Professional Documents
Culture Documents
Vader Paper3
Vader Paper3
Ken Vader
CST 373
Professor Cahill
4/11/17
Corporate Culture Shapes Employee Ethics
As I find myself nearing graduation with a Bachelors degree in Computer Science from
California State University at Monterey Bay (CSUMB), it is more clear now than ever that entering the
technology industry as a software engineer requires a strong code of ethics. Prior to enrolling at
CSUMB I was a stay at home father of triplets. Prior to that I was a system administrator for a
witnessed employees across all departments and pay grades operate in ethical gray areas. These were
not bad people doing bad things. Rather, it was good people doing what they felt they needed to do in
order to be successful in their position. In hindsight, I attribute much of this to the culture and tone that
was set by the CEO. That culture was one that generally favored profit over everything else. The CEO
may not be directly instructing employees to cut corners or make ethically questionable decisions, but
In the following pages, I will explore a similar situation involving Volkswagen and their
emissions testing on diesel vehicles. Was the Volkswagen issue the result of a few rogue engineers or a
mandate from the top? This issue touches on corporate ethics and culture, as well as the personal
ethical compass of individual engineers. Exploring this subject will examine the motives of engineers,
where their motivations were coming from, as well as the motives of the executives setting the
direction and culture of the company. This exploration will also attempt to see how big of a role did
individual engineers ethics come into play. This topic is particularly fascinating as a case study in how
an individuals ethics can be shaped by the environment that they are in. There appears to be evidence
that the culture of success over ethics was a top down mandate.
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The scandal for Volkswagen came to light in 2014, when the Environmental Protection Agency
(EPA) in the United States was testing Volkswagen vehicles. The EPA was particularly curious as to
why Volkswagen diesels were appearing to emit fewer emissions in the United States than in Europe
(Lynch and Santos, 2016). As the EPA dug deeper, they eventually found that Volkswagen had placed
defeat devices on the tested vehicles. These devices were software driven components that disabled
certain parts of the car when it detected that it was being tested for emissions. The main source of that
detection relied on the fact that during normal testing only two wheels would be spinning. The
Volkswagen board had been warned about this software in 2011 via an internal memo. The company
that originally created the software, Bosch, had written a letter to Volkswagen in 2007 warning them
that the software should be used for internal testing only, not for use on vehicles to be sold (Arvinth,
2015). When news of the scandal broke, Volkswagen did something rather surprising: it admitted guilt.
The company estimated that as many as 11 million vehicles were affected, with the bulk of those
vehicles being sold in Europe (Ewing, 2015). The fallout from the scandal caused Volkswagen to
ultimately decide to replace its CEO and to set aside over $7 billion to cover the expected costs of fines
and litigation (Arvinth, 2015). It turns out, that was not nearly enough, as Volkswagen ultimately paid
close to $20 billion in fines (Overly, 2017). That shows the what, now we need to look at the why.
To fully explore this, we need to go back to 2007 when Martin Winterkorn became CEO of
Volkswagen. Mr. Winterkorns tenure as CEO begins two years before the devices were first installed
on vehicles purchased by consumers. According Lynch and Santos (2016) Mr. Winterkorn was known
as a detail oriented autocrat, that promoted the idea that management should be involved in every phase
of business. Mr. Winterkorn ordered Volkswagen engineers to design a fuel efficient diesel system and
have it ready to ship in a very tight deadline. This, ostensibly, could have created an environment that
rewarded good news over truth. Rather than find ways to work within their reality, the engineers found
it more rewarding to create an alternate reality. Volkswagen executives were determined to increase
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sales, and one way to do that was to produce the most fuel efficient non-hybrid vehicles available, with
The United States is a huge market for vehicle sales, and Volkswagens need to produce fuel
efficient vehicles did not happen in a vacuum. After the 1973 oil embargo, the United States has
enacted a series of standards and laws that has continually raised the bar for fuel efficiency on car
manufacturers. The original goal was to increase the average fuel efficiency of new cars to 27.5 miles
per gallon by 1985. In 2007, Congress passed a new wave of legislation that required a car
manufacturer to have a combined fuel efficiency average of at least 35 miles per gallon by the year
2020. This average included cars, light trucks, and SUVs (EPA, 2009).
At the same time, the EPA was also enacting standards for allowable emissions. The first round
of these standards was put out in 1990. In the 27 years since they were first introduced, the standards
have been progressively tightened. The California standards are the strictest in the nation, and other
states are allowed to either follow the EPA standards or the California standards at their own discretion.
Under the Obama administration both the fuel efficiency standards and lower emissions standards were
put under joint EPA and Department of Transportation (DOT) regulation. The joint program supports
the fuel efficiency standards described above, as well as tightening the emissions standards further
(EPA, 2009). The impetus for the new standards was the view that climate change was a significant
threat to the global environment and needed to be addressed. The EPA/DOT report also states that it is
their opinion that climate change is the result of greenhouse gases and is a direct result of human
activity (EPA, 2009). These regulations, and the changing attitudes on global warming and climate
change, helped to shape the Volkswagen executives decision to push for high fuel efficiency and low
Another area that shaped Volkswagens decision is fuel cost. In general, diesel fuel is cheaper
for the consumer than gasoline. So, Volkswagen wanted to use that information as leverage to help sell
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their TDI diesel vehicles. In Europe, the emissions standards focus more on lowering carbon dioxide
and carbon monoxide, which is more concerned with fuel efficiency. In the United States, the emissions
standards focus more on lowering nitrogen oxides and particulate matter, which is more concerned with
air pollution. Most diesels imported into the United States use urea tank and injection systems to reduce
emissions to acceptable levels. Prior to 2007, Volkswagen had considered using this method, as they
had been in talks with Daimler to use their system (Lynch and Santos, 2016). When he took over as
CEO, Mr. Winterkorn abandoned that plan and ordered the engineers to find a different method that
would meet emissions standards in the United States. The end result of that decision, as we now know,
was the installation of the defeat devices and software on Volkswagen TDI models from 2009 to 2015.
The mass media jumped on this story at the time and showed little hesitation in condemning
Volkswagen for its cheating software. This condemnation took many forms. The New York Times,
framed much of their initial reaction as Volkswagen cheating, wrote about how the automaker illegally
installed software in its diesel-power cars to evade standards for reducing smog (Davenport and Ewing,
2015). Writing for Fortune, Paul Argenti (2015) placed the blame of the scandal on corporate greed
and a poor overall culture, rather than blaming any single executive. In a 2017 Washington Post article,
Steven Overly noted how out of the ordinary it was the there were any executives being indicted at all,
let alone six of them. In general, the mass media seemed to focus on the corporate culture at
Volkswagen as the primary cause for the scandal. The individual engineers are rarely mentioned
specifically or even the engineers as a group. They appear to have escaped the cross-hairs of the mass
media.
Consumers who have purchased one of the affected Volkswagen vehicles are sure to have
opinions on the scandal. The voluntary recall that Volkswagen implemented provides a fix for the
defeat device at no cost to the consumer. Some consumers that are happy with the power and fuel
efficiency that they are getting with the defeat device enabled may be reluctant to take their vehicle in
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to have it fixed. The impact their vehicle is having on the environment is probably not immediately
noticeable to them, so the performance and mileage boost is considered an acceptable trade off. Other
consumers may not be concerned with the performance but see the mileage issue in strictly economic
terms and are therefore not interested in the voluntary recall. In both of these cases, these groups of
consumers are not likely going to be interested in publicly declaring their intention to ignore the recall.
Because of that it is difficult to get an accurate estimate on how many of the vehicles that have not been
Other auto manufacturers that also sell diesel vehicles are another group that has reason to want
to see the Volkswagen scandal fade away. While it is certainly advantageous for the other
manufacturers if Volkswagen takes a considerable public relations and sales hit over the scandal, the
public perception of diesel vehicles needs to remain positive. If the public begins to closely associate
diesel vehicles with Volkswagen and scandal, diesel sales will drop across all manufacturers. Clearly,
this is unacceptable. Manufacturers such as Chevrolet, Ford, and Dodge are leveraging known auto
media, such as Car and Driver or Jalopnik, to put out positive pieces on their own diesel offerings. It is
a safe move, as the U.S. consumer has a short memory and they will not likely be thought of in the
The government, specifically the EPA, has a different view on this. For the EPA, the scandal
was both a source of frustration and a success story. It was frustrating to find out that they had been
fooled for six years, defrauded some would say. But there is also at least a small sense of pride in that it
was EPA engineers that found the defeat device. When the scandal broke, the Obama administration
made the decision to make an example out of Volkswagen and made every effort to hit them with the
harshest penalties possible. They wanted to send the message to other international corporations that
Viewing the scandal through the ethical framework of utilitarianism presents an interesting
discussion. Utilitarianism is described as the greatest good for the greatest number. The first thing
that needs to be established is: the greatest good for whom? Which majority are we seeking to do the
greatest good for? The answer to those questions can have dramatic effects on what is then considered
ethical. In the case of the Volkswagen scandal, if we say that the majority to be served is consumers,
then it would seem that Volkswagen being honest about the mileage and performance of their vehicles
without the defeat device is the ethical choice. Hiding that information from consumers does not allow
the consumer to make an informed choice about the vehicle they are purchasing. If they wish to own a
vehicle that has a minimal impact on the environment, they are instead buying a vehicle that has the
opposite effect. If we instead decide that the majority is the company itself, then a case can be made
that anything short of illegal activity is ethical. Under these conditions, even some illegal activity could
be rationalized away as being better for the company, and therefore acceptable. The companys
dishonest behavior regarding the defeat device could be seen as a reasonable step, as it allows the
If the Volkswagen scandal is examined with egoism in mind, it becomes a bit more
straightforward. In his 1962 work Capitalism and Freedom, Milton Friedman wrote In such an
economy, there is one and only one social responsibility of business - to use its resources and engage in
activities designed to increase its profits so long as it stays within the rules of the game, which is to say,
engages in open and free competition, without deception or fraud. . . . That last part is particularly
relevant to Volkswagen. Volkswagen did engage in open and free competition, but it made a concerted
effort to do so fraudulently. Under egoism, Volkswagen should do what it can to increase profits, even
at the expense of social justice. But competing in a deceptive way is not acceptable. And without the
deception, they would not have been able to compete in the United States with the defeat devices on, so
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the results would most certainly have changed. Volkswagens pursuit of dominating the worldwide auto
Viewing Volkswagen and the scandal using the environmentalism framework tells a story of
missed opportunity. Volkswagen wanted to become the worlds largest auto manufacturer, and they saw
the United States as a key market in their strategy. It is currently popular in the U.S. to drive a low
emissions, high fuel efficiency vehicle. Volkswagen could have taken advantage of those factors and
created vehicles that fit what the market was clamoring for. Instead, they chose to pretend they had
done that, and sold cars that were quite damaging to the environment. Once this became public,
consumers that are concerned with the environment stayed away from Volkswagen. Volkswagen had an
opportunity to license existing technology from Daimler that would have lowered their emissions,
while still maintaining performance. There is no one-size-fits-all in the auto industry, but Volkswagen
effectively removed themselves from competing in the environmentally friendly market for at least a
few years. It will take some time, and a hefty public relations campaign, to make people forget how
The further away we get from this scandal the more questions it raises about the future of
Volkswagen, the future of diesel vehicles in America, and potential health risks incidents like this pose.
In an open letter on the Volkswagen website (Woebckin, 2017), new CEO Hinrich Woebcken has
charted the companys vision for its place in the American automotive industry over the coming years.
autonomous driving or future electric vehicles. Volkswagen has also reorganized, creating a North
American unit that will oversee all operations relevant to Canada, the U.S., and Mexico. Mr. Woebckin
feels that This structure marks an important culture shift for Volkswagen, bringing Volkswagens
engineering, decision-making and leadership closer to our dealers and the customers we serve here
(Woebckin, 2017). There is no mention of steps that have been or will be taken to ensure that a
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scandal like the one from 2015 does not happen again. The implication here is that the newly created
North American unit will keep tighter control over the processes since they are geographically closer.
The environmental impact of Volkswagens deception can only be estimated. An MIT study
claims that Volkswagens use of software to evade emissions standards in more than 482,000 diesel
vehicles sold in the U.S. will directly contribute to 60 premature deaths across the country...(Chu,
2015). This estimate is based on the number of vehicles sold with the defeat device between 2008 and
2015. The MIT study goes on to further estimate that if Volkswagen had recalled no vehicles that it
would have resulted in approximately 140 to die early (Chu, 2015). Since Volkswagen did roll out a
voluntary recall, the number of affected individuals is certainly lower than 140. The study did not
measure the impact that these vehicles had on global warming or climate change. There is no way to
force the owners of these vehicles to take them to a dealer to be fixed. Estimating the impact over 20
years is difficult, as many of these cars will be off of the road by then from salvage.
Diesel still has a place in the American automotive sector, but it will need to be clean diesel for
it to gain much traction in the light truck and passenger vehicle sectors. Researchers at West Virginia
University foresee this scandal spurring on innovation. Dan Carder, a researcher at West Virginia
Universitys Center for Alternative Fuels, Engines and Emissions (CAFEE) claims In our 25 years of
experience, we have seen that situations like this tend to spur rapid acceleration in technology
advancement...(WVU, 2016). If the researchers at CAFEE are correct, that could mean clean diesel
that comes much closer to what Volkswagen was doing fraudulently. CAFEE researchers also feel that
the stricter regulations following the Volkswagen scandal will lead to auto manufacturers having no
choice but to innovate (WVU, 2016). It seems likely that diesel will be a part of that innovation. The
auto industry does not typically cast aside technology that it has been iterating on for over a decade.
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Wharton Professor Eric Orts and University of Maryland Professor Rena Steinzor note that for
lasting change to occur, the company culture must change (Orts and Steinzor, 2016). They compared
the situation at Volkswagen to the inaction that occurred at General Motors during the ignition switch
scandal that they went through. During the GM crisis, executives would agree that action needed to be
taken, even agreeing on what action to take, and then never implement those actions (Orts and Steinzor,
2016). A company must reward innovation by its engineers, but that innovation needs to be proven
through rigorous testing. Volkswagens North American unit may fit this bill, but it will take solid
evidence and testing prior to their innovations being taken seriously in the future.
The Volkswagen scandal was a series of breakdowns at every level. In 2007, the CEO sets up a
culture that rewards results, but does not reward thorough testing. The engineers, feeling the pressure of
these executive imposed deadlines, implemented a system that they knew was fraudulent. Test
engineers, with knowledge of the software bought from Bosch, had to have known why the numbers
were dramatically lower on the vehicles being exported to America. Whether or not the executives
knew specifically what was going on is irrelevant. They created the environment where this behavior
would be rewarded, rather create an environment that rewarded actual innovation with thorough
testing. There is enough blame to go around. If just one executive had inquired as to how they were
making such strides or just one engineer chose to speak up, none of this would have happened. My
guess is that the engineers valued their jobs over their integrity.
The more research I did on this topic, the more I realized it was really a systemic problem. Yes,
Volkswagen takes the hit in this case, as they should. But it occurred to me that the need to have
unparalleled success and dominate a market, any market, could lead to a similar result. That drive for
success is a great quality for a company or an individual to have, but if there is no commitment to
honesty and integrity then you have the breeding ground for deceptive or fraudulent behavior. This
situation becomes especially complicated in the auto industry. The EPA regulations are some of the
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most strict in the world, because we want to feel like we are attempting to protect our environment.
This makes it more difficult for a foreign auto manufacturer to export cars into the U.S., as they have to
make special modifications for the cars to be legal here. Thus, providing incentive to cheat on
emissions testing, either to make your cars look more efficient or to just make them legal so you can
get into the American market. There is a substantial amount of money involved in the auto industry and
America is a car culture. Foreign manufacturers are not going to give up just because the testing is too
strict.
Going forward, there does not need to be lower barriers on emissions testing, quite the opposite.
In fact, I would support not just stricter emissions laws, but allowing EPA or DOT engineers to fully
road test any vehicle that would be sold here. Lab testing is not enough, and proper road testing is the
only way to be sure the vehicles adhere to the regulations. This is easier said than done, as regulation is,
at times, a hotly debated topic. So, to help spur that on, there needs to be a groundswell of support from
citizens. People will have to voice their desire for cleaner and more fuel efficient vehicles. One part of
that is voicing those desires with your wallet and only buying efficient, low emission vehicles. That is
not enough. Educating people on the harmful effects of higher emission vehicles is also necessary. Part
of that education must involve information regarding climate change and the role the auto industry has
in global warming. This is still a very politicized issue, and it is not going to be solved in our lifetime.
We need to start the conversation now, and keep it going with our children to have a chance. In the long
term, starting that conversation and pushing for green innovation is where we can contribute the most.
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Sources
Argenti, Paul. (2015, October 12). The Biggest Culprit in VWs Scandal. Fortune. Retrieved from
http://fortune.com/2015/10/13/biggest-culprit-in-volkswagen-emissions-scandal/
Arvinth, Karthick. (2015, September 28). VW Scandal: Carmaker Was Warned By Bosch About Test-
scandal-carmaker-was-warned-about-test-rigging-software-2007-1521442
Chu, Jennifer. (2015, October 28). Study: Volkswagens emissions cheat to cause 60 premature deaths
premature-deaths-1029
EPA (2009, September). EPA and NHTSA Propose Historic National Program to Reduce Greenhouse
Gases and Improve Fuel Economy for Cars and Trucks. Environmental Protection Agency. Retrieved
from https://nepis.epa.gov/Exe/ZyPDF.cgi/P1005POO.PDF?Dockey=P1005POO.PDF
Davenport, Coral and Ewing, Jack. (2015, September 18). VW Is Said to Cheat on Diesel Emissions.
ordered-to-recall-nearly-500000-vehicles-over-emissions-software.html
Ewing, Jack. (2015, September 22). Volkswagen Says 11 Million Cars Worldwide Are Affected in
https://www.nytimes.com/2015/09/23/business/international/volkswagen-diesel-car-scandal.html?_r=0
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Lynch, Luann J. and Santos, Carlos. (2016, October 17). VW Emissions And The 3 Factors That Drive
https://ideas.darden.virginia.edu/2016/10/vw-emissions-and-the-3-factors-that-drive-ethical-
breakdown/
Orts, Eric and Steinzor, Rena. (2016, July 5). The Latest Fallout from the Volkswagen Scandal: Five
http://knowledge.wharton.upenn.edu/article/five-takeaways-from-the-volkswagen-scandal/
Overly, Steven. (2017, January 11). Six Volkswagen Executives Indicted in Emissions-Cheating
https://www.washingtonpost.com/news/innovations/wp/2017/01/11/justice-department-volkswagen-to-
plead-guilty-to-three-criminal-counts-in-emissions-scandal/
Woebcken, Hinrich. (2017, January 3). Driving Volkswagens Future in America. Volkswagen.
WVU. (2016, September 19). One year after Volkswagen scandal WVU researchers look to the future
archive.wvu.edu/n/2016/09/19/one-year-after-volkswagen-scandal-wvu-researchers-look-to-the-future-
of-emissions-technology.html