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Discussion Board #1
Liberty University
BUSI 561 – Legal Issues in Business
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Definition of Project:
Virtually every organization faces the challenge of delivering a quality product or service
to the customer while maintaining socially acceptable business practices. Key individuals at
Volkswagen made decisions that broke the trust of the customer as well as legal requirements for
a corporation to disclose accurate information concerning their product. Legal, spiritual and
ethical lines were crossed but could have been avoided with proper oversight and inspection.
This discussion post will explore the steps that could have been taken to avoid this error in
judgment and practice.
Diagnosis of current situation:
Paul Lippe described the effort by Volkswagen to deliberately manipulate test results as
“a concerted fraud around the core value proposition of ‘clean diesel’” (Lippe, 2015). Decision
makers within the organization opted to take a calculated gamble in creating test results that
would please the public but end in disaster if discovered how they were achieved. Legally,
Volkswagen failed to abide by the laws that protect the consumer from this very type of
misleading activity. “All companies are subject to legal responsibilities and are required to
follow the law, which impact organizations planning process. In order to operate soundly, a
company must familiarize itself with external factors that govern the industry that the company
operates within” (Doucet, 2009). Ethically the company has a responsibility to establish business
practices that protect the consumer, the employees and the shareholder from negative
consequences due to inappropriate behavior. “The first principle is to the responsibility of
businesses beyond shareholders toward stakeholders and states that “Businesses have a role to
play in improving the lives of all their customers, employees, and shareholders by sharing with
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them the wealth they have created” (Bateman & Stair, 2006, p. 175). Volkswagen failed all of
these parties with this unethical behavior to avoid appropriate regulation.
Besides the biblical concept found within the 10 commandments to be honest and refrain
from lying, the scriptures also speak to the business environment concerning the way in which an
individual or an organization operates. “Poor is he who works with a negligent hand, but the
hand of the diligent makes rich” (Proverbs 10:4). God can see not only the outcome of our labor
but also the effort and honesty that is placed in it. He is faithful to reward those who conduct
themselves in a way that abide by biblical principles and standards.
Recommendations:
In this situation with Volkswagen, there seems to be a clear case of missing
communication, vision and oversight when it comes to the focus on corporate responsibility. As
a leader in this organization I would have wanted to make these a priority that impacts every
decision made everyday. One factor that affects this in today’s business environment is referred
to as organizational slack.
According to a well-known definition, organizational slack signifies “a cushion of actual
or potential resources which allows an organization to adapt successfully to internal
pressures for adjustment or to external pressures for change in policy, as well as to
initiate changes in strategy with respect to the external environment” (1981, p. 30).
It seems that open communication between the departments that had oversight into this specific
issue and some communication from the legal team at Volkswagen could have proactively put a
stop to this misguided idea. Setting expectations and inspecting the adherence to those
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expectations can ensure that a system of checks and balances keep all parties aware of the
company’s responsibility to do what is right. Vince Molinaro outlined the benefits of leadership
within an organization that highlights accountability. Listed among the top benefits that
leadership accountability produces was a focus on the customer and a desire to act in the best
interest of the organization rather than self. As a leader, I would have put a sense of urgency on
this mindset and a system of inspection and communication to drive a healthy focus and open
communication toward a common goal. Internal processes that require transparency are often
met with a negative attitude as employees feel they are micro-managed, however, it is this type
of oversight and involvement that will help a company avoid issues like this.
As CEO of the diesel division, I would have weighed my options concerning how to
respond to the situation. Sekar Raju and Priyali Rajagopla state that there are 3 possible
responses for an organization when addressing ethical and competence failures. These 3 options
are to deny, accept responsibility or simply not respond. Denying the issue in this case would
have been disastrous as the facts were out in the open and the company would have been seen
as dishonest and irresponsible. There are some benefits to not responding that allow more detail
to be presented that would allow the CEO to provide the best response based on the most
comprehensive information. I may have used this approach as I have learned in my own career
that a delayed response can be a wise approach at times. The negative side to this strategy would
be that the public may see this lack of response in a negative light and irresponsible. The strategy
that I would have most likely taken would have been to be upfront and honest about the failure
but also provide the promise of a thorough investigation and corrective actions to ensure this
type of failure does not happen again. I John 3:18 instructs us as Christians to “…let us not love
with words or speech but with actions and in truth.” As followers of Christ and leaders in
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business we have a responsibility to lead in truth and with honesty in every aspect of our day.
This approach to being honest about this failure would certainly be criticized and may even be
unpopular internally but at the end of the day I would know that at least I did the right thing and
pleased my Heavenly Father in the process.
Summary:
The temptation to take shortcuts and avoid regulation is always present in the business
world. Proper oversight and adherence to laws can be costly but is necessary to protect the
company, the shareholder and the consumer. When a company like Volkswagen breaks the trust
among those parties with dishonest business practices the reputational damage can last for years.
Christian leaders can impact the business landscape with principles of honesty and open
communication that are suggested in God’s Word.
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References
Bateman, S. & Snell, A. (2007). Management: Leading and collaborating in a competitive world
(7th ed.). New York: McGraw-Hill.
BibleGateway. Retrieved September 04, 2016, from http://biblegateway.com/
Bourgeois, L. J. (1981). On the measurement of organizational slack. Academy of Management
Review, 6(1), 29-39.
Doucet, J. (2009). Legal, Social and Ethical Responsibilities in Business. Retrieved September 3,
2016.
Lippe, P. (2015, October 13). Volkswagen: Where were the lawyers? ABA Journal. Retrieved
from http://www.abajournal.com/legalrebels/article/volkswagen_where_were_the_lawyers/
Molinaro, V. (2015). Driving Leadership Accountability: A Critical
Business Priority for HR Leaders. People & Strategy, 38(3), 32-33
Raju, S., & Rajagopal, P. (2008). Responding to Ethical and Competence
Failures. Advances In Consumer Research, 35855-856.
Schneper, W. D., Meyskens, M., Soleimani, A., Celo, S., He, W., &
Leartsurawat, W. (2015). Organizational Drivers of Corporate Social
Responsibility: Disentangling Substance from Rhetoric. SAM Advanced
Management Journal (07497075), 80(1), 20-32.
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