The Volkswagen Emission Scandal Presented by Consolata Ochieng
The Volkswagen Emission Scandal Presented by Consolata Ochieng’
Contents • • • The deception How it started The blame game Moral status of corporations Ethical theories Management communication and responsible leadership Choices Ethical Choices An ideal process for ethical decision making Prompts
The deception • What has Volkswagen done? The company has falsified emissions data on its diesel vehicles, pretending they were cleaner than they are • How exactly? By installing a piece of software into computers on its cars that recognize when the car is being tested – a socalled "defeat device". This fine-tunes the engine’s performance to limit nitrogen oxide emissions. When used on the road, the emissions levels shoot back up • How widespread is the problem? 11 m cars worldwide had the software installed • Which models are involved? The allegations, which have been admitted by Volkswagen, cover the Jetta, Beetle, Audi A 3 and Golf models from 2009 to 2015 and the Passat in 2014 and 2015. Audi, Seat and Skoda cars are also affected, as well as VW vans. Some diesel and petrol vehicles also have "irregularities" around carbon dioxide emissions. • What happens next? VW has offered to fix affected models and expects to start the recall in January 2016. It is facing investigations in over a dozen countries as well as lawsuits from motorists.
How it started • The Scientists A group of scientists at West Virginia University led by Mr. John German had a brilliant idea. There had been data suggesting that diesel cars in Europe have high NOx (nitrogen oxides and dioxides) emission. The idea was to look at US where the emissions standards are more stringent so the cars would be clean then tell the results to Europe to confirm to them the existence of clean cars • The Plan Send researchers to take their cars – a Volkswagen Passat and Jetta, an a BMW X 5 out on the roads to simulate ordinary driving conditions using a portable emissions measurement system making possible to collect real world driving emissions data, for comparison with laboratory dynamometer testing. The failure is detected when two outputs are very different • The Results Very high emissions in the real world Mr. German tells Volkswagen about his findings in May 2014, but the company had failed to fix the problem. He finished his report and turned over the data to EPA (US Environmental Protection Agency). In December 2014, the EPA announced VW was issuing a software fix to solve some vehicles’ emissions problems. VW swore to the agencies that they would fix the problem. In May 2015 CARB (California Air Resources Board) tested some of the vehicles wit the fix and the emissions were still very high
How it started • The announcement Volkswagen had tried to offer a lot of explanations for the emissions for a very long period of time since it was first discovered. On Friday, 18 September 2015, the EPA issued a notice of violation of the Clean Air Act to VW for intentionally programming turbocharged direct injection (TDI) diesel engines to activate certain emissions controls only during laboratory emissions testing. • Volkswagen’s response Volkswagen insisted for a year before the outbreak of the scandal that discrepancies were mere technical glitches. They only fully acknowledged that they had manipulated the vehicle emission tests after being confronted with the evidence regarding the “defeat device”. The admission came after the EPA threatened to withhold approval for the company’s 2016 Volkswagen and Audi diesel models.
The blame game Wolfgang Hatz Ulrich Hackenberg • Two top engineers An internal inquiry into the emissions scandal centered around Ulrich Hackenberg, head of research and development at premium brand Audi, and Wolfgang Hatz, the Volkswagen’s group engine chief and head of R&D at sports-car brand Porsche. It was reported that the engineers found they couldn’t deliver as promised a clean diesel engine for the U. S. market and thus installed the engine software designed to fool regulators. Hackenberg and Hatz are viewed as two of the best and brightest engineers in German industry. They were put in charge of research and development at the Volkswagen group shortly after Martin Winkerton became chief executive in January 2007.
The blame game • Martin Winkerton The CEO resigned on September 23, five days after the US EPA accused Volkswagen of cheating. He accepted responsibility for the irregularities found in the diesel engines. He still insisted that he was unaware of the scandal, he had personally committed no misconduct and that he didn’t see any wrongdoing in his part.
The blame game • Ferdinand Piech The grandson of Ferdinand Porsche and a powerful member of the Porsche clan that controls Porsche and Volkswagen. Until this spring, he chaired the Volkswagen group’s board. He is known for tightly controlling Volkswagen’s operations, close selection of executives and carefully shaping its executive ranks.
The blame game • Volkswagen Management Did the pressures to grow at all costs create dishonest employees? The company may have been hell bent on growth whose performance culture created this problem rather than direct orders from the top of the company. Volkswagen hit its 10 million global target in 2014 – four years earlier than planned –and passed Toyota Motor Co. and General Motors to take the top spot in the first half of this year. But to dominate the global market, it needed to increase U. S sales. Mr. Winkerton gave U. S. executives a goal of more than tripling annual sales, to at least 800, 000 vehicles, in a 10 -year plan he set in in 2008
Moral status of corporations • Moral Responsibility Are corporations considered as moral agents? Should we demand that they assume the same burdens of morality just as people? Should they develop something close to conscience? • Moral Person View If corporations are agents, then they also are moral agents, because anything which is an agent is also a moral agent • Proof So long as one uses the proper definition of an “agent” – namely, anything which behaves intentionally which corporations do, therefore they are moral agents. Corporations act intentionally in their decision-making structure. This kind of intentionality involves the use of deliberation which is undertaken by members in the corporate structure and the use of reasons e. g. Profit maximization. • Conclusion A corporation must possess a decision-making process which is genuinely moral
Ethical theories EGOISM • According to egoism, acceptable behavior is that which maximizes benefits for the individual – doing the act that promotes the greatest good for oneself. Egoism looks at each decision by considering the effects of a decision only as it relates to the individual decision-maker. It views corporate decision making in terms of decisions of individual employees and the interests they pursue • Hackenberg and Hatz seem to have been under pressure. The company acknowledged that managers were struggling to meet U. S. sales targets. The two engineers may have found that they couldn’t deliver as promised clean diesel engine for the U. S. market and decided to install the engine software designed to fool regulators. CON • Acting out of self interest doesn’t prescribe moral behavior
Ethical theories Utilitarianism • The utilitarian candidate is the principle of utility, which holds that “actions are right in proportion as they tend to promote happiness; wrong as they tend to produce the reverse of happiness. By happiness is intended pleasure and the absence of pain; by unhappiness, pain and the privation of pleasure. ” • The right actions are the ones that produce most good – happiness. The utilitarian doctrine is that happiness is desirable and the only thing desirable, as an end; all other things being desirable as means to that end. Happiness is pleasure – all mental states that feel good. Utilitarianism seems unconcerned with justice and individual rights. It cares only about the consequences of our actions. It doesn't matter whether the actions are moral, ethical or good as long as the consequence is to bring happiness. Utility is likely to be maximized by lying, taking human life, violating someone’s rights all unethical. • Hackenberg and Hatz chose to lie. Volkswagen would have dominated the market with the increase in sales and be the top automaker. No consideration was put into the consequences of their actions. The pollutants that Volkswagen failed to effectively control are nitric oxide (NO) and nitrogen dioxide (NO 2), which are collectively known as NOx. NO 2 is a dangerous pollutant as it can cause respiratory damages. But combined wit the atmospheric pollutants, NOx can form even more dangerous pollutants: ozone and particulate matter. Further to this, there are death consequences from health issues, environmental impact, and legal and financial repercussions involved. • PRO – It provides a definite method for solving moral dilemmas that take into account conflicting interests • CONS – It may lead to acts that are, perhaps, simply wrong in themselves regardless of their consequences The principle of morality provides us with a criterion that distinguishing right and wrong.
Ethical theories Universalism According to universalism, all people should uphold certain values, such as honesty and other values that society needs to function. Universal values are principles so fundamental to human existence that they are important in all societies e. g. rules against murder, deceit, torture, and oppression. The Caux Principles for Business were made to establish global universal ethical principles. Executives from Japan, Europe, and United States created two basic ethical ideals: • Kyosei – means living and working together for the common good, allowing cooperation and mutual prosperity to coexist with healthy and fair competition • Human dignity – concerns the value of each person as an end, not a means to the fulfillment of other purposes. This would have been the ideal approach for Volkswagen in decision making. Virtue Ethics Virtue ethics is an excellent tool of ethical decision-making. It takes a person of courage, integrity to place the good of others (public interest) ahead of one’s own self interest and that of one’s employer. It recognizes that the person must be honest, trustworthy, fairminded, and so on for the decision itself to reflect these characteristics.
Management communication and responsible leadership • Ethics are not only shaped by laws and individual development and virtue, they may also be influenced by the company’s work environment. • The ethical climate in an organization is the process by which decisions are evaluated and made on the basis of right and wrong. More often than not, responsibility for unethical acts is placed squarely on the individual who commits them. But the work environment has a profound influence as well. • When employees feel pressured to meet unreasonable goals or deadlines, they may act individually, but managers are in part responsible for setting the right standards, selecting employees with the ability to meet standards, and providing employees with the resources required for success. Managers also need to keep the lines of communication open so that employees will discuss problems in meeting goals, rather than resorting to unethical and possible illegal behavior. • Unethical corporate behavior may be the responsibility of an unethical individual but it often also reveals a company culture that is ethically lax which may be the root of the problem at Volkswagen Responsible organizational leadership involves maintaining a close connection to and awareness of operations through monitoring and to attend to the signs and cues regarding the company’s problems. The findings by the West Virginia University scientists were presented to Volkswagen nearly a year and a half ago in a public forum where Volkswagen even asked questions but they never did anything to fix it. Leaders have the obligation to be informed about the operations within a system. They many not know all the day to day activities but they are obligated to know about core operations and major processes. To create a culture that encourages ethical behavior, managers must be more than ethical people. They should also lead others to behave ethically.
Choices Pre-Crisis • Volkswagen’s poor management styles led engineers to make unethical decisions • The West Virginia Scientist had shared the results with Volkswagen but they didn’t fix the problem Post-Crisis • Volkswagen insisted for a year before the outbreak of the scandal that discrepancies were mere technical glitches. They only fully acknowledged that they had manipulated the vehicle emission tests after being confronted with the evidence regarding the “defeat device”. The admission came after the EPA threatened to withhold approval for the company’s 2016 Volkswagen and Audi diesel models • Within 48 hours of the story first appearing, the CEO released a statement in which he took full responsibility and promised action. • Mr. Winkerton went further and announced the explicitly announced the number of cars fitted with the ‘defeat devices’ was not half a million but 11 million and the deceit was not limited to the USA only but worldwide • The Resignation of Martin Winkerton (CEO) - When faced with an ongoing misconduct investigation, resignation may be the best option. As the employee, you might benefit from resigning, especially with compensation, instead of waiting out a long-term investigation. If you don't have positive expectations, resigning is sometimes the best way to move forward. A drawback of resigning is that the public may presume your guilt if you resign in the midst of a prominent investigation.
Ethical Choices • Ethical choices are based on principled decisions, not on self-interest or easy returns. One has to consider not only the result/consequence that is arrived at from the decision but also the process/actions that are taken to achieve the result. If either is unethical, then it would not be considered an ethical decision. • Decision makers should act in accordance with certain virtues of behavior, or character traits, such as truthfulness, trustworthiness, respect, fairness, responsibility, objectivity, and integrity. • The pressure from the management to have diesel powered cars, promising high mileage and low emissions without sacrificing performance drove them to make unethical choices. • Disabling the emissions controls brought major advantages, including much better mileage which was a big selling point in Volkswagen’s push to dominate America. The automaker also avoided more expensive and cumbersome pollution-control systems. Implications Unethical decisions can lead to an ethical downhill battle where once a decision is made that violates ethical tenets the decision maker starts to descend the slippery slope and it is difficult to reverse course and reclaim the high road. This leads to cover-ups and even more unethical decisions down the road. • VW have had to recall up to 11 million vehicles affected by the violation. • Sales of vehicles with EA 189 engines were halted is some European countries • In the United States, VW has withdrawn its application for emissions certification for its 2016 diesel models , leaving thousands of vehicles stranded at ports • On 9 November 2015, Volkswagen announced that 482, 000 diesel Audi and VW owners in the United States would be eligible to receive $1, 000 in vouchers, in addition to the $2, 000 it is offering current VW owners for trade-ins. (this doesn’t prevent owners from filing lawsuits)
An ideal process for ethical decision making Understand all moral standards Define complete moral problem Recognize all moral impacts - Benefits to some - Harms to others - Rights exercised - Rights denied Determine the economic outcomes Consider the legal requirements Evaluate the ethical duties Propose convincing moral solution
Prompts • Do you think Volkswagen responded well to this crisis? Will this help it restore faith in its brand prevent long term damage to the company? • In your own opinion who would you blame for this scandal? Do you think Volkswagen created dishonest employees? • Volkswagen developed diesel engines for the US market and problems arose to meet the requirements. The deceit required more effort than merely adding some code to the engine software. It’s both writing the code, but you also need to do validation. Do you think Hackenberg and Hatz came up with the solution and made the decision on their? Or do you think the top executives could be wearing a Veil of Ignorance? • Reference: http: //www. bbc. com/news/business-34324772 https: //en. wikipedia. org/wiki/Volkswagen_emissions_scandal http: //fortune. com/2015/09/30/volkswagen-diesel-scandal-consequences/ http: //www. forbes. com/sites/greatspeculations/2015/09/28/the-domino-effect-of-volkswagens-emissions-scandal/ Corporations and Morality by Thomas Donaldson
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