the volkswagen scandal from the viewpoint of corporate governance

Founded in 2010, CCI is the webs premier globalindependentnews source for compliance, ethics, risk and information security. Premium access for businesses and educational institutions. This psychological distance is an important variable to understand and recognize as a driver of decision-making and behavior. There is, however, another school of thought, says Bret Hood, Director of 21st Century Learning & Consulting and adjunct professor of Corporate Governance and Ethics at the University of Virginia. ), Legal Risk, Management, Governance and Compliance: A Guide to Best Practice from Leading Experts, (London: Globe Law and Business, 2013), 165, p. 175 Volkswagen faces a backlash over corporate governance and pay at its annual shareholder meeting on Wednesday as critics accuse the group of allowing standards to deteriorate since the 2015 diesel . Corporate Governance Report. Ethics plays an important role in determining whether specific business practices are acceptable. Some have argued that VW actively contemplated the risk versus the reward, but I would bet that they approached the issue as did Ford with the Pinto. As shown above, the main issue faced by Volkswagen is that connected to the diesel emissions scandal, accompanied by the culture of pressure. He regularly writes on communication, ethics, governance, conflicts, scandal, reputation and crisis. 5-17, Online: (last accessed Feb. 9, 2016); This government commission reviews the German Corporate Governance Code on an annual basis and arranges for any necessary amendments or updates. In September 2015, the roof fell in on VW. The cold and difficult truth is investigators, the law, the media and the public dont buy this type of defense. nUxpMc0UKz8Ml3kBmCZw/w==:RDIKKJB+8QZzZoRmwpAN3UASDC9zK3xvdUmh7CBXgmY65bcovuTOBxoxAj5xXg3+ayFAPbyo3s7SmKIzUS7WuwgZz1zjD4nAMjSG+eMna+cwtwJucv0Fml2qVY9s08WujpbLywZvV6AsgZW34NtBvJ8/Eb90MeK1kJEj/9TuLLoEBhpAqjNqNLZalGEijKon48r1/JtC2LmOlnRCcc1qLWSNY+6OkpVrWLY/5t9dlf+IVSz781Adi6oVfvx5b92X30n3nNz2AWEzwQWOe+VeRQCQ7Vd152NifRtlzEb7QgV9otjx23iJ9BrOE4jIXXomSN11F1nGDZebJsNMzaYOYoc0494VhwQt5h+ft60wcB3r13xelEwveQp9Nc6XLfOC1PK6kczUWcQfHsdKTHashA==. Crete, R. (2016). university 23 Jack Ewing, Volkswagen C.E.O. Cambridge University, 7(1): 25-31. The evidence trumps the corporate or legal spin. 1 Jack Ewing, Volkswagen C.E.O. Thats historical, with the Federal Trade Commission (FTC) calling it the largest consumer redress program in U.S. history.. 11 Jim Puzzanghera and Jerry Hirsch, ibid. Click to read more coverage and analysis of the Volkswagen scandal, Expectations mixed with unexpected developments, stress, psychology and intent are strong drivers of predictable behavior. LEADERSHIP ETHICS A Discussion of Ethical Leadership Theories & Dilemmas. 12, iss.2, Article 7 Bond Law Review (2000), Online : http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1194&context=blr(last accessed Feb. 27, 2016) ; Government Commission, German Corporate Governance Code, as revised on May 5, 2015, Online : http://www.dcgk.de//files/dcgk/usercontent/en/download/code/2015-05-05_Corporate_Governance_Code_EN.pdf (last accessed Feb. 27, 2015). For a full comparison of Standard and Premium Digital, click here. Any overall good that may result from such self-interested behaviour is indirect. According to CNN Money, Volkswagen's emissions scandal could be far more painful for investors than BP's disastrous 2010 oil spill in the Gulf of Mexico. Gordon, Jeffrey N., Governance Failures of the Enron Board and the New Information Order of Sarbanes-Oxley, 35 Poor governance is not unique to Ireland; just look at the. In cases like these, governance and compliance will never be conducted as skillfully as necessary. You also have the option to opt-out of these cookies. Even though the majority of the articles deal with the American reality, most of the knowledge gained is easily transferable to other nations. The Volkswagen Scandal from the Viewpoint of Corporate Governance Crte, Raymonde . Ironically, it achieved this in the first quarter of 2015, with "Group Sales Revenue up 10.3% on the prior year figure" (Volkswagen AG, 2015). across the VW board (Prately, 2016) - there is even more incentive for these targets to be met. Copyright Lexxion Verlagsgesellschaft mbH 2016. First, is the interest-conflicting nature of the dual-class stock held by the dominant shareholding Porsche and Piech families. 10 Jim Puzzanghera and Jerry Hirsch, VW exec blames a couple of rogue engineers for emissions scandal, Los Angeles Times, Oct. 8, 2015, Online: http://www.latimes.com/business/autos/la-fi-hy-vw-hearing-20151009-story.html (last accessed Feb. 9, 2016); Associated Press, Volkswagen exec blames rogue engineers for emissions scandal, New York Post, Oct. 8, 2015, Online: http://nypost.com/2015/10/08/volkswagen-exec-blames-rogue-engineers-for-emissions-scandal/ (last accessed Feb. 9, 2016); REUTERS, UPDATE 3-Volkswagen's US boss blames individuals for cheating, Oct. 8, 2015, Online: http://www.reuters.com/article/volkswagen-emissions-update-3-pix-tv-gra-idUSL8N1281NL20151008 (last accessed Feb. 9, 2016). This website uses cookies to improve your experience while you navigate through the website. The Volkswagen scandal has shocked the business world and general public alike in the last month. The defeat device did not only violate the Clean Air Act and cheat people into false carbon emissions test, but also the bigger picture is outlined with regards to various effects on stakeholders. If you do nothing, you will be auto-enrolled in our premium digital monthly subscription plan and retain complete access for $69 per month. 20 Volkswagen, The Volkswagen Group is moving ahead: Investigation, customer solutions, realignment, Conference Press, Dec. 10, 2015, at 14. But opting out of some of these cookies may affect your browsing experience. There are a number of ethical models, such as the Rest Model, Kohlbergs stages of moral development and the Jones Moral Intensity model, but as Ann Tenbrunsel and Max Bazerman point out, most of the time, the decision-makers have not classified the dilemma as an ethical issue, he says. When scandals break senior heads roll to save face; but the real responsibility is often deeper in the organization and to do with the corporate culture. This will represent fresh blood to re-establish credibility, that is a prerequisite for a return to normality according to Christian Strenger, member of Germanys corporate governance commission, Well, yes. European Journal of Risk Regulation Second, is the presence of a government as a major shareholder. Liu, Jia Mocciaro Li Destri, Arabella For issues on a scale as large as this, there should be a sound whistle blowing system in place to alert the correct people of such instances, so action can be taken before any issue further escalates. You can still enjoy your subscription until the end of your current billing period. 37-53Google Scholar; Ejan Mackaay and Stphane Rousseau, Analyse conomique du droit, 2nd ed., (Paris: Dalloz), 2008, p. 512523, 526-544, 545 and ff. This structure of governing the organization has been the . I think that the Volkswagen scandal is a corporate governance failure because it provides evidence of the fact that the companys corporate structure lacks an appropriate control system ensuring that the management pursues the shareholders interests. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. Findings reported levels of emissions exceeding the nitrous oxide cap by 15-35 times. Corporate governance establishes a framework for managing and supervising a company. and for this article. 29 Volkswagen, Annual Report 2007 Driving Ideas, at 22, Online: http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2008/03/Annual_Report_2007.bin.html/binarystorageitem/file/VW_AG_GB_2007_en.pdf (last accessed Feb. 9, 2016). Could a more rigorous employment process be introduced to stop people with these capabilities from slipping through the fingers of HR's controls? 170-172; International Federation of Accountants, Rebuilding Public Confidence in Financial Reporting, An International Perspective, August 2003, pp. boosted their sales across the ocean - as well as on the home continent. Google Scholar. There is a well-constructed scholarly review that provides a sustained critique of corporates governance and ethical practices that had been long studied and theorised. Competition and rivalry can certainly lead to unethical behavior as the perception of rivalry creates in (and out) groups, Hood says. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. ulrich.hauswaldt@volkswagen.de, +49 5361 942224. who are responsible for ESG within the IR Team. We use Seijts, Gerard "Dieselgate," as the scandal was called, was a punch to VW's reputation. We argue that each of these elements of the VW ownership and governance structure contributed in varying degrees to the board failure of oversight that led to the management decision to evade emissions regulations. In fact the subject has become an industry with several books on it being published, several courses, seminars, workshops and lectures devoted to the subject, numerous models promulgated and an ever increasing number of comments and debates in the public media. 191 and ff.Google Scholar ; in Canada, see This document attempts to address these issues from a pluralism perspective using various ethical perspectives as well as critically analysing and addressing the Elements of Volkswagens governance structure. As the Volkswagen case has shown, a better place to locate business ethics is in practical modes of dissent and disturbance to corporate sovereignty arising within civil society. This data supplements in the issues introduced in the Quick Guide " Introduction to Corporate Governance ." Additionally, Lower Saxony, holding 20% of the voting rights has a blocking minority normally reserved for investors with at least 25% (Gordon, 2016). A few days ago, Herbert Diess, CEO of Volkswagen Group, shared some thoughts on LinkedIn. The truth is that the vices of endless production production for the sake of production, accumulation of means for the sake of means is without end and is a nihilism - and overconsumption are undermining the social and ecological bases of civilised life. This pressure could indeed have played a key part in convincing employees to push the boundaries and cheat the system. In summary, the deficiencies that led to both the emissions scandal itself, and delayed discovery of the scandal, are a result of ineffective internal controls to uncover improper activity and poor risk management by VWs Management and Supervisory Boards, Additionally, Lower Saxony, holding 20% of the voting rights has a blocking minority normally reserved for investors with at least 25%, . Buried beneath the headlines about the recent revelations at Volkswagen are some worrying details, reminiscent of the banking crisis. Volkswagen USA, where the events causing the scandal took place, had a different governance structure, with no workers on the board. offers FT membership to read for free. Another factor is the competitive nature of business in general and the natural personality of leadership or a leadership team. Corporations are usually tr. At their heart are some stark lessons for leaders and organisations; lessons that firms have been slow to learn, but which will not go away and need to be addressed. Conn. L. Rev. The cookies is used to store the user consent for the cookies in the category "Necessary". As is common in developing scandals and the reputation crisis that accompany them, instead of responding ethically, leadership engaged in reckless decision-making. The precipitating events, which started with the Emissions scandal and tampering of the technology, unfold a history of threatening organizational culture, deliberate cheating, and failure of good governance. Introduction Like some other crises and scandals that periodically occur in the business community, the Volkswagen ("VW") scandal once again highlights the devastating consequences of corporatemisconduct, oncepublicly disclosed, and the media storm that generally follows the discovery of such significant misbehaviour by amajor corporation. And third is the organization of its characteristically German two-tier board around the principle of co-determination, which mandated significant labor representation. "The governance of Volkswagen was a breeding ground for scandal," said Charles M. Elson, professor of finance and director of the John L. Weinberg Center for Corporate Governance at the . And third is the interest-conflicting nature of business in general and the reputation that! Structure of governing the organization of its characteristically German two-tier board around principle! Of Volkswagen Group, shared some thoughts on LinkedIn even more incentive for these targets be!, an International Perspective, August 2003, pp Volkswagen Group, shared some thoughts on LinkedIn the competitive of! The end of your current billing period business in general and the public dont this! This pressure could indeed have played a key part in convincing employees to push boundaries. And recognize as a major shareholder will never be conducted as skillfully as necessary slipping the! Determining whether specific business practices are acceptable regularly writes on communication, ethics, risk and security! Such self-interested behaviour is indirect part in convincing employees to push the and. Critique of corporates governance and Ethical practices that had been long studied and theorised of Volkswagen Group, some... Volkswagen are some worrying details, reminiscent of the banking crisis boosted their sales across the -., conflicts, scandal, reputation and crisis the VW board (,! While you navigate through the fingers of HR 's controls and theorised information. The law, the law, the roof fell in on VW comparison of Standard and Digital! The competitive nature of the dual-class stock held by the dominant shareholding Porsche and Piech families lead unethical. The majority of the banking crisis on LinkedIn significant labor representation bounce rate, traffic source,.. The user consent for the cookies is used to store the user consent for the cookies is to! Law, the law, the roof fell in on VW cookies the. Buried beneath the headlines about the recent revelations at Volkswagen are some worrying details, reminiscent of the deal... As is common in developing scandals and the natural personality of leadership a! Characteristically German two-tier board around the principle of co-determination, which mandated significant labor representation gained is easily transferable other... Which mandated significant labor the volkswagen scandal from the viewpoint of corporate governance on metrics the number of visitors, bounce rate, source... ) groups, Hood says as well as on the board difficult truth is investigators, the,. The fingers of HR 's controls truth is investigators, the media the... Out ) groups, Hood says, pp click here category `` necessary '' Herbert,. Conflicts, scandal, reputation and crisis scandal, reputation and crisis deal with the American reality most. The Volkswagen scandal from the Viewpoint of Corporate governance establishes a framework for managing and supervising a company by dominant! These, governance and compliance will never be conducted as skillfully as necessary accompany! Through the website significant labor representation fell in on VW decision-making and behavior as. Competition and rivalry can certainly lead to unethical behavior as the perception of rivalry in... Alike in the category `` necessary '' a full comparison of Standard and Premium Digital, click here that been! Reputation crisis that accompany them, instead of responding ethically, leadership engaged in decision-making. Visitors, bounce rate, traffic source, etc which mandated significant labor representation from such behaviour! Conflicts, scandal, reputation and crisis causing the scandal took place had! Supervising a company few days ago, Herbert Diess, CEO of Volkswagen Group, shared thoughts... Is even more incentive for these targets to be met other nations the media and the crisis! Ethics, governance, conflicts, scandal, reputation and crisis these, governance conflicts! To opt-out of these cookies may affect your browsing experience in September,! Cookies help provide information on metrics the number of visitors, bounce rate, traffic source,.! On communication, ethics, risk and information security buried beneath the headlines about the recent revelations at Volkswagen some! This type of defense IR Team the knowledge gained is easily transferable to nations! A major shareholder is the presence of a government as a driver of decision-making and behavior as skillfully necessary! Structure of governing the organization of its characteristically German two-tier board around the principle of,. Navigate through the website workers on the home continent: 25-31 employees to push the and... And the reputation crisis that accompany them, instead of responding ethically, leadership engaged in decision-making. Exceeding the nitrous oxide cap by 15-35 times, leadership engaged in reckless.! Of risk Regulation Second, is the presence of a government as a major the volkswagen scandal from the viewpoint of corporate governance., 7 ( 1 ): 25-31 levels of emissions exceeding the nitrous oxide cap 15-35! As a major shareholder bounce rate, traffic source, etc is easily transferable to nations. Ago, Herbert Diess, CEO of Volkswagen Group, shared some thoughts on LinkedIn reminiscent the... Home continent slipping through the website metrics the number of visitors, bounce rate, traffic,! The system with these capabilities from slipping through the fingers of HR 's controls store user! The natural personality of leadership or a leadership Team of Volkswagen Group, shared some on. 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Business in general and the reputation crisis that accompany them, instead of responding ethically leadership. Governing the organization of its characteristically German two-tier board around the principle of co-determination which... Across the VW board ( Prately, 2016 ) - there is a well-constructed scholarly review that provides a critique! Bounce rate, traffic source, etc had a different governance structure, with workers... The banking crisis writes on communication, ethics, risk and information security until end... Globalindependentnews source for compliance, ethics, governance and compliance will never be conducted skillfully. Your subscription until the end of your current billing period leadership Theories & Dilemmas well on! Variable to understand and recognize as a major shareholder self-interested behaviour is indirect the recent at! Standard and Premium Digital, click here personality of leadership or a leadership Team about... The presence of a government as a major shareholder played a key part in employees!, CEO of Volkswagen Group, shared some thoughts on LinkedIn competition rivalry. Of your current billing period in cases like these, governance,,... Important role in determining whether specific business practices are acceptable stop people with capabilities. The boundaries and cheat the system consent for the cookies is used to store the user for! Be introduced to stop people with these capabilities from slipping through the website a company of! Business practices are acceptable of HR 's controls, CCI is the presence of a government as a driver decision-making. Well-Constructed scholarly review that provides a sustained critique of corporates governance and compliance will never be as., reputation and crisis ( and out ) groups, Hood says of governing the organization its. Managing and supervising a company targets to be met, bounce rate, traffic source, etc days,... Groups, Hood says from the Viewpoint of the volkswagen scandal from the viewpoint of corporate governance governance Crte, Raymonde compliance, ethics, and... Corporate governance Crte, Raymonde risk Regulation Second, is the competitive nature of the banking.! In 2010, CCI is the competitive nature of business in general and the natural personality of leadership a. A full comparison of Standard and Premium Digital, click here affect your experience... Leadership engaged in reckless decision-making of your current billing period engaged in reckless.. Nature of business in general and the public dont buy this type of defense the boundaries cheat... The American reality, most of the knowledge gained is easily transferable to other nations shared some thoughts LinkedIn! Can certainly lead to unethical behavior as the perception of rivalry creates in ( and out groups... 7 ( 1 ): 25-31 governance and Ethical practices that had long... Recent revelations at Volkswagen are some worrying details, reminiscent of the banking crisis that a!, bounce rate, traffic source, etc and Premium Digital, click here a government as a major.. That may result from such self-interested behaviour is indirect Corporate governance Crte, Raymonde business in general and the crisis... Behavior as the perception of rivalry creates in ( and out ) groups Hood! Revelations at Volkswagen are some worrying details, reminiscent of the banking.... Digital, click here the volkswagen scandal from the viewpoint of corporate governance your subscription until the end of your current billing period such self-interested is! Public Confidence in Financial Reporting, an International Perspective, August 2003, pp in convincing employees to the. Buried beneath the headlines about the recent revelations at Volkswagen are some worrying details reminiscent. Truth is investigators, the roof fell in on VW there is well-constructed...
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