To begin with, Business ethics is defined as a system of laws and guidelines by which business professionals and corporations operate in a fair, legal and moral fashion (“Business Ethics, 2017”).
Although the sole motive of most businesses is profit, I believe that running a business is about more than just making money.
In my opinion an ideal business institution is one that operates with an efficient, cost effective model in order to make profits but at the same time ensuring that it provides benefits to all stakeholders involved and does not provide significant gains to one at the cost of another.
Even though governments all across the globe have taken several efforts to enforce laws that safeguard the interests of society against unethical business practices, several corporations have crossed the line time and again. A recent incident that took me by surprise was a global emissions scandal by the Volkswagen group.
After the clean air act was passed by the FPA, engineers at Volkswagen were pressured to modify existing vehicle prototypes to comply with the new regulations. This meant high costs in R&D and reduction in the milage of their vehicles which was their main selling point. (Russel Hotten, 2017). In addition they were losing business to their competitors in North America such as Toyota and Honda that use hybrid technology. Hence, they decided to install a device that would automatically reduce the engine power when a vehicle is being tested in a laboratory in order to falsely pass emission tests (Russel Hotten, 2017).
So in a nutshell, the Volkswagen group violated the trust of their customers and national government bodies across Europe and North America, not to mention the adverse effects the harmful emissions from their vehicles have had on the environment. All of this, just to put in a few more millions in their bank account.
And was it even worth it in the end? Within months of this scam, the company was charged with an $18 Bn dollar fine and had to set aside another $6.7 Bn to repair and replace the faulty vehicles. In addition, they have faced several lawsuits from individual vehicle owners. (Russel Hotten, 2017).
I’d classify this as a classic case of “pennywise pound foolish”. In addition to their financial loss, this scandal has slandered Volkswagen’s brand name and legacy which will surely have a long lasting negative impact on future sales. In fact, just a month after being exposed, the company recorded their first quarterly loss in 15 years, worth $2.5 Bn (Russel Hotten, 2017).
Works cited:
Business Ethics. (2016, June 09). Retrieved September 14, 2017, from http://www.investopedia.com/terms/b/business-ethics.asp
Hotten, R. (2015, December 10). Volkswagen: The scandal explained. Retrieved September 12, 2017, from http://www.bbc.com/news/business-34324772
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