BUSI 561 Business Ethics

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Running head: BUSINESS ETHICS 1 Business Ethics BUSI 561 Liberty University

BUSINESS ETHICS 2 Abstract There has been a lot talk, debate, and controversy over smog. greenhouse gases and better emissions for vehicles. With more laws being passed directing and governing the auto industry, has the auto industry found themselves in a no win situation by failing to meet or exceed the government regulations surrounding fuel efficiency and emissions? Is it possible that the engineers might have falsified and manipulated the data from their tests and forwarded this misinformation to the shareholders? Are the engineers and lawyers collaborating in this disingenuous plot? What if the auto industry was manipulating and falsifying their tests and misrepresenting their product for a larger piece of the market? This article will attempt to answer these questions.

BUSINESS ETHICS 3 Business Ethics Overview In the early 2000’s diesel automobile sales were a fraction of what they were when news broke in 2015 that Volkswagen cheated test results on their diesel engines. Volkswagen “aspired to be the biggest seller of cars in the world” and “sales of US diesels were critical” to achieving this goal (Valentini & Kruckeberg, 2018). In their quest for global dominance of the diesel market Volkswagen abandoned their ethics and morals and compromised their integrity. “For what does it profit a man to gain the whole world and forfeit his soul?” (Mark, 8:36, ESV). In 2015, Volkswagen made headline news when it was reported that they were in direct violation of the Clean Air Act that was last amended in 1990. The Environmental Protection Agency had discovered and sent notice to Volkswagen that the diesel engines that were manufactured from 2009 to 2015 had failed to pass the nitrogen oxide test during laboratory testing. It was determined during the ensuing investigation that there was an engineering design in which was incorporated into the engine to manipulate the engine’s data during laboratory testing. The test results, design and engineering flaws, and manipulation of data set off a chain reaction of events that brought discredit to Volkswagen but also cost Volkswagen billions of dollars in repairs, fines and penalties, stocks, and sales. In the years leading up to the scandal, Volkswagen increased their sales through marketing and by branding themselves as a clean diesel engine automobile manufacturer. Volkswagen’s determination and quest for dominance only contributed to their own demise. In this case, it would seem Volkswagen had decided it was cheaper to develop a program to cheat emissions than it was to develop a more efficient and cleaner burning diesel engine.

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BUSINESS ETHICS 4 Legal or Engineering Department In an ever changing global economic environment the stakes are high. Corporate leadership and stakeholders not only expect performance and results; they demand it. While deadlines, budgets, overhead and profit are scrutinized, failure is not an option. With this said, many have questioned Volkswagen’s involvement and knowledge of the software that was incorporated into the diesel engine design. Paul Lippe listed seven possibilities on Volkswagen’s DieselGate. Lippe stated that the most probable possibility was that, “The Volkswagen engineers neither discussed with nor hid what they were doing from Volkswagen’s in-house lawyers, and the in-house lawyers didn’t realize what was going on” (Lippe, 2015). This is a bold statement and begs to question; at what point do the lawyers get involved? Are the engineers operating independently and to whom do they report? At some point in time Volkswagen’s senior leadership must have received a brief on the design and the performance tests before moving forward. From a standpoint of a functional manager in the engineering department I would have asked to see the emission test results and to see if the design had performed to the level of expectation for which it was intended. If the test results showed that there was a deficiency, then I would share that information with the design team so we could collaborate to correct the deficiency. As a manager, depending on company structure, I might engage the legal department to ensure we were operating within the legal boundaries for the industry. As the CEO In this case, Martin Winterkorn stepped down as Volkswagen’s Chief Executive Officer less than two weeks after the emission scandal hit the news. Bhaduri states, “Leaders’ values and

BUSINESS ETHICS 5 beliefs are reflective of organizational culture and vice versa. This is because culture dictates behaviors and practices in an organization” (Bhaduri, 2019). As the incoming Chief Executive Officer, I realize that I am a servant leader. As such, I serve the people of the organization, but this is not to mean that I would compromise my integrity to save the organization at the expense of the people for whom I serve. “Do not be conformed to this world, but be transformed by the renewal of your mind, that by testing you may discern what is the will of God, what is good and acceptable and perfect” (Romans 12:2, ESV). Additionally, I recognize that a crisis is a moment to teach as well as a moment to learn. In this instance, I would reassure the public that the company is dedicated to quality. In keeping with the time honored tradition of delivering quality, I would vow to find out where things went wrong and to ensure this does not happen in the future. After the public service address, I would immediately collect the data, collaborate with staff and shareholders to find out and answer the five W’s (who, what, when, where, and why), review company policy and company structure, coordinate to correct the deficiency(ies), look for areas to improve, strive to rebuild public trust and confidence, and regain a favorable public image of the company. Once the five W’s were answered, I would go public to address the issues and to inform the public of the action in which was taken towards those that were involved with the situation that brought discredit upon the organization at the expense of the consumer. Spiritual and ethical perspective A leader is always being watched and evaluated by their subordinates. Every decision, mannerism, and word spoken is scrutinized and their followers are looking for their guidance, action, courtesy, respect, and humility. A leader’s actions in how they handle a situation will tell a lot about their character. A leader with character ensures his subordinates know that he will be

BUSINESS ETHICS 6 there when times get tough. A leader with character delivers guidance with clarity, encourages without being condescending, and is decisive and humble. “Ethical character is formed over time and withstands the test of time” (Gini & Green, 2014, p. 437). “There is no question among scholars that business organizations must not only abide by the law, but also consider the ethical and moral obligations that go beyond the law” (Merenda, & Irwin, 2018).

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BUSINESS ETHICS 7 Reference Bhaduri, R. M. (2019). Leveraging culture and leadership in crisis management. European Journal of Training and Development , 43(5/6), 554-569. doi:10.1108/EJTD-10-2018- 0109 Gini, A., & Green, R. M. (2014). Three critical characteristics of leadership: Character, stewardship, experience: Business and society review. Business and Society Review , 119(4), 435-446. doi:10.1111/basr.12040 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/ Merenda, M. J., & Irwin, M. (2018). Case study: Volkswagen's diesel emissions control scandal. Journal of Strategic Innovation and Sustainability , 13(1), 53-62. Valentini, C., & Kruckeberg, D. (2018). “Walking the environmental responsibility talk” in the automobile industry: An ethics case study of the Volkswagen environmental scandal. Corporate Communications: An International Journal , 23(4), 528-543. doi:10.1108/CCIJ-04-2018-0045

BUSI 561 Business Ethics

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