Managerial Ethics and Social Responsibility

The lack of ethics occurs in companies managed by capitalists who think only of their own profit, having as a priority to enrich themselves no matter what. They do not mind using scams, lies to make up results to achieve their goals. In 2015, the automobile company Volkswagen was accused by the American government of defrauding pollutant test results in approximately 480,000 vehicles sold in the country.

In September, the company admitted that 11 million diesel-powered vehicles in models of various brands belonging to the group were adulterated. This fraud undermined the image of the German automaker, since the company positioned itself as environmentally conscious, having in a letter of July 2014 to Greenpeace committed to reduce CO2emissions by 2020. The company’s shares suffered a sharp fall and Martin Winterkorn resigned as chief executive of Volkswagen.

The United States charged the former CEO of Volkswagen with conspiracy and wire fraud for covering the company’s attempt to cheat on U.S. diesel emission tests. In a meeting on July 27, 2015, Martin Winterkorn and other senior leaders were informed about these irregularities discovered in the U.S., at this meeting, the former CEO approved the use of the cheating software from U.S regulators. Which shows he was completely aware of his unethical behavior, choosing profit over ethics.

The fraud consisted of a mechanism installed on cars equipped with a diesel engine type EA 189. The United States Environmental Agency (EPA) has concluded that the software recognizes when the vehicle is under technical inspection, changes the engine to economy mode and injects chemicals to reduce toxic gas emissions. This way, the results of surveys show emissions that would conform to norms. But under normal driving conditions, the issue would be up to 40 times higher than the US law allows.

The burning of diesel releases several pollutants into the atmosphere, such as carbon monoxide, nitrogen oxide, sulfur, among others - responsible for the deaths of thousands of people annually. This is the reason why countries have regulatory agents to control emissions of these gases. Volkswagen committed a very serious crime by making 11 million cars seem less toxic than they really are. Besides fooling its customers, the brand was contributing even more to the global warming process.According to analysis published in the British newspaper The Guardian, the impact of 11 million adulterated vehicles worldwide can mean the emission of 237 thousand to 948 thousand tons of polluting gases per year, which is an extremely high amount.

Regarding the emission of pollutants in the atmosphere, Diesel is seven times worse than gasoline, and the exposure to this kind of pollutant can lead to increased risks of lung cancer, asthma and bronchitis, cardiovascular diseases and strokes.Volkswagen’s behavior was clearly very unethical, since the brand was harming people and the environment, with the intent of generating more profit.

The company violated many ethical principles, as the Principle of Government Requirements (ethical principle that claims you are not allowed to take any action that violates the law), Principle of Personal Virtue (ethical principle that claims that anything that is not honest, open, and truthful should never be done) and the Principle of Utilitarian Benefits ( an ethical principle that says actions that actions that does not result in a greater good for society should never be taken). The German brand also committed fraud, which is an explicit lack of legal responsibility. It also goes against the U.S. Sentencing Commission Guidelines for Organizations, which was created in 1991 to prevent and discourage organization’s unethical behavior.

Companies that break these guidelines can be prosecuted and punished. In the case of Volkswagen, the company pledged to adopt an Accommodative strategy, this is a responsiveness strategy in which the company takes responsibility for the problem and does what society expects to solve it. Volkswagen announced that it would spend 6.5 billion euros to pay fines and repair its vehicles.

A poorly managed company, that is, with a lack of business ethics, sets false objectives to deceive employees and those who somehow negotiate with it, causing a cancer that gradually destroys the company and does not bring benefits to anyone. Unethical decisions taken because of a capitalist greed is detrimental to people of good faith who really work and depend on the company to survive, who devote a long time of their lives to the company, sometimes invest their savings, and in the end, they end up with nothing.

Differently from what happened to Volkswagen and many other businesses involved in scandals concerning lack of ethics and social responsibility, a well-managed company would make sure to follow the U.S. Commission Guidelines for Organizations, this way the company would avoid being punished and paying fines. Volkswagen leaders should not have chosen profit over having an ethical behavior and being socially responsible, because of this mistake the brand lost a lot of money and had its reputation damaged.

A good option for helping businesses to stay ethical would be to make Overt Integrity tests, which has the goal to evaluate applicants’ honesty, by doing this, it becomes easier to separate the people who are more likely to have an unethical behavior from those who are not. Personality-based integrity tests are also very important for companies that are truly concerned about having an ethical behavior and ethical employees.

Having a code of ethics is very important, because this type of code sets specific ethical standards on various relevant topics like conflicts of interest, bribes and falsifying records. Besides an ethics code, companies’ managers should be involved in ethics training with the purpose of generating an ethical atmosphere in the company. When employees start being aware of the importance of being ethical, the whole company evolves.

For example, if the Volkswagen employees were involved in a company that emphasizes the importance of ethics, it is possible that the automaker would not have had to go through this scandal situation, since ethical workers would not have accepted to be a part of it and would have taken steps to stop it. Every company should adopt a model of ethical decision making, where the person identifies the problem, identify the constituents, diagnose the situation, analyze options, make a choice and finally act. This is very helpful model that can be used in various situations involving ethics.

It is also very important for companies to adopt legal responsibility (following societies’ laws and regulations while trying to meet economic responsibilities), be ethical responsible (social responsibility to not violate principles of right and wrong) and adopt proactive strategies, in which the company anticipates the problem before it occurs and does more than the expected by society to assume responsibility and come up with a solution to the problem.For improving its damaged image Volkswagen should adopt discretionary responsibilities, which means going beyond its social responsibility. It involves taking philanthropic actions to contribute for social, educational and cultural purposes.

By doing it, over time, people would look at the company differently.It is possible to conclude that nowadays, with the evolution of information systems and better capacitation of people to manage companies, the room for anti-ethical companies is decreasing more and more. Companies that do not adequate themselves will experience a loss of market and will not be able to survive.