Table of Contents
2 Volkswagen, CSR and Ethical Dilemma:
3 Corporate Social Responsibility Theory by CarrollS:
4 Decision Making and Managers’ Morality:
In the recent decades, managers and organisations are changing their view in managing the organisations. Ethics and the ethical value in making a decision have changed the perspective of organising a business. The theorists have described that revenue generation and profit making are not only the sole ideas in running a business. Satisfying all stakeholders and contributing to the societal development makes the organisation sustainable for long term. On this change, the organisations have formed new department by the name department of corporate social responsibility (CSR). Moreover, governments are insisting companies to follow CSR and providing with incentives. However, ethical dilemmas are coming into light. This paper will discuss some theories of CSR and relates with recent Volkswagen ethical dilemma.
Ethics are the norms that play a vital role in building healthy relations and constructive society. Ethics can be defined as a set of norms in the society that distinguish a decision whether it is right or wrong (Macklin, 2007). In the context of ethics, corporate companies have to follow some ethical norms in their decision making to have a healthy working environment. Generally, the outputs of these ethical norms in terms of HR department are impartiality in judgment, mutual respect, etc, (Macklin, 2007). Not only the companies should maintain ethical values at internal organisational environment but companies should also feel some responsibility as they use resources from society and environment to make profits (Visser, 2006). In this context, corporate social responsibility (CSR) was framed and many theories and abundant research has been done, stating the uses of a corporate social responsibility. CSR can be defined as a structure that keeps a company away from making illegal decisions, and developing ethical and philanthropic ideology and business at economic profits (Visser, 2006). In the recent decades, most of the companies are following CSR but there are some issues and dilemmas that are noted because lack of organisational focus on CSR (Robinson, Davidsson, van der Mescht & Court, 2006). Ethical dilemma is a situation either where morals are ignored to achieve profits, the profits are individual or organisational (Robinson, Davidsson, van der Mescht & Court, 2006). This essay will discuss two theories of CSR evaluating with an ethical dilemma of Volkswagen (VW) and CSR activities of VW and provides some suggestions in leadership and decision making processes to avoid such Ethical issues.
2 Volkswagen, CSR and Ethical Dilemma:
Volkswagen (VW) is a German automobile manufacturer operating in multi continents and one amongst the leading car manufacturers. From the vision statement of VW it is found that, VW wanted to be the most attractive employers by 2018 (Volkswagen, 2016). In addition, Volkswagen believes that healthy and skilful team can make an efficient team (Volkswagen, 2016). By these findings, it can be predicted that the company is bound to maintain a healthy working environment, which is an evidence of following corporate social responsibility (Jamali & Mirshak, 2006). Apart from the internal ethical environment VW is actively participating in the social support activities (one of the components in CSR activities) such as education and training centre in India and other countries, awareness programmes on fuel consumption in Australia , conservation of threatened species in China, encouragement to technology innovations at graduate levels and other public awareness programmes (Volkswagen, 2012). Though VW is playing an active role in CSR, in the year 2015 an ethical dilemma has been recorded.
In the world of manufacturing industries, companies and manufacturers have to maintain certain standards in their products in the market (Hotten, 2015). Despite of these standards, VW has violated the permitted carbon emission level of their diesel variant vehicles, which was identified by a small research team at University of Virginia (ABC, 2015). Latter the issue was reported to Environmental Protection Agency (EPA). EPA, in its investigation has discovered a defeat device that cheats the agency in from recognition of excess pollution at checking stage before the car is certified to release in the market (Spence, 2015). To describe in depth, VW has used a device in the vehicle’s exhaust system that neutralise the carbon dioxide elements, but to make the device to be effective more fuel has to be consumed by the vehicle (Spence, 2015). However, VW cannot afford a higher fuel consumption car in its products, which is a potential threat to its market (Hotten, 2015). The neutralising device is designed to have a flexibility in switching it on and off as a result, fuel consumption can be altered (Hotten, 2015). Moreover, a software feature is provided in the vehicle interface that actually reports carbon emissions by the vehicle (Hotten, 2015). In the real time usage the readings recorded by the software does not match with actual emissions (Spence, 2015). As the carbon element-neutralizing device is switched off in the real time usage for lower fuel consumption, the carbon dioxide elements are released into atmosphere which is much more higher than the standard emission values (Spence, 2015). By the software features and defeat device, VW has cheated the EPA from discovering the real time emission values. After the issue being exploited, EPA has found that the carbon emissions are 40% higher than the legal limit of carbon emission (Colvin, 2015). As VW claim their cars to be with low emission by cheating the EPA, there is an ethical issue, which can damage the company’s prestige in the global society. In this critical situation, VW has to act carefully on the issue. On the issue, the company’s chief executive officer has resigned taking responsibility of the issue (Colvin, 2015). The executive committee of VW has appointed new leader and has called back for rectification for all the claimed vehicles (Colvin, 2015). By this response, it can be assumed that VW is trying to resolve the problem and retain their company’s value.
Few more cases that are similar to VW issue are being recorded, but to evaluate such issues, to understand the role of corporate social responsibility and to map company’s activities to CSR functions some theories are required. From the research, it is discovered that, of the theories developed and research, Carroll has explained the value of CSR and developed a CSR pyramid. The pyramid illustrates the important components that are to be followed by a company at different levels of the company’s management.
3 Corporate Social Responsibility Theory by CarrollS:
Corporate social responsibility has come into existence by the notion of enterprises has to take some responsibility in the development of the society rather, just profit making (Carroll & Shabana, 2010). There are some arguments against CSR in the early years of its development, that responsibility of an enterprise is to make profits but it is proved that following CSR make long term benefits (Carroll, 1999). CSR is defined as a management practice that helps the organisations to meet societal expectations such as legal, ethical, commercial norms (Jamali & Mirshak, 2006). CSR means working for social development with the organisation’s employees and fellow communities (Jamali & Mirshak, 2006). Carroll has differentiated the organisational responsibilities in to four segments; they are economic, legal, ethical and discretionary or philanthropy (Carroll, 1999). Furthermore, for an effective implementation of CSR, organisations should be aware of ongoing issues that require the organisations responsibility and responsiveness to the issues (Carroll & Shabana, 2010). The functions of four responsibilities are discussed below by mapping with CSR activities of Volkswagen (VW):
Economic responsibility: The main aim of economic responsibility is to make profits for the company with the activities that helps to improve the internal environment and value of the organisation (Carroll & Shabana, 2010). The activities such as providing some returns to stakeholders, job creations, healthy treatment of employees, generous salaries, promoting technology innovations, educational contributions etc, (Visser, 2006). By following these activities company increase its income and simultaneously helping the fellow community to develop (Visser, 2006). VW is significantly contributing in this area. From the vision strategy of VW, it is identified that, VW is bound to become an attractive employer by providing various benefits to the employees (Volkswagen, 2016). Furthermore, VW is conducting various technology innovation programmes in Russia, other European countries and some of the countries in the rest (Volkswagen, 2012). VW, with starting a new plant in Pune, India, also started a training institution that provides required technical work force to the plant (Volkswagen, 2012). By this there is job creation in India and solves the human resource problems simultaneously training the potential graduates in local communities (Volkswagen, 2012). Many more such programmes are being conducted by VW that creates some profits to the organisation in direct and indirect ways.
Disclaimer: all examples that follow apply to the United States. Different countries have different standards and legalities.
I recently realized that I started my series on business ethics in the wrong place. It doesn’t help to throw a list of ethics violations at you before defining ethics in general.
Don’t close that internet window! You might be thinking, Pft, I know what ethics are, thanks for nothing. But hold the phone.
I thought most people knew, too. Until in a long conversation related to these incidents, wherein several people used the words ‘moral’ and ‘ethical’ as if they are perfect synonyms. They’re not.
Just because something is immoral doesn’t mean it’s unethical. And just because something is unethical doesn’t mean it’s illegal. But, there are consequences to each. Sometimes the consequences of an immoral action can be far worse than those of an illegal action. Sometimes an unethical action can lead to professional ruin, but leave your personal life unscathed.
So, what makes something immoral, but not unethical? What makes something illegal, but not necessarily immoral? Why can you be arrested for some bad things and not others?
Essentially, what’s the difference between moral, ethical, and legal?
Spheres of influence. I’ll break it down, then give some examples. And there’s even a diagram. Yes, a diagram.
Here we go.
Morality governs private, personal interactions.
Ethics governs professional interactions.
Law governs society as a whole, often dealing with interactions between total strangers.
There are things that fall under the governance of all three. Let’s say someone kills his business partner. Obviously that’s immoral, unethical, and illegal. But, what if a married CEO has an affair with his next-door neighbor? That qualifies as immoral (for most people. We’ll get to that), but if the neighbor has nothing to do with him professionally, it’s not unethical. And we all know it’s not illegal (as a general rule. Some states have strange, antiquated, unenforceable laws. But that’s beside the point).
Here’s a visual:
The lowest portion of the pyramid, in red, is morality. More things tend to be covered by morality than either of the other two. Just like more things tend to be unethical than illegal. The gray center represents things that can be grouped under all headings.
I had a difficult time figuring out how to accurately represent the way these relate to one another. I considered a Venn diagram, but the circles didn’t seem to overlap quite right. Even this pyramid doesn’t apply universally–and that’s because morality, unlike the other two, is a largely personal and variant thing. A diamond, or a smaller pyramid, might replace the rectangle for a lot of people.
Let’s go back to the adultery. A fun subject for any writer, right? Not so much fun in real life, depending on your morality. For the majority of couples, fidelity is important–it’s something they’ve agreed upon. But, some people agree to open marriages. For them, finding extra partners is not immoral.
Morality governs personal interactions, and different social groups have differing moralities. Groups tend to agree (consciously or subconsciously) on a set of rules for how they’ll behave around each other.
Similarly, the professional world has agreed on certain standards. Business ethics are part of a subgroup that covers trade. There are other types of professional interactions. For example, those attending a parent-teacher conference are attending a professional meeting. And their interactions are governed by ethics. Both the parents and the teacher might have a tendency to use colorful (pardon the euphemism) language when they get upset. But in a professional setting that language is typically inappropriate. Especially when it comes to educators.
Things that are considered immoral have personal consequences. Cheat on your spouse and you might get a divorce. Similarly, things that are unethical have professional consequences. If you cuss out your student’s parents… well.
Here’s an example from our field: plagiarism. Plagiarism is not always copyright infringement, though copyright infringement is often plagiarism. If you get someone to write your term paper for you, and you present it as your own work, you have not infringed on anyone’s rights. But you have behaved unethically. If you do this in school you can be expelled. If you do this in a job you can be fired. But no one will arrest you, or fine you. It is unethical, but not illegal.
You’ll note that in my very especial diagram the gray portion does not include all of Law. There are things that are illegal that someone might not consider immoral or unethical.
What? Hu? Why is there a law about it if no one thinks it’s wrong?
The speed limit is 65. You’re doing 74. You haven’t been drinking. You’re on a straight-away and can see for miles. Have you violated your morality? I’m guessing, no. Ethics? Not unless driving is part of your profession. Have you broken the law? You betcha.
The speed limit is there in the interest of safety and fairness, whether we appreciate it or not. As are many laws.
And I won’t waste your time listing the consequences to illegal actions.
Ok, hopefully I’ve cleared things up–by I may have muddied the waters. I’m open to questions, comments, etc.
P.S. Thanks for being patient with me over the last couple of weeks!
P.P. S. Here’s a little something extra, assuming I haven’t confused you enough already. Sometimes moral rules outweigh societal laws. If you take your brother’s car for a joy ride and call him from the road to say you’ll bring it back the next day, he’ll probably be pissed. But he probably won’t call the cops. Say instead you take the car from a random guy who lives three blocks over. Even if you call him and promise to bring it back the next day, I’m betting he’ll be on the phone with the authorities the second after he hangs up on you. Crazy world, hu?