Business ethics is a branch of philosophy which is associated to decision making power of association in concern with 'what is right and wrong'. It involves the moral issue of ascertaining whether an activity performed by organisation is morally right or not. In this concern, business entities now ensure that they comply with all the ethical and legal procedures so as to avoid any statutory intervention or procedures. By adhering to all the ethical process, businesses today aim at creating a positive corporate image and position in market along with brand productivity and trust of business associates. Thus, it can be said that ethics largely affect any entity. This report is based upon the case study of Volkswagen and explores the dimensions of ethics in relation to the activities of company. This paper includes application of utilitarian and rights frameworks to the case study so as to lead to views upon ethics of the case. Also, it will assess the qualities recognised for ethical leadership and the creation of an ethical organisation.
a) Explanation of ethical concern and identification of key stakeholder
The purpose of this report is to explore the unethical practices employed by company and its vast consequences. It concerns Volkswagen's position as an ethical enterprise with a particular reference to
b) Ethical Theories
Ethical theories provide the base for process of decision making in context of business environment. Such theories lay the foundations on the basis of which individuals who are a part of business association makes selections of processes, techniques and policies. Each theory differ from each other in terns of view points regarding rules of decision making and predicting outcomes associated with what an individuals regards to be an ethically right decision. In relation to this, there are various theories or frameworks of ethics available for an individual or business. The two theories discussed herein are Utilitarian and Rights theory.
The management of Volkswagen knew that the engines designed and manufactured by entity released a lot of pollution into air which was much more than the ethical standards set for various countries. To adhere to Clean Air Act emission standards, it is essential that each diesel car manufactured in market possess a software installed in the vehicle which is useful in cleaning of diesel exhaust. In case of Volkswagen, the company engaged in unethical practices wherein they enabled the software when the car went through emission test and disabled it when the vehicle was put into use by customers (The Volkswagen Scandal is Not an Ethical Issue, 2018). This was done in order to bring improvements in fuel efficiency and vehicle performance. The consequence of this act was that the cars produced by company released 40 times more nitrogen oxide into air than desired which was detrimental for environment and also for human health (Mansouri, 2016). When this unethical act of enterprise became public, it disappointed public and had a severe impact on the corporate reputation and position of Volkswagen across the globe.
Utilitarian and Kant theory have been applied to Volkswagen to gain an insight into the ethics involved in the unethical practice of company described earlier. These theories ascertain the extent to which decision taken by management of company in relation to equipping the vehicles with cheat software was justified and ethical.
This approach of ethics differentiates right from wrong by emphasizing upon outcomes. This theory emphasizes upon indulging in such practices that ensure the maximum good for the greatest number of persons. The approach of utilitarianism belongs to consequentialist form of ethics which implies that, here, the prima facie objective is to ascertain whether an action or policy is good or bad in context of its consequences upon business organisation. The utilitarian theory is thus, basically based upon the perspective of independent individuals in relation to what determines whether an act is beneficial or baneful within the business environment.
Keeping this in consideration, it can be observed that the practice adopted by Volkswagen was exact opposite of the approach of utilitarianism. Volkswagen indulged in dishonest arrangement of defeat devices in order to escape the consequences of failure of emissions test. During this entire course of action and this unethical practice of Volkswagen becoming public and turning into a scandal, nothing good for consumers was observed on part of company. The action undertaken by Volkswagen did not, in any way, benefit anyone from within the company or outside the organisational premises. Instead of benefit, the consumers who bought the cars from company in which defeat device was fit were now faced with extreme difficulties as they possessed no clue in relation to what to be done with the defective car (Sianond et. al., 2017). As a consequence of the unethical practice of Volkswagen gaining limelight and becoming public, the whole scene soon turned into a scandal in which company's overall image and position was largely harmed. To deal with this, the only option left with company was recalling of defective cars. Consequently, a large sum of money was spent on rectification of the defect in cars. This led to a large number of employees losing their jobs as the company could not afford hiring such a large workforce after spending billions upon the recalled vehicles.
If the outcomes of the practices adopted by Volkswagen are taken into accounts, all the major consequences were negative except one. The only positive outcome of act was the looking forward of company towards reinforcing the policies, procedures, methods and processes in a way that it ensures adherence to compliance mechanism, audit and risk management (Elson, Ferrere and Goossen, 2015).
It is a theory which is largely based upon taking into consideration ethical principles while taking decisions in individual or business environment. Kant theory can be referred to as the ethical act of treating people with due respect and assuming them to be equally capable of living an autonomous life. The basic principle undermined in this theory is that people are the end and not the source for creating the end product or process. Also, the aim here is to determine the rights of people and creating a well structured process for prioritization of rights along with resolution of conflicts.
Volkswagen engaged in unethical practice of arrangement of defeat devices in vehicles produced by company. Also, the enterprise made an unethical decision by lying to the employees, management, shareholders, consumers, dealers and business associates. This act of Volkswagen was completely unethical from the view point of Kantianism. Company never gave these people who were closely related to the operations of entity to gain knowledge in relation to what were they doing (Fracarolli Nunes and Lee Park, 2016). The organisation made them believe in such facts which never really existed in concern with entity.
Also, Volkswagen dishonest behaviour led to continued purchase of cars manufactured by company along with purchase of shares by shareholders. Customers and shareholders did not possess the knowledge about cheating done on part of entity. Along with this, employees who were functioning towards making the components of car and other parts were blind towards the unethical practice of making faulty cars. Furthermore, the dealers who were involved in distribution of vehicles were also clueless about the dishonest practice of Volkswagen. Thus, enterprise did not offer these key individuals the right to have access to important information about entity and its products and also used the services of all such persons for generation of income and profitability for Volkswagen.
Qualities for ethical leadership and creation of ethical organisation
There are ample number of reasons due to which an organisation may behave unethically
in business environment. These can be unending financial loss, continuous pressure from shareholders in relation to growth, intention of leaders to achieve organisational goals before or on time, greed of management or many a times, even ignorance of owners and senior leaders. Every organisation has a prescribed code of conduct and practice which consists of the values, processes, methodologies and culture of entity. It is required by each association to make such code of practice which comply with ethical requirements of society and environment (Weiss, 2014). Also, senior leaders should adhere to code of ethics so as to align the behaviour of employees towards employing such practices which do not harm society or environment.
A leader leads the workforce towards engaging in such practices that are morally and ethically right. Also, being a leader, I should possess certain characteristics and qualities that would aid me in becoming an effective ethical leader. The behavioural attributes and qualities that I should possess are briefed below:-
Gratitude: Gratitude can be referred to as the humbleness and thankfulness of leaders in relation to the efforts put in by employees. I should possess gratitude towards my subordinates and praise them when they work well according to the desirability of organisational goal. It means that I should be down to earth while interacting with subordinates so that I gain support from them and employees develop a sense of being to the enterprise. With this, the workforce would be committed to deliver a better performance by enhancing their productivity. Also, this would result in organisational success by way of building healthy relationship with personnel.
Humility: This reflects that leaders should possess humble behaviour and communicate the need of good performance from employees so as to gain team success. I should be modest and unpretentious towards the workforce and let them know my vulnerability without getting a desirable performance from them. It can also be seen as a source of confidence that an employee builds in leader. It will create a healthy environment and promote early realisation of organisational goals and objectives (Dierksmeier, 2011).
Magnanimity: Employees in any entity perform better when they view their leader as a role model. I need to work in a manner that my subordinates feel accountable and responsible towards me and act in a way that co-relates with the desired behaviour and performance. I should be realistic, aligned to vision of company and passionate towards accomplishment of goals and objectives of entity. By doing this, employees would develop a sense of accountability and would work in a manner that ensures timely completion of tasks.
Integrity and Resilience: A leader needs to function in a manner that is in consideration with the ethical and statutory requirements. I need to be committed towards the organisational and ethical principles so as to ensure that the subordinates under me also follow the same code of conduct and work in a manner that is morally desirable by law and society. It would reflect a sense of belongingness in workforce towards the leader as well as the enterprise (Ismaeel and Blaim, 2012). Also, it would mean that employees operate in a morally ethical manner towards the timely realisation of organisational goals and objectives.
Justice: This reflects that leader must need to govern behaviour of their employees in proper manner. In a company there are various conflicts so in order to create a healthy working environment leaders should learn effective ethical leadership. In order to handle different organisational situations I have to implement various techniques to create a environment which encourage innovative culture in company. Justice done is fair and proper manner encourage employee to work hard. I need to take care that there is no unexposed biases prevailing in company working culture. Leader need to act in honest and fair way to promote healthy relationship with workers. There is a need to work in more diversified way and erase all unhealthy activities in organisation (Godemann and et. al., 2014). Effective justice helps employee to retain in firms for long period of time. Also, it can help company to increase their profitability and productivity. Justice also serves as an effective motivation to workers which helps them to increase their level of performance.
Mercy and Compassion: Compassion guides individual to have mercy which includes forgiveness. As to perform management function smoothly a leader should have to learn this act of forgiveness and leniency. In any organisation if a worker is convicted in any crime then after asking for mercy to their leader they can demand for lesser punishment. In an professional environment by exercising this function of mercy and compassion I can take my decisions in warm hearted manner. Apathy takes employees towards effective working process. By having deep understanding of this culture leader can handle problematic situations in correct ways.
Thus, by engaging in ethical practices myself and leading the employees towards following that code of practice only, I would strive to ensure that an organisational culture is maintained where workforce complies with ethical and moral concerns while performing tasks. Also, leaders by prevailing this culture in their working process will be able to create smooth and healthy working environment (Crane and Matten, 2016). This will help employee to share their problems with leader in courageous manner. Thus, this will develop an effective work culture for all employees and ensure the creation of an ethical org