Business Values & Ethics

ABS – MBA
Assignment

STUDENT ID

UNIT TITLE:

NAME (in Full):

GENERAL INSTRUCTIONS
• All assignments are to be submitted on 02nd February 2024 on
https://lms.atmsstudentgateway.com/

• Any Assignment submission extension request must come to Azra Fatima (Head:
Examination | Academic) [email protected] 5 days before the date of submission with
a valid reason and supported documentary evidence.

• APA 7th edition referencing guidelines needs to be followed.

• Similarity between student’s work is strictly not accepted, any student found with similar
work will be graded Zero and fail for the course. However, Plagiarism is an academic
offence and will not be tolerated.

• Any revaluation request should come in 5 days of grade release. Any late request will not
be obliged.(Form and other details shall be shared based on request)

• Revaluation cannot be requested for plagiarized assignments as the assignment stands as an

academic misconduct.

• If a program participant submits the assignment late, but within 1 week after the submission
date a 20%penalty will be applied

• Re-evaluation request is NOT applicable for any failed courses provided the mark range
from 59 to 69.Any grade which is below the range is however not applicable for this request.

• Any rescheduling request can be fulfilled within one week after the actual date of the
assessment. Anylate request will not be obliged.
• Assignment once submitted to exam board is final for marking.

• Second extension cannot be provided without supporting documentary evidence.

• Program participants are strongly advised to keep a copy of their work in case the submitted
 copy shouldgo astray.

PS. Kindly note to adhere to all the above instructions. Failing to read this, ATMS will not be
responsible for anyactions taken.

Total Marks / 90

PLAGIARISM

Plagiarism is defined as providing material from an uncredited source, or without the

acknowledgementof the original author. For longer submissions and reports, students are
required to provide an Assignment Cover Sheet, which states that submission is their original
work, and has not been submittedfor another assignment, either in that course, or another

Plagiarism may have many forms including but not limited to:

o Outright copying another author’s work without acknowledgement

o Cut and paste without the correct citation and acknowledgement.
o Copying key words but changing the sentence structure without crediting
theoriginal source
o Copying the sentence structure but changing some words without crediting
theoriginal source
o Following the structure or organization of another author’s work, or order
ofpresentation of ideas
o Submitting work that was created by an unacknowledged third party (i.e.,
writingservice, or another student)
o Copying from published authorities without acknowledgement
o Failure to correctly use quotation marks when expressing another author’s idea
o Incorrect or improper use of in-text citation and referencing
o Missing or incorrectly presented bibliography or reference list
o Pretending ownership of another author’s ideas
o Making work available to another person for copying
o Falsifying results

The plagiarism tolerance for MBA is 8 %.

In cases where the plagiarism percentage exceeds the tolerance, students are given a second
chance to rework on their assignments and submit. However, if the percentage continues to
exceed the tolerance percentage the student will be awarded one grade lower than the
originalgrade achieved.
 Assignment
Total 3000-3500 words

Part A
Business Values and Ethics Assignment
A number of vehicle manufacturers have been found guilty of falsifying their data on car
emissions in order to make the vehicle appear to meet vehicle emission standards set by their
governments. This means that the cars were emitting more pollutants that are damaging to
the environment than scientists had previously thought.
Using the VW case study from the recommended textbook and/or the related documentary
Hard NOx (Dirty Money), answer the following questions:

Questions:
1. Outline the main points of the VW emissions scandal.

2. Analyse, using Rest’s four stage model of ethical decision-making, at what stage VW
deviated from the model in its decision-making processes regarding the attempted cover-up.

3. How can individual decision-making theories (e.g. Cognitive Moral Development and
Moral Intensity) be applied to this case?

4. What does this case say about sustainability? How can we apply sustainability and other
CSR theories to this case? How would Milton Friedman (shareholder theory) perceive this
case?

5. Do you think that VW’s senior management handled the scandal well? Could earlier
admission of the fraudulent activities have reduced the negative impact on the firm?

6. How could VW seek to improve their approach to ethics management in the future? Can
claims that the firm has so quickly changed its culture stand up to scrutiny?
7. What does this case (and other cases mentioned on this module) reveal about the
relationship between technology and ethics? How can companies (including your own
company) ensure that technology is used ethically
Part B

Case Background:
TechCom Innovations (Private Corporation - ABC): TechCom Innovations is a privately
held corporation founded by a group of tech entrepreneurs. The corporation's shares are held by
a limited number of shareholders, and ownership is not publicly traded. It operates in the
technology sector, specializing in the development of cutting-edge software solutions.
TechCom Innovations is currently facing financial difficulties and is exploring options to raise
capital.
GlobalAuto Parts (Public Corporation - XYZ): GlobalAuto Parts is a publicly traded
corporation with shares listed on a major stock exchange. It operates in the automotive
manufacturing sector and is known for producing high-quality automotive components.
GlobalAuto Parts has a diverse shareholder base, including institutional investors, individual
shareholders, and public investors. The corporation has consistently performed well in the stock
market, and its stock price has experienced significant fluctuations.

Key Distinctions:
1. Ownership Structure:
• TechCom Innovations (ABC) is privately held, with shares owned by a select
group of individuals or entities. These shareholders have limited liquidity in
trading their shares.
• GlobalAuto Parts (XYZ), on the other hand, has publicly traded shares, allowing
anyone to purchase and sell its stock on the stock exchange. This results in a
broader ownership base.
2. Regulatory Requirements:
• Private corporations like TechCom Innovations (ABC) are subject to fewer
regulatory requirements and disclosure obligations compared to public
corporations like GlobalAuto Parts (XYZ). Public corporations must adhere to
stringent reporting and transparency standards enforced by regulatory bodies
such as the Securities and Exchange Commission (SEC) in the United States.
Questions:
1. How does the ownership structure of TechCom Innovations (ABC) differ from that of
GlobalAuto Parts (XYZ)?
2. What implications do private ownership and limited shareholders have on corporate
governance and decision-making within TechCom Innovations (ABC)?
3. What are the key regulatory obligations that public corporations like GlobalAuto Parts
(XYZ) must comply with, and how do they impact the company's operations and
financial reporting?

References
Crane, A., Matten, D., Glozer, S., & Spence, L. (2019). Business ethics: Managing corporate
citizenship and sustainability in the age of globalization. Oxford University Press, USA.
Gibney, A., & Gibney, A. (2018). Hard NOx. Dirty Money.
VW Emissions Case Study
This case examines the (un)ethical decision -making of the Volkswagen Group leading up to the 2015
emissions scandal, as well as the attempted cover-up. The case focuses on the details of the scandal,
its context and eventual discovery, as well as subsequent investigation and actions taken by
Volkswagen. It draws upon a range of themes, particularly influences on ethical decision-making,
moral development, and organizational culture.

Founded in Wolfsburg, Germany in 1937 as a military vehicle manufacturer, The Volkswagen Group
or ‘VW’, grew over the course of the 20th century into a mass manufacturer of card, motorbikes and
commercial vehicles, its fame grew with the introduction of classic models such as the beetle, Gold
and Polo. And it thrived due to the acquisition of and investment in a growing number of other well-
known brands, most notably Audi, Seat and Skoda.

By the beginning of the 21st century, the VW group had not only become a global automotive giant
but one of the biggest companies in the world. In 2014 it employed 590,000 employees, generated
sales of Euro 202.5 billion and delivered more than 10 million vehicles to its customers, Alongside its
core mass market brands. It boasted a stable of luxury, iconic brands from Porsche and Bentley to
Bugatti and Lamborghini. It was feted for its social and environmental credentials, emphasizing that it
believed in championing responsible business, with a long-term focus on the benefit of its customers,
employees, the environment, and society.

Yet by the end of 2015, it had become clear that VW had pro-actively engaged in cheating US
legislation concerning vehicle emissions through the manipulation of software in 11 million cars
worldwide. Beyond the environmental damage caused, in due course the scandal would come to cost
the company at least $25 billion, a drop in the company’s share of the European car market, an almost
50% drop in share price, the resignation of Martin Winterkorn, Chief Executive of the US division,
and the arrest of Rupert Stadler, AUDI CEO.

The origins of “Emissions gate”

A swath of environmental legislation was formulated and implemented at the turn of the 21st century,
for example the Environmental Protection Act was passed in Demark in 1992, while the
Environmental Act was passed in the UK in 1995, and the Canadian Environmental Protection Act
was introduced in 1999. This new legislation included in many cases, heightened scrutiny and control
of the environmental impact of automobiles. This was perhaps most apparent in the US, where the
introduction of the 1990 Clean Air Act Amendments precipitated a tightening of light-duty vehicle
emission standards designed to reduce environmentally damaging emissions, such as carbon and
nitrogen. When introduced in the noughties, this legislative shift led to pressure on a automotive
manufactures for a new generation of vehicles which adhered to new emissions standards. However,
commercial pressures necessitated that such alterations would not compromise on performance and
efficiency, which would heighten the running cost and [potentially impact sales.
VW, at a presentation to US regulators in September 2008, promoted their response to the legislation:
a generation of re-designed diesel automobiles, which met the country’s pollution laws, thus
minimizing the smog, soot, and harmful emissions long attributed to diesel engines, while not
compromising on performance. Regulators satisfied, this new generation of diesel cars were put on
sales to the general public by VW, who were hoping to finally crack the US car market.

However, unbeknownst to US regulators, this new generation of vehicles did not meet the newly
imposed emissions legislation as it had proved too difficult to design vehicles which would allow the
required balance between emissions and performance. Instead, VW engineers had designed ‘defeat
devices’, which ensured that, when fitted to VW’s cars, the vehicles passed the regulatory, lab-based
emissions test. These defeat devices could detect when such a test was being performed through the
measurement of factors such as steering patterns, atmospheric pressures and engine use, and would
accordingly alter emissions controls to switch on fume cleaning technology. However, when used on
public roads, some models would pump out nitrogen at up to 409 times the legal limit.

Uncovering the problem

In early 2014, transport campaigners Peter Mock and John German set out to prove to Europe that
clean diesels cars could exist; the US had appeared to achieve a fantastic result: diesel cars that could
pass its strict emissions test without compromising performance. A 1,300-mile test journey was
undertaken from San Diego to Seattle using a number of car models to prove their point. Despite all
the models having lab-based emissions test, the VW’s tested gave some unusual result, appearing to
emit dangerous levels of toxins, some at 35 times the legal limit. As a result of this the US
Environmental Protection Agency (EPA) launched an investigation in May 2014. Volkswagen, after
repeating the test themselves, asserted that the results we caused by a minor software error, which was
easily fixable through the issue of a product recall. This denial continued for over a year after the EPA
had first launched its investigations until August 2015 when VW finally came clean to senior
officials, the EPA, and the California Air Resources Board, admitting that the automotive
manufacturer had deliberately misled US regulators through the alteration of vehicle software to cheat
emissions test VW’s confession was allegedly only precipitated by both bodies threatening not to
certify the company’s 2016 diesels models. Over the following month, the company revealed further
details regarding exactly how the software worked to the US regulators and the regulators devised its
response to the news before, finally, in late September, news of VW’s wrongdoings broke to the
public. Initially, when news of the unethical decision-making relating to emissions fixing of 600.000
VW diesel cars in the United States broke, public dismay was evident. However, Michael Horn, head
of US operations, assured a congressional committee that the wrong doings were the result of ‘a
couple of software engineers’ and Dr Winterkorn, VW CEO, publicly stated that he was aware of no
wrongdoing on his part. However, the case spiralled, with VW being forces to admit the cars in
Europe were also affected later in 2015, increasing the total number affected to 11 million diesel cars
across a number of the firm’s brands: VW, Audi, Seat, Skoda, as well as 800,000 petrol cars being
affected. Eventually, after investigation by US regulators, it became apparent that the fault did not lie
with a small number of rouge software engineers but was in fact a far larger conspiracy involving
senior figures within the company and extensive attempts to cover up the wrongdoing.

The roll call of unethical decision-makers

As part of a plea bargain with the US Government, an agreed statement of facts between the US
Department of Justice and VW in 2017, and investigations by German authorities, it became clear that
the conspiracy had most likely started as early as 2006, when company executives met in Wolfsburg
to discuss the intentional inclusion of software that would defeat emissions testing in its vehicles.
Accordingly, on top of mangers sanctioning the use of these defeat devices in millions of cars that
were delivered to customers over a six-year period, from 2009 to 2015, engineers at the company
were encouraged to hide their usage, despite objections.

The scandal appears to have become even murkier when a cover-up operation began in response to
US investigators commencing their 2014 investigation. Specifically, VW set up a taskforce to handle
officials enquiries, designed to give the appearance of co-operation while in fact obfuscating the
existence of the defeat device from regulatory bodies. The cover-up, between 2014 to 2015, involved
VW executives and engineers feeding regulators false and misleading data, the company issuing a
bogus recall of cars which allowed them to inform the regulators that the issue had been rectified as a
result of software updates, and thousands of incriminating documents being destroyed just a month
before the scandal was made public.

After the scandal broke, German police searched the houses and offices of dozen of VW executives
and, in mid-2018, another senior figure within the company, Audi CEO Rupert Stadler, was arrested
in Germany due to fears that he might prevent, obstruct, or hinder the investigation. Meanwhile, in the
US, authorities indicted six former VW executives, and Oliver Schmidt, VW’s former US
environmental and engineering manager, was prosecuted in 2017 for being a key conspirator, accused
by the US government of misleading investigators and deliberately destroying documents, and
sentenced to seven years in prison on top of a $400,000 fine.

The conspiracy took a more serious turn in 2018, when an indictment by US authorities against
Micheal Winterkorn, former VW CEO, was released, claiming that he not only had full awareness of
what engineers were doing but also authorized a continued cover-up. The indictment asserted that
engineers at the company had become aware of a study by the International Council on Clean
Transport in 2014, which had concluded that CW diesels were producing higher emissions on the road
than they were in laboratory test, and the senior managers were informed, including a memo written
concerning the test which was sent to Dr Winterkorn. Additionally, in July 2015 it is alleged that Dr
Winterkorn was given a presentation about the situations, which supposedly included details of the
cover-up and the consequences of the regulators finding out, a month before any admissions were
made to authorities.

Moreover, in 2017, Robert Bosch, auto components maker, although not conceding any wrongdoing,
agreed to pay $327.5 million in compensation for its role in supplying the cheating software,
suggesting awareness of the conspiracy was not just confined to individuals within VW.

VW turn over a new leaf

Despite the eruption of the emissions scandal in late 2015, the ensuing public outrage at the
dishonesty and disingenuous actions of VW, the enormous financial cost to the company, and the
detrimental environmental consequences of its actions, after an initial dip, VW’s latest financial result
suggest that the company has managed to shrug off any wrongdoing. In fact, if an individual had
invested in VW a day before the emissions scandal broke in 2015, as of the beginning of 2018 the
stock would be up 10% having outperformed both BMW and Daimler. Sales at VW exceed those
prior to the scandal breaking in 2015, cost have declined, employee numbers have gone up, and plans
to release a large range of all electric cars by 2025 have impressed investors and the public alike.

Arguably this is the result of a maelstrom of apologies from the company , massive levels of
compensation and fines , damages from the scandal currently totalling $25 billion and a total
restructuring of the group whistle -blowing system, However , Extensive investigations by US and
European authorities were required to expose the depth of the scandal and its cover-up and as of 2018
aftermath appears not to have run its courses , Despite it being three years since the scandal initially
broke. In addition to this , Evidence suggests that the environmental and human costs of the fraud
dwarf the financial costs incurred by VW , with experts calculating that it directly resulted in 526 k
tones of nitrogen oxides being emitted above the legal limit, This equates to an economic valuation of
life lost totalling $ 39 billion dollars , not accounting for the incalculable human value of these lost
years, Meanwhile , Since 2015 , questions have been raised about endemic cultural issues of unethical
practices and behaviours within the wider automotive industry. Nissan, Daimler, General motor,
Suzuki and Mitsubishi have all been found to be knowingly engaging fraudulent practices regarding
emissions fixing and fuel economy figures since the VW scandal broke.

Accordingly, the depth of VW’s deception, along with its considerable attempts at a cover-up, in
tandem with the news that they are not the only automobile manufacturer with the same problem. Has
led many to question whether these practices have truly been stamped out within the industry or
whether future scandals are perhaps an inevitability.