VW Emissions Scandal: Was it the Customers Fault all along by Nieuwenhuis - Article Example

Article analysis: “VW emissions scandal: was it the customers’ fault all along?” (Nieuwenhuis 2015) Introduction The article by Nieuwenhuis (2015) titled “VW emissions scandal: was it the customers’ fault all along?” gives some insight on the Volkswagen (VW) emissions scandal and the relationship between the company and its customers. In the article, it is argued that VW could have cheated regarding its emission levels as a way of avoiding the installation of selective catalytic reduction (SCR) systems that would require customers to top up VW diesel engines with urea, a chemical that has a pungent smell. Thus, Nieuwenhuis (2015) tends to suggest that customers’ demand for hassle-free vehicles could have led to the company avoiding a situation in which the maintenance of its vehicles would appear cumbersome to the customers. In the end, this is what ignited the emissions scandal that made the company suffer a major blow with regard to sales and reputation. An alternative would have been for the company to educate its customer and work closely with them to enlighten them on the use of SCR in diesel engines and how to handle urea top-ups. This essay will critically evaluate the article by Nieuwenhuis (2015) by applying two theoretical principles: the corporate governance theory and the values and identity theory. Prior to the critical evaluation of the article, an overview of the VW emissions scandal is presented. Overview of the VW emissions scandal In September 2015, the United States Environmental Protection Agency (EPA) came to the realization that many VW cars that were being offered for sale in America had a “cheating device” (Gates et al. 2016; Hotten 2015; Wells 2016). This is software, installed in diesel VW engines, could detect when the cars were being tested under laboratory controlled conditions (specifically on a stationary test rig) and change the performance accordingly to improve emission results. The cheating device would put the vehicle in safety mode whereby the engine would run below its usual power and performance level (Hotten 2015). But in actual road conditions, the engines would switch off the test mode and thus produce emissions above the recommended standards. This meant that nearly all VW diesel cars that were fitted with the cheating software were producing emissions up to 40 times the stipulated levels in the United States while on the road (Hotten 2015), but this would not be detected because on being tested, the cars would produce lower emissions what were within the recommended standards. That is until the EPA discovered the anomaly. Critical evaluation of the article by Nieuwenhuis (2015) As noted above, the essay will apply to theoretical principles to critically evaluate Nieuwenhuis’ (2015) article. The two theories, corporate governance theory and the values and identity theory, are applied as presented below. Application of the corporate governance theory Corporate governance can be defined as the systems of overseeing and regulating the conduct of businesses or companies and of ensuring that there is a balance in the interests of all stakeholders (i.e. internal stakeholders. external stakeholders, regulatory authorities and the society at large) who can be impacted by the company’s conduct (du Plessis, Hargovan & Bagaric 2011, p. 10). The aim of overseeing and regulating the conduct of companies or businesses is to ensure that such businesses have responsible behaviour that is desirable with regard to achieving the best possible level of efficiency as well as profitability for a company (du Plessis, Hargovan & Bagaric 2011, p. 10). Corporate governance can also be defined as a set policies, processes, rules, regulations, laws and customs that govern the manner in which a corporation or a business should be administered, directed and monitored to maximise employee effort and ensure maximum gains for all of the company’s stakeholders (Mandal 2010, p. 26). The relevance of corporate governance to the article by Nieuwenhuis (2015) is premised on the idea that corporate governance concerns itself with the relationship between a corporation and its stakeholders. A company’s stakeholders include customers, employees, managers, boards of directors, regulators, special interest groups and other parties that may be affected by the company’s operations (Ferrell, Fraedrich & Ferrell 2010, p. 30). In essence a company’s corporate governance framework is supposed to guide the relationships that the company has with its stakeholders. For instance, the corporate governance framework is supposed top ensure that a company makes ethical decisions and is responsible towards the interests of its stakeholders (Ferrell, Fraedrich & Ferrell 2010, p. 30). Looking at the article by Nieuwenhuis (2015) corporate governance issues can be seen where it is stated that the UK managing director of VW presented evidence to the transport select committee, he apologised to the more than one 1 million of the VW customer who were affected by the emissions scandal that the company was involved in. This means that the managing director felt sorry that VW had wronged its customer by cheating them about the levels of emissions produced by their VW diesel cars. According to Mandal (2010, p. 26), the key elements of effective corporate governance standards include trust, honesty, openness, integrity, transparency, accountability add responsibility, mutual respect and values, performance orientation, and being dedicated to the organisations mission and vision. By apologising, to customers, the UK managing director of VW acknowledged that the company had not demonstrated corporate governance principles such as openness, trust, honesty and integrity with its decision to cheat so as to increase the sales of its diesel cars. What is not clear in the article however is whether the company also apologised to its other stakeholders such as the communities affected by the high levels of emissions, regulatory authorities like the EPA in the United States, and other parties that may have been affected by the emissions as well as the cheating by the company. Another issue that is worth looking at with regard to the article by Nieuwenhuis (2015) is the level of trust and openness between VW and its customers and other stakeholders. By asking “Was it the customers’ fault all along?”, Nieuwenhuis (2015) seems to the saying that customers are partly to blame for VW’s decision to cheat so as to please them. According to Nieuwenhuis (2015) the closeness between automobile manufacturers and customers waned in the 1930s when more motor vehicles started becoming available and drivers became less skilled. As well, automakers started resenting the ideas that customer were making a lot of input in determining what the financial output in the form of cars would look like. The result is that automakers alienated customer from their plans, and consequently, customers have to rely on vehicles offered in the market. As such, most customers have no idea how some systems in cars work. Additionally, many customers expect vehicles to deliver in terms of performance, low emissions and fuel consumption not mater how they treat the vehicles. Still, car manufacturers do not trust customer to top up new liquids to cars in order to increase performance. It is the level of distrust between VW and customer that could have led the company to cheat so as to please its customers. For VW, the fear that customers would not be happy with having to top up their vehicles with urea to reduce emissions could have caused the company to cheat by fitting the cheating device in its diesel engines. In the automobile industry it appears that cheating is rampant because many customers are not aware how certain systems work. For instance, Toyota admitted that it misled consumers in the United States by hiding and making deceptive statements regarding safety issues that caused the company’s cars to accelerate even as drivers attempted to slow down (Cowan 2014). Just like VW, Toyota first denied the defects before finally admitting its mistake. These examples show that some automakers are not willing to be open or accountable towards their mistakes. Application of the values and identity theory A value can be defined as belief that a given type of conduct is preferable to a contrary mode of conduct. On the other hand, identity can be described as the basic cognitive mechanism by which human beings group themselves individually or collectively. In regard to organisation identity refers to what an organisation is and what it stands for that distinguishes it from other organisations (Davies 2016, p. 12). Values help individuals and organisations by offering a framework for how people or organisations treat others, customers and make sense of life. Personal values affect how individuals interpret organisational policy as well as decisions (Osborne & Redfern 2006, p. 129). Looking at VW’s actions as presented by Nieuwenhuis (2015), one can ask what kind of values and identity the organisation espouses. The point that the UK managing director of VW apologised after the emissions scandal shows that the company has some values that do not promote unbecoming behaviour such as cheating their customers and the authorities. However, what is astounding is what drove the company to do what it did. The company knew that cheating about its emissions would make its cars appear to be producing low emission while in reality they were not, but it went ahead to fit the cheating devices. Therefore, it is worth asking if VW espouses dishonesty and deceit as one of its values as long as it increases the sales of its products. Another perspective of looking at the article by Nieuwenhuis (2015) is to look at the issues addressed from the perspective of the customer. It is argued that the customer appears to have lost touch with developments in the automobile industry. Customers seem to prefer products that are easy to use and which deliver superior performance. This point is shared by Flint and Woodruff (2001, p. 323), who argues that customer’s personal values are the central beliefs that guide customers behave across different situations. Since automakers like VW are aware that customerd do not want things that are tedious to handle, such as topping up a vehicle with urea (which has an unpleasant smell) to reduce the car’s emissions, they tend to avoid the use of systems that will appear too complicated to the customer. This can be said to be the reason why VW decided to avoid the use of an SCR system and instead opted to use a cheating device so as to appear to have significantly reduced emissions. Therefore, while VW thought that it was making work easier for its customers – which could be one of the company’s values – it ended up being involved in a major cheating scandal. VW can be said to have ignored its identity at the expense of attaining the short-term and risky goal of increasing sales of low-emission cars. A company’s identity is what enables the company to create value (Aglietta & Rebérioux 2005, p. 128). This is based on the company’s human capital, material capital and immaterial capital (Aglietta & Rebérioux 2005, p. 128) such as knowledge. The fact that VW failed to stand for what is good for the customer in regard to what it was required to install in its cars means that it ignored its identity and values. Conclusion This essay has critically evaluated the article “VW emissions scandal: was it the customers’ fault all along?” by Nieuwenhuis (2015). Having applied the corporate governance theory and the values and identity theory in the analysis, the issues that merger are as follows. To start with, by installing a cheating device in its diesel cars, VW ignored corporate governance principles such as honesty, openness and integrity towards its customers and other stakeholders. Given that Nieuwenhuis (2015) reports that UK managing director of VW apologised after the cheating scandal, this is an indication that the company somehow accepted responsibility after the debacle. Secondly, it can be seen that VW ignored its identity and values by not doing the right thing just to please its customers and to be seen to be complying with regulations on emissions. However, given that the manager of the company apologised after the scandal, one can see the company was not comfortable with the unbecoming behaviour such as deceiving customers and the authorities. Top of Form Bottom of Form References Aglietta, M & Rebérioux, A 2005, Corporate governance adrift: a critique of shareholder value, Edward Elgar Publishing Limited, Cheltenham. Cowan, J 2014, ‘Toyota to pay $1.3 billion for deadly defect cover-up’, ABC News, 20 March, viewed 9 September 2016, . Davies, A 2016, Best practice in corporate governance: building reputation and sustainable success, Routledge, Oxon. du Plessis, JJ, Hargovan, A & Bagaric, M 2011, Principles of contemporary corporate governance, 2nd edn, Cambridge University Press, New York. Ferrell, OC, Fraedrich, J & Ferrell, L 2010, Business ethics: ethical decision making and cases 2009 update, 7th edn, South-Western Cengage Learning, Mason, OH. Flint, DJ & Woodruff, RB 2001, ‘The initiators of changes in customers’ desired value results from a theory building study’, Industrial Marketing Management, vol. 30, pp. 321–337. Gates, G,  Ewing, J, Russell, K & Watkins, D 2016, ‘Explaining Volkswagen’s emissions scandal’, The New York Times,  July 19, 2016, viewed 9 September 2016, . Hotten, R 2015, ‘Volkswagen: The scandal explained’, BBC News, 10 December, viewed 9 September 2016, . Mandal, SK 2010, Ethics in business & corporate governance, Tata McGraw Hill Education Private Limited, New Delhi. Nieuwenhuis, P 2015, ‘VW emissions scandal: was it the customers’ fault all along?’, The Conversation, 16 October, viewed 8 September 2016, . Osborne, N & Redfern, M 2006, Reflexivity: linking individual and organisational values’, in J Jonker & M de Witte (eds), Management models for corporate social responsibility, Springer, Berlin, pp. 126-133. Wells, P 2016, ‘Volkswagen, emissions and the ‘crisis spiral’, The Conversation, 29 April, viewed 9 September 2016, . Read More