1 Outline the main points of emission scandal.

What role could issues regarding

moral intensity have played in the decision-making that let to the scandal? (with
references)

Here are the main points of the scandal to date:

What is known so far?
Volkswagen admitted to fitting the engines of 11-million diesel vehicles worldwide with so-
called defeat devices, sophisticated software that can skew the results of tests for nitrogen
oxide emissions.
The devices turn on pollution controls when cars are undergoing tests and off when they are
back on the road, allowing them to spew out harmful levels of nitrogen oxide. They have
been fitted to 1.2, 1.6 and 2.0-litre engines of the type EA189.
Out of the VW group's 12 different brands, five are affected, Volkswagen itself, Audi, SEAT,
Skoda and VW commercial vehicles.
Around 8.5 million vehicles are affected in Europe and 480 000 in the United States.
What are the latest developments?
On Monday (November 2), the US Environment Protection Agency (EPA), which was the
source of the initial allegations, accused VW of installing the software into the bigger 3.0-
litre diesel engines of some high-end models of VW, Audi and Porsche sold in the United
States. According to the EPA, at least 10 000 vehicles are affected.
VW denied the new accusations but said it would "cooperate fully with the EPA (to) clarify
this matter in its entirety."
On Tuesday (November 3), VW revealed that it had uncovered "unexplained
inconsistencies" in carbon emissions of around 800 000 more vehicles.
A VW spokesman said that the 1.4, 1.6 and 2.0-litre motors of VW, Skoda, Audi and Seat
vehicles are affected, adding that these cars had been found to be releasing more of
greenhouse gas CO2 than previous tests had shown.
What are the consequences for customers?
The 11-million vehicles fitted with the rogue devices are being recalled in a massive
campaign to remove the defeat device.
For some models, a simple software adjustment is necessary, but for most of the others, the
engine itself needs to be adjusted mechanically. The recall is scheduled to begin at the start
of 2016 and could last the rest of the year.
The owners of the vehicles involved will be contacted directly by their dealer who will inform
them of the steps that need to be taken.
For the owners of the 800 000 vehicles which are releasing more CO2 gas than advertised,
there will be no changes in practice. Volkswagen must simply adjust the description of the
technical specifications to reflect the actual levels of carbon gas emission.
At the same time, because the customers have effectively been fraudulently sold a car,
they could claim compensation or their money back.
What are the consequences for Volkswagen?
The carmaker is in its biggest-ever crisis. Chief executive Martin Winterkorn resigned and
was replaced by the then head of the group's luxury sports car division Porsche, Matthias
Mueller.
Mueller promised to be ruthless in getting to the bottom of the scandal.
A number of executives have been suspended. Mueller has drawn up a far-reaching
reorganisation and a sea-change in VW's culture.
The recall action is expected to cost billions of dollars. In addition, the carmaker faces
potential fines, amounting to as much as $18 billion in the United States alone, as well as
legal costs from private lawsuits.
As a result, the scandal has wiped nearly 40% off Volkswagen's market capitalisation
since the scandal broke.
Volkswagen has set aside 6.5 billion euros in provisions to cover the initial costs, pushing it
into its first quarterly loss in more than 15 years in the third quarter of this year. The full cost
of the affair are still incalculable, but experts suggest it could run to tens of billions of euros.
Some industry experts have begun to speculate about a possible break-up of the group,
with Volkswagen's up-scale niche brands such as Lamborghini or Ducata mooted as
possible divestment candidates.
Which questions must still be answered?
The question of responsibility needs to be answered and VW has commissioned both
internal and external investigations to find the masterminds behind the deception. German
prosecutors have also launched a criminal investigation.
VW has denied the EPA's accusations regarding the bigger 3.0-litre engines, but offered no
explanation so far for the irregularities found by the authorities.
With regard to the carbon emission irregularities: questions left unanswered included
whether the information was deliberately falsified and by whom. Do the excess carbon
emissions exceed regulatory norms? How can customers find out if that is the case?

https://www.wheels24.co.za/News/Volkswagen-emissions-scandal-Main-points-so-far-
20151104-2

2 . Analyse, using Rest's four stage model of ethical decision-making, at what stage
VW deviated from the model in its decision-making processes regarding the
attempted cover-up. ( with references)

Any decision-making body that lacks effective decision-making processes is at significant

risk of failure, scandal, and ineffectiveness. Legal scholars and policymakers have largely
ignored the connection between decision-making processes and the efficacy of corporate
leadership.

Volkswagen's 2015 emissions scandal provides a vehicle to critically assess the

relationship between Germany's two-tiered board and an effective decision-making process.
This Article argues that the structure of Volkwagen's dual board did not automatically result
in an effective deci-sion-making processes. Additionally, an effective decision-making
process—the attributes of which can be found in organizational behavior theory—is
essential to helping German boards accomplish their legislative mandate. Moreover, it is
essential to helping the boards of transnational corporations, which have a wide range of
structural variations, effectively govern the organizations for whom they work.

In sum, Volkswagen and other German corporations may follow the structural requirements
of German corporate law, but without effective processes, German directors are likely to fail
in their monitoring and supervisory roles. Without effective processes, directors are
watchers asleep at their post, uninformed, dormant, and ineffective in preventing gross
failures of corporate integrity. Unless German boards adopt and implement a Process-
Oriented Approach, the Volkswagen emission scandal will simply be another mark on a
timeline for a century plagued by corporate failure.

From the emission scandal, VW, deviated from Moral Sensitivity in which a moral
behavior requires that the individual interpret the situation as moral. The simplest way is to
apply The Golden Rule. In other words, whenever an action affect others, moral issues
exist. Absent the ability to recognize that one's actions affect the welfare of others, it would
be virtually impossible to make the most ethical decision when faced with a moral dilemma.
A useful perspective is to identify the stakeholders - internal and external parties - and how
they could be affected by a certain action. 

https://www.ethicssage.com/2018/10/how-do-we-make-ethical-decisions-an-essay.html
https://repository.law.umich.edu/mbelr/vol7/iss1/3/

3 What context-related factors could have influenced executives and engineers at VW

not to whistle blow on the fraudulent activities? ( with references)

The responsibility for the decision to deceive the emissions testers will ultimately rest some
way up Volkswagen's management chain. But as well as the senior decision-makers, there
is very likely to have been a much larger group of engineers who knew of the illegal
deception, understood the consequences and chose not to reveal it to authorities or
the media. The lack of whistleblowers from this larger group is striking.

The ethical duties of software engineers in these circumstances are, theoretically, quite
clear. The Software Engineering Code of Ethics, agreed jointly by the Association for
Computing Machinery (ACM) Institute of Electrical and Electronics Engineers (IEEE),
states that a software engineer should:

Disclose to appropriate persons or authorities any actual or potential danger to the user, the
public, or the environment, that they reasonably believe to be associated with software or
related documents.

While the code also addresses responsibilities to employers, including

confidentiality, it makes clear the primacy of the public interest in cases where these
ethical duties conflict:

[...] in all these judgments concern for the health, safety and welfare of the public is
primary; that is, the "Public Interest" is central to this Code.
Acting on this professional obligation, when it involves revealing an employer's
unethical practices to regulators or the media, usually imposes a tremendous
personal cost. As a consequence, examples of engineers blowing the whistle are
very rare.

https://theconversation.com/where-were-the-whistleblowers-in-the-volkswagen-emissions-
scandal-48249
4 Do you think that VW's senior management handled the scandal well? Could earlier
admission of the fraudulent activities have reduced the negative impact on the firm? (
with references)

The Management handled the scandal well when they announced plans in April 2016 to
spend €16.2 billion (US$18.32 billion at April 2016 exchange rates) on rectifying the
emissions issues, and planned to refit the affected vehicles as part of a recall campaign. In
January 2017, Volkswagen pleaded guilty to criminal charges and signed an agreed
Statement of Facts, which drew on the results of an investigation Volkswagen had itself
commissioned from US lawyers Jones Day. The statement set out how engineers had
developed the defeat devices, because diesel models could not pass US emissions tests
without them, and deliberately sought to conceal their use. In April 2017, a US federal judge
ordered Volkswagen to pay a $2.8 billion criminal fine for "rigging diesel-powered vehicles
to cheat on government emissions tests". The "unprecedented" plea deal formalized the
punishment which Volkswagen had agreed to. Winterkorn was charged in the United States
with fraud and conspiracy on 3 May 2018.As of 1 June 2020, the scandal had cost VW
$33.3 billion in fines, penalties, financial settlements and buyback costs. Various
government and civil actions are currently undergoing in the U.S., as well as the European
Union, where most of the affected vehicles are located; while they remain legal to drive
there, consumers groups and governments seek to make sure Volkswagen has
compensated these owners appropriately as they had to do in the United States

An earlier admission of the fraudulent activities may not reduce the negative impact to the
firm. This is simply because , a fraudulent act is not just unethical but unlawful.
.
https://en.wikipedia.org/wiki/Volkswagen_emissions_scandal

5 How could VW seek to improve their approach to ethics management in the future?
Can claims that the firm has so quickly changed its culture stand up to scrutiny?
( with references)

There will always be a time when a certain business decision makers may face ethical
dilemmas that may be very difficult to solve.

In response to the dynamic business world, the Tucker's Five-Question model may be far
too simple to use to evaluate VWs approach to ethics management in the future. However,
it would not undermine its usefulness. The model is developed to help decision makers
analyse the situation from different ethical aspects, to help them to form a decision in a
clear and logical way in order to maintain the company's ethical reputation.

https://www.accaglobal.com/an/en/student/sa/features/vw-turing.html

The age of transparency poses a challenge for business leaders who view strategy, brand
and culture as separate pieces.
No company culture is perfect - by its nature it's constantly evolving. Trying to present a
perfect face to the always-on digital world is bound to fail. But you can take steps to improve
your work culture, and share compelling stories about this journey, with your people, and
with the world.