulness among others.
Another relevant verse is James 4:17, “So whoever knows the right thing to do and fails to do it, for him it is sin” (ESV). In addition to identifying sin, the verse identifies accountability and responsibility. It is a failure for company staff whom recognize illegal or unethical activity and do not take action to correct it.
At some point, Volkswagen decided to compromise integrity by choosing to prioritize immediate fiscal goals. Emissions software cheating devices were installed, while marketing the vehicles as emissions and environmentally friendly. The company desired success, but corporate culture was ready to enter an ethical crises to achieve it. The desire and motivation for achievement was costly, as a number of Volkswagen CEO’s have had to resign or left the company.
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 or a manager in either the legal office or the engineering department, my responsibility would be to report the findings of a cheating software to either my supervisor or another leader at the diesel division. I know the company was obligated to adhere to the U.S. Clean Air Act of 1970. I would also report the findings to the in-house attorney, and document or keep a paper trail of these findings. It is ethically wrong to have a device that cheats an emission test. As an engineer, I would not sign off on code that would defeat the purpose of EPA and Clean Air Act regulations.
If I was on the legal office, I would start a file of these findings, and then present the evidence to the supervisors at the diesel division. As a lawyer, I would recommend department audits, and review how illegal practices affect the stakeholders, including employees, customers, stockholders and the company future. I would suggest that the CEO of the diesel division contact the EPA and the company legal team about these findings. Plans would have to be made to address the software, and it may be necessary to hire outside legal counsel to limit damage to the company's reputation. If the company was to deal with a problem quickly, and report findings to authorities, a company may be given some leniency.
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 a CEO of Volkswagen, I would need to share that we violated federal laws and prepare an apology. The company legal team would be contacted, and we would prepare how the news would be shared with the EPA and other federal agencies. Vehicle factories might have to be shut down production until vehicles which complied with emissions tests could be produced. As a CEO, these findings would have to be shared with other stakeholders, including board members.
I would want to document all steps being taken to resolve the issue, and remind my colleagues that this incident could affect employees and the company’s future. Once the EPA was reached, I would arrange an internal investigation and department audit. A well-done internal investigation might lower penalties from prosecutors or regulators down the road.
Paul Lippe, the CEO of the Legal OnRamp, in a 2015 article suggests that legal team should have more time really understanding the business and the sources of risk (Lippe, Paul, 2016). To prevent such incidents from occurring again, I would have the Volkswagen engineers explain their approach and techniques to the Volkswagen legal team in an easy to understand manner. I would make sure there is transparency and clear communications between the engineering team and the Volkswagen’s in-house lawyers. The importance of good ethics and clear accountability in the workplace would be emphasized.
Another step is to review the company mission and ethical guidelines with managers and engineers, and see if there was an accountability system so that the laws and regulations are being followed. I would want all managers to know they will be held accountable for their actions, and the activity in their divisions.
Eco-Friendly Cars Are Our Future. (2021, Dec 26). Retrieved from https://studymoose.com/eco-friendly-cars-are-our-future-essay
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