1
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
Business Ethics
BUSI561_C01_202140
Dr. Martin
09/29/2021
2
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
Business Ethics: Volkswagen’s Emissions Scandal
Ethicality in business happens to be one of the most intricate aspects of decision-making.
Putting in perspective, managers have to weigh shareholders' wealth maximization and social
responsibility on the decision scale to find balance and the most discreet solution to an actual
issue of ethicality. In fact, ethicality often remains seemingly easier than it actually is until the
prerogative action that is best aligned with the law and the practice of business comes in
hindsight: Here is often the threshold of ethical issues. The biggest scandal, so far, Volkswagen
has had to face concerns a defiance of what should, in fact, be considered a social responsibility
– supporting the sustenance of clean air and aerial toxicity reduction – and corporate honesty.
However, their violation came with the objective of being the biggest car producer in the world.
On May 25, 2014, former Chief Executive Martin Winterkorn was informed about the long
began fraud of falsifying the emission levels of their powerful diesel engines to maneuver their
business out of legal and ethical ineligibility and further gain the EPA Certificates of Conformity
(Kubasek et al., 2020) – by embedding a software that sedated the cars’ emission levels when on
the road (Boston, 2019). Winterkorn showed no concern for the implication of such a practice on
consumers and the general public as was evident by his silence on the issue. At the time
Volkswagen was indicted, they had already sold an estimate of 11 million diesel cars with the
emission-falsifying software, worldwide (Lippe, 2015). The perpetuators of the fraud were
initially the engineers of the company as was verified by investigations of the FBI. Investigations
also regarded the role of the company lawyers in this. However, neither Winterkorn, the
engineers, the company lawyers, nor the company itself was excused by the law or established
ethicality standards. The question to be tackled hereof concerns what each of the mentioned
3
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
should have done in alignment with the law and ethicality to avoid things getting from bad to
worse, and at most, out of their control.
Rooting Out the Ethical Flaws
Ethical crisis can be avoided when the right steps are taken by each corporate insider to
counteract the spread of unethical or illegal business ideas. In the case of Volkswagen, there was
hardly any possibility that the lawyers were not aware of the embedded software. If, after
investigations, Winterkorn confirmed knowing of the emission manipulation – a year before his
retirement – then, it is most likely that the company lawyers knew about the embedded software
much earlier; did or did not know exactly how it functioned, but did not ask questions. However,
the role of a corporate lawyer cannot be accomplished without his discreet analysis of every
corporate decision, in terms of how it affects the business in the legal and social environments. In
this regard, Volkswagen’s lawyers flawed: As a corporate lawyer, I would have asked, “What is
this software?”, “Why has it been designed?”, keeping in mind that I stand to remind every
employee of the law and ethics of the business environment in which they operate. Sometimes,
to conceal the act, technical managers may tend to give a superficial explanation to an unethical
situation. As Volkswagen’s lawyer, it would be my duty to ask as many questions as required to
have in-depth understanding of what the embedded software actually is. And if required, other
managers should be informed to exact transparency by ensuring the managers of the engineering
department explain the software inside out. Often, issues not investigated early enough begin to
damage the logistic efforts of businesses until they become apparent at hindsight: At such
juncture, ethicality becomes only more difficult to practice. Volkswagen’s lawyers, thus, failed to
make findings on how safe the software was for the customers, the public, and their reputation on
4
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
the long run – if it presented any form of legal risk or questioned how well they handled their
social responsibility of supporting clean air and reduced aero toxicity.
Investigations did not point to the lawyers as being the central culprits. The engineers
designed the software and were fully aware of its function – sedating the emissions of the
company’s diesel cars. As a manager in the engineering department, I would have taken into
consideration the future legal cost of making a software that falsifies the emission levels of the
vehicles. The law requires honesty of every concern, as one of its code of business. The
Constitution does not allow the uncircumscribed prerogative to indulge in business as one
pleases: Certain business practices may either be conditioned or completely prohibited as they
are unethical (Kubasek et al., 2020). What is more, corporations today are well-informed that
their operations are increasingly under scrutiny (Valbrune et al.), and on the long run,
transparency often exposes hidden activities. Another crucial guideline to have been followed is
the public disclosure test which entails that a company should make decisions it can proudly
televise to the public (Kubasek et al., 2020). Any decision that goes contradictory to such test
would have to be annulled. Considering the current integration of the different business
landscapes around the world, integrity of work should have been paramount to the engineers to
secure the public's trust and the business' reputation.
Martin Winterkorn perhaps believed that it was long past the time to take corrective
actions towards the violation of the U.S. environmental laws. Or perhaps, he found it yet safe to
dabble around the unlawful act, as it allowed aggressive competition and enhanced profit-
making. Irrespective of reason, he was also found guilty of the crime (Boston, 2019). While
shareholders’ wealth maximization is the focus of businesses, companies built solely on profit
are bound to be less successful than businesses that consider what responsibilities are accrued to
5
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
them in their social environment (Valbrune et al.). Given a change to be Winterkorn, I suppose it
would be best to have considered the ethical standards on which the Clean Air Act was built. As
the CEO, it would be my responsibility to support the reduction of emissions which is the goal of
the U.S. government (Environmental Protection Agency). According to one Bible commentary,
the golden rule which infers the context of Matthew 7:12 – what you want others to do to you,
you must also do to them – has become a mainstream principle in society (What Does Matthew
7:12 Mean?), and has thus inflected its different ramifications, including the code of conduct in
business. As a CEO, it would be my responsibility to consider the cost of risking corporate
reputation, trustworthiness, and corporate continuity as much as I consider the maximization of
shareholders’ wealth. Considering the long-term effect of dishonesty, reporting the practice to the
U.S. regulators would have redeem the company of future financial loss and reputational
damage: Culprits alone would have been prosecuted, and the company free of fines and
questionability. At the juncture of its becoming public, the decision to have been carried out was
what eventually was: ensuring that Volkswagen pleads guilty and makes a solemn promise to
take corrective actions towards being more transparent and social responsibility-conscious
(Sustainability 2021). Such will serve to reinforce the company’s values, restructure its view of
ethicality, and allow it an opportunity to repair the reputational damage caused.
Conclusion
Over the last few years, numerous big businesses have made headlines with bad news of
noncompliance to business ethics. While ethicality in business may seem too subjective
sometimes, its importance in setting a balance between profit maximization and social
responsibilities cannot be overemphasized. As much as a business needs to recognize its
competitors, it needs to understand its legal and social constraints. Ethicality is hardly as easy as
6
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
it sounds, however, observing constitutional laws is key to setting the pace for long-term trust
from external parties – the public, which constitutes the consumers and potential buyers, and the
government. Avoiding the realization of ethical issues at hindsight requires a timely check of
every staff that contributes to the creation of a product or service offered to the public. As was
the case of Volkswagen, unclear communication can cost financial loss and reputational damage;
can allow the coordination of unethical decisions which can hamper the exacting of the objective
for which the unethical decisions were even created. Lawyers are meant to ensure that every
action contributing to the company’s value chain is checked I accordance with the law and
verified to be of positive impact to the company's value chain and consequently its market. Top-
level managers are not left out of the quest of identifying optimal ethical practices. Managers
must not accept a decision from a bias of corporate gain but must evaluate all possible options to
ensure the decision made benefits the company and offers no harm or undeserved cost to any
external party.
7
BUSINESS ETHICS: VOLKSWAGEN’S EMISSIONS SCANDAL
References
Kubasek, N. K., Browne, M. N., Barkacs, L., Herron, D., & Dhooge, L. (2020). Biblical
worldview edition of dynamic business law (2nd ed.). N. J. Kippenhan (Ed.). New York,
NY: McGraw Hill Education.
Boston, W. (2019, September 25). Volkswagen CEO faces charges from scandal. Wall Street
Journal. (Links to an g site.)http://ezproxy.liberty.edu/login?
url=https://search.proquest.com/docview/2296520342?accountid=12085]
Lippe, P. (2015, October 13). Volkswagen: Where were the lawyers? ABA Journal.
http://www.abajournal.com/legalrebels/article/volkswagen_where_were_the_lawyers/
Valbrune, M., De Assis, R., Cardell, S., Taylor, T. C., Sappleton, D. N., Mitchell, C. M., &
Mitchell-Phillips, K. (n.d.). 3.1 Business Ethics - Business Law I Essentials. OpenStax.
Retrieved September 29, 2021, from https://openstax.org/books/business-law-i-
essentials/pages/3-1-business-ethics.
Environmental Protection Agency. (n.d.). Summary of the Clean Air Act. EPA. Retrieved
September 29, 2021, from https://www.epa.gov/laws-regulations/summary-clean-air-act.
What Does Matthew 7:12 Mean? BibleRef.com. (n.d.). Retrieved September 29, 2021, from
https://www.bibleref.com/Matthew/7/Matthew-7-12.html#commentary.
(What Does Matthew 7:12 Mean?)
Sustainability. Volkswagen Group. (2021, September 22). Retrieved September 29, 2021, from
https://www.volkswagenag.com/en/sustainability.html#.
