In this competitive world of business, the corporate leadership of the world is driven by moral representatives who are highly educated and experienced beyond their abilities to make a good judgment that has to be obvious when analyzing the events in the business world. The instance that Volkswagen had rigged its diesel engine to falsify the tests conducted for checking the emissions was shocking. It is always possible on the part of the leaders of business to get things right, however, how Volkswagen got it was even more incredible. This is regarded as corporate misbehavior which is not acceptable from any point of view of markets, sustainability of the business, business leadership, finances, and corporate social responsibility (Berger & Herstein, 2014). There were a lot of myths about the company that the goal of the company was to increase the value of shareholder value. The myth had a close resemblance to reality as the investors were only concerned about the price and the implications that were possible in society. It is possible that the myth was the reason for the decision of Volkswagen to install the defeat software to cheat on the tests of the emissions. The judgment of the shareholders regarding this action was clear from the immediate reaction of the market which resulted in a drop in the price of the shares by a third which led to a loss of billions of the value of Volkswagen. From this, instance it is evident that unethical behavior leads to the destruction of the value of the shares (Bijlmakers, 2013).
It was found that these revelations in the business world led to the rise of the suspicion of ethics in the business of every organization. Volkswagen which had a good reputation in the global market had been marketing its diesel automobiles as vehicles that had low emissions during the design of the motors to give deceptive readings. This incident had ramifications that spread worldwide. According to the report of the Four Corners, 7-Eleven, which is a convenience chain was also found to be exploiting and underpaying its workers in many of the franchises of the convenience brand. It was also revealed that the work culture of the company was no different than that of slavery (Burki, 2015). However, these two cases led to the revelations of many businesses that exploited the workers. These instances of illegal and unethical practices in the business assist the contention regarding the incompatibility of ethical behavior with the logic of the corporation. In some aspects, it is also stated that it would be a mistake to consider the businesses to be ethical (DesJardins & McCall, 2014). These instances are unfair to those corporate people who are concerned about the ethical standards and are proud to abide by them. This also has to lead to ignoring common sense. Being unethical can be extremely bad for the business of any organization as 7-Eleven and Volkswagen have discovered.
Volkswagen had faced costs of billions of dollars regarding the fines and recalls. The automobile brand also had to face a severe loss of reputation that also resulted in reduced sales to a greater extent. The implications were so wide-scale that the founding chairman of the 7-Eleven had to resign (Edward & Willmott, 2013). This did not end the consequences of the unethical measures that were taken by the company as the newly appointed chairman had to confront the unpleasant franchisees and undertake the job of restructuring the company back to its original fame.
The financial industry had to suffer from the collapse of the economy of the intentionally programmed diesel engines to cheat the emission tests by the leading automobile company, Volkswagen, and the exploitation and underpayment to the employees by the renowned convenience chain, 7 Eleven to reduce the labor costs. There are many similarities between the scandals made by both companies which also include the resignation of the Chief Executive Officer of both companies (Edward & Willmott, 2013).
Both companies considered that bad ethics were good for their business. Both of these scandals were found to have been consistently scrutinized in terms of the ethics of business. These considerations exclude the nuanced and contentious debates regarding the morality nature of the business. In both cases, the ethical issues associated with lying, breaking of law, cheating, deception, profiteering mercilessly, exploitation, etc. in the context of common comprehension of ethics, these aspects are on the distant side of the grey and thick line which makes the distinguish between the right and wrong. In each of the cases, it was found that there was ethics in these companies which held the notion that bad ethics is profitable for business (Gu & Neesham, 2014). After seven long years of orchestrated cheating at a large scale by Volkswagen which was done simply to increase sales, Volkswagen became the biggest manufacturer of cars in the world in the year 2009. Similarly, the institutionalized fraud of wages and exploitation of labor at 7-Eleven could keep the costs of the store down to increase the profits of both the parent company and the franchisees. 7 Eleven could receive the status of being the Franchisor of the Year of Australia twice.
The next similarity between the scandals of both companies was that they had to devise ways and follow the concept of not getting caught for their unethical practices. For both companies, the concept of “bad ethics is favorable for the business” was working very well for the business operations till they got caught for their unethical initiates. Both cases triggered and raised debates in all sectors of the business world and society. The bottom lines were threatened and heads of the leading business tycoons rolled (Heath, 2014). There is no apprehension that many organizations have been deriving huge profits from fraud, deceit, exploitation, and lies. These two cases of scandals stated that bad ethics are good for business until and unless the company gets caught. The scandals regarding the unethical initiatives were also about the legal, political, economic, and social implications that were the outcomes of these scandals.
In both the cases of Volkswagen and 7 –7-Eleven, there was a massive outrage from the public and outcry from the media regarding their selfish and reprehensible behavior. To bring these two companies to justice did not involve the measures taken by any single entity or individual or the action of the government. The effort that was made to correct the disaster was collective which involved academics, scientists, media, politicians, NGOs, and the general public (Jorge & Peña, 2014). This was, however, the victory that was the sole of the democratic and civil society dissent. This further could reformulate the proposal for the culprits that bad ethics are profitable for business as long as you do not get caught and unless you are among the subject of an outcry by the public.
The breaching of democratic business ethics was one more thing that was similar in both the scandals made by Volkswagen and 7-Eleven. It was the concept that both the companies followed regarding the ethics of their business that their business ethics and any alterations to the business ethics should be done and kept in the house only. Business ethics is mostly considered an aspect of self-regulation by the corporation so that the vexing outsiders would not interfere in the affairs of the corporation (Jorge & Peña, 2014). If the businesses wanted ethics in their functionality, then these companies would not have committed unethical actions which would have led to more outcries by the public and the corporate getting caught. It can also be stated that the scandals committed by both companies were not mistakes, a lapse of ethics, an error, or poor judgment. The unethical activities were designed and framed intentionally, which were executed by violating the laws in both spirits and letters. These scandals were also instances of violation of ethics to the highest extent.
Volkswagen deceived those people and organizations to which it owed a duty of honesty and it did this intentionally. It misinterpreted the automobiles fraudulently to be other than what they were. The franchise holders of 7-Eleven who exploited workers were executing the orders regarding what they were asked to do to continue to stay in the business. The survival of the business depended on cutting the corners of ethics according to the owners of 7 Eleven which made them getting tempted to do so and with a strong urge. The most important fact is it intentionally opted to do so and deviated out of the accuracy from its way to commit the wrong actions (Posada, 2015). It was ironic that the risk-taking, competitive, and unregulated economy was encouraged by many politicians in an environment that is conducive to behavior of ethics.
A good leader can speak to the people about their identity, what they presently are, and can become in the future. A good leader can also talk about the manner the people live and how they can live in the future. For a leader to become an ethical leader it is important to be concerned with the prescription of the moral behaviors and requirements and the unacceptable and acceptable ways of behavior that act as the functions of principles of philosophy. I agree with the fact that good leaders are ethical leaders as being ethical would inculcate the behavior and differentiate the behavior as is right and good as opposed to wrong or bad in a given circumstance (Rhodes, 2016). A good leader would follow ethics which are the code of moral principles and values that guide the behavior of the group or individuals about what is wrong or right. A leader can be a good leader only when he ethically executes all the and considers both the legal and morally acceptable to the community at large. A leader can be considered to be a good leader only when he or she can deal with the ethical dilemmas that keep cropping up during uncertain situations in which variations of interests, beliefs, and values that pertain to different stakeholders are in the circumstance of conflict (The Conversation, 2017). A leader is meant to possess the art of persuading a follower to be interested in doing the activities and things that he or she sets as goals and objectives. Therefore, leaders vary depending on the individual style of leadership that has its roots in the personality and the characteristics. Certain leaders are transformational and charismatic and they have their power due to which they are successful in engaging the employees on the other hand, other leaders who are not ethical exert legitimate and positional power (Stanwick & Stanwick, 2017).
A good leader is characterized by various attitudes, beliefs, habits, conduct, practices, and values which are dependent on the professional, institutional, and organizational culture to some extent. Good leadership regarding the normative ethics of the organization can be associated with how the individuals ought or should behave in an organization. Ethical leadership is vital in being a good leader and in the orientation that enables the company to attain its objectives, mission, and vision as declared goals. Ethical leadership can be considered the prime factor in the management of the reputation of the company in the external environment which is a necessary aspect of good leadership to deal with the competition in the global market (Tse, et al., 2017).
The moral health of a company hugely depends on the example and standards of the chief executive who is supposed to be the prime leader of a company. Good leadership includes being ethical in two ways such as 1) to ensure the making of ethical decisions, and 2) to develop a climate in the organization in which the flow of ethics has been fostered. Ethical leadership is an integral part of good leadership which denotes the construct that appears to be dubious and includes different elements that vary. Good leadership needs ethics to prevent people from doing incorrect things and enable them people to do the correct thing. An ethical leader is a good leader who lives up to the morals and ethics of conduct that are important to him. To be a good leader, one needs to have ethics require one to adhere to more of a global standard of moral behavior (West, 2014).
Ethically leading an organization is believed to be a procedure of inquiry by making inquiries regarding what is right and what is wrong along with a mode of conduct that sets the example for the employees and other followers regarding what is wrongness or rightness of particular actions. Ethical leadership is vital to be considered in terms of energizing and healing the powers of love, identifying the leadership in a relationship that is reciprocal with its followers. The mission of the leaders is to support and serve and the passion of a good leader comes from the compassion that the ethical leadership is beginning to gain attention and is even found to bring down the ethical leadership to compassion. Being a good leader is all about working fairly considering the welfare of others and thinking about the implications of the actions of an individual. These aspects, however, relate to the ethical leadership already. A good leader can detect a good or bad sense of business which can also enhance the ethical sense of others. Thus, to be a good leader one should be ethical in approach.
To improve the organizational climate of any company, ethical codes are required to be followed.
Most companies like Volkswagen and 7- 7-Eleven issued statements of values and standards that were supposed to guide their behavior in the business. However, these companies did not follow those guidelines in the past (The Conversation, 2017). Therefore, it is easy to be doubtful regarding the efficacy of the statements of the policies such as Volkswagen pledging to work towards the protection of climate (Michaelson, et al., 2014). The codes probably can be effective if they are very particular and it is required that the leaders of the companies take them seriously (Ferguson, 2017).
To avoid such types of scandals in the future, companies should conduct ethical training sessions for their employees. However, the effect of these training sessions would be difficult to assess but would prove to work even if the objective is to encourage and motivate the employees to recognize and discuss the dilemmas in ethics that crop up during their work in the business environment (Ferguson, 2017).
Regulations by the government:
The regulations always have the benefit of enforcing the law behind requirements of ethics hence, making it less probable for companies like Volkswagen and 7-Eleven to gain an advantage by being unethical in their business practices. The obvious challenge that arises other than the red tape is the regulation that the organizations might place their ingenuity to execute at a side or flout the law.
Motivating the whistle-blowing:
The role that the whistleblowers play is quite vital in revealing the misdemeanors by the corporate like Volkswagen and 7-Eleven. If the whistle-blowers are given more protection and rewards, they would be more prevalent as it happens in certain countries. Thus, governmental organizations must encourage whistleblowers to reveal such unethical incidents (Gu & Neesham, 2014).
Reformation of the Boards of Management:
By giving more power to the shareholders and by needing representation by the employees on the boards of the company, companies like Volkswagen and 7-Eleven can rebuild and encourage ethical behavior which the other companies must incorporate naturally. However, the representatives of the employees in Volkswagen did not prevent this in the past, but after the reformation, it has become crucial for both companies.
This is the most crucial measure that is required for the encouragement of ethical behavior in a company. If the general mass can regulate the behavior of a company, when the company needs to devise the data that is available regarding its execution and operations, then it would have an interest in denial and avoidance of behavior that is unethical. The companies would have legitimate rationale to maintain certain things as secret but the power of proving it needs to be bestowed on them. However, the revelations of the illegal and unethical behavior are no rationale to have negativity regarding the reforms. The scandal of Volkswagen and 7-Eleven alteration in the diesel engine and labor exploitation would serve a good purpose if it can encourage the citizens, business leaders, and government to create a global business environment that is completely ethical.
The report covered the discussion about the scandals made by Volkswagen and 7-Eleven. The report also deals with the unethical practices and the similarities between the unethical practices that both companies made which led to such scandals. The significance of being ethical and acquiring ethical behaviour for a good leader in a business environment of reflected and discussed. The ways to improve the organizational climate in the organizations which would make the leaders and the individuals in the organization act ethically for having an ethical work environment and business operations are discussed in the report.
Berger, R. and Herstein, R., 2014. The evolution of business ethics in India. International Journal of Social Economics, 41(11), pp.1073-1086.
Bijlmakers, S., 2013. Business and human rights governance and democratic legitimacy: the UN “Protect, Respect and Remedy” Framework and the Guiding Principles. Innovation: The European Journal of Social Science Research, 26(3), pp.288-301.
Burki, T.K., 2015. Diesel cars and health: the Volkswagen emissions scandal. The Lancet Respiratory Medicine, 3(11), pp.838-839.
DesJardins, J.R. and McCall, J.J., 2014. Contemporary issues in business ethics. Cengage Learning.
Edward, P. and Willmott, H., 2013. Discourse and normative business ethics. In Handbook of the philosophical foundations of business ethics (pp. 549-580). Springer Netherlands.
Edwards, M.G. and Kirkham, N., 2014. Situating ‘giving voice to values’: A metatheoretical evaluation of a new approach to business ethics. Journal of Business Ethics, 121(3), pp.477-495.
Ferguson, A. 2017. Revealed: How 7-Eleven is ripping off its workers. [online] Smh.com.au. Available at: http://www.smh.com.au/interactive/2015/7-eleven-revealed/ [Accessed 23 May 2017].
Gu, J. and Neesham, C., 2014. Moral identity as a leverage point in teaching business ethics. Journal of Business Ethics, 124(3), pp.527-536.
Jorge, M.L. and Peña, F.J.A., 2014. Determinants of corporate social responsibility and business ethics education in Spanish universities. Business Ethics: A European Review, 23(2), pp.139-153.
Michaelson, C., Pratt, M.G., Grant, A.M. and Dunn, C.P., 2014. Meaningful work: Connecting business ethics and organization studies. Journal of Business Ethics, 121(1), pp.77-90.
Rhodes, C., 2016. Democratic Business Ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty. Organization Studies, 37(10), pp.1501-1518.
Stanwick, P. and Stanwick, S., 2017. Volkswagen Emissions Scandal: The Perils of Installing Illegal Software. International Review of Management and Business Research, 6(1), p.18.
Tse, Y.K., Zhang, M., Doherty, B., Moore, S.R. and Keefe, T., 2017. Exploring the Hidden Pattern from Tweets: Investigation into Volkswagen Emissions Scandal. In Supply Chain Management in the Big Data Era (pp. 172-198). IGI Global.
The Conversation. 2017. 7-Eleven, Volkswagen cases show why we should push back on ‘corporate ethics’. [online] Available at: https://theconversation.com/7-eleven-volkswagen-cases-show-why-we-should-push-back-on-corporate-ethics-48739 [Accessed 23 May 2017].
The Conversation. 2017. How could VW be so dumb? Blame the unethical culture endemic in business. [online] Available at: https://theconversation.com/how-could-vw-be-so-dumb-blame-the-unethical-culture-endemic-in-business-48137 [Accessed 23 May 2017].
West, A., 2014. Ubuntu and business ethics: Problems, perspectives, and prospects. Journal of Business Ethics, 121(1), pp.47-61.Order Now