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Volkswagen Scandal


What Is The Roots Of Unethical International Business?

Ethics in business is very paramount. Globalization has increased competition among companies. Business ethics requires that leaders adopt social, environmentally, and economically sound operations. As a matter of fact, some laws are enacted so as to guide business operations in various countries (Brown, 2016). Further, there are international laws that are businesses are supposed to adhere to and influence ethical decisions. This paper is seeking to assess the scandals that rocked both the Volkswagen and the 7-Eleven companies. Large companies are in a better position to act in ethically manner. However, ethical probity may be undermined by cultures which encourage risk-taking and aggressive behavior (Shin, Sung, Choi, and Kim, 2015). Research has demonstrated how ethical standards are ignored when workers achieve advancement and respect only by engaging in unethical acts just like Volkswagen and 7-Eleven.

Volkswagen is a German based automaker. The company operates in the international automotive industry as a producer and a distributor (Hakim, and Tabuchi, 2015). The company has a subsidiary in America. The company designs manufactures and distributes cars all over the world. The operations of the company are conducted in two divisions (Brown, 2016). The divisions include financial services and automobiles. It suffices to point out that the motor division entails the development of cars, vehicles, and engines. The financial services division deals are concerned with customer and dealer services, insurance and banking activities, renting vehicles and the business of fleet management (Brown, 2016). 

It is worth noting that for six years, the company been providing inaccurate statistics about its emissions. In essence, Volkswagen had been cheating on the emission testing particularly for the diesel vehicles (Brown, 2016). The company fitted the car with computers that could detect any moment that they were being tested. By so doing, the computers would temporarily change how the engines worked. The computer actions showed that the cars were cleaner when they were not clean (Ephraim, 2016). In fact, the vehicles emitted forty times the amount of emissions dictated by the federal government (Fracarolli Nunes, Fracarolli Nunes, Lee Park, and Lee Park, 2016). When the cheating was detected, the chief executive officer of the company had to resign. Also, the company had to be faced with what is described as the most expensive recall. It suffices to point out that the company was slapped with huge fines (Brown, 2016).

It is paramount to point out that there is a long history of cheating on the regulatory testing. The cheating occurs regularly in automobile emissions (Fracarolli et al., 2016). The critical aspect of the Volkswagen cheating case is that the technicians programmed it. The program was fitted into the algorithm which happened to control the emissions of the car effectively. Studies have revealed that computers allow people to cheat on the emissions (Griffin, and Lont, 2016). Further, the fact that cheating is built in the software aids in cheating on some emissions. The kind of software used in the cheating is quite sophisticated and as makes it difficult to detect. Volkswagen was charged in a federal court sitting in San Francisco (Brown, 2016). The company was ordered to pay $15.3 billion. The company had successfully dodged testing of about eleven million cars. Initially, the official at the company claimed that there was no fraud but a slight technical error (Clemente, and Gabbioneta, 2017). Later on, they admitted that it was not a technical error but deliberate action on the part of the company (Brown, 2016). The deception by the company was a breach of trust.

7-Eleven Scandal

The 7-Eleven company is accused of mistreating its employees (Briton, 2015). Reports emerged showing that the chain store was exploiting its workers in a number of the franchise. The investigation revealed that the company was thriving on the slavery (Fraser, 2016). There is a lot of evidence that indicates that businesses are continuously exploiting their employees for increased profit margins.

The investigations at 7-Eleven helped in unearthing the massive exploitation of the staff (Fraser, 2016; Briton, 2015). They were underpaid and most of the time forced to work for longer hours. It is worth noting that most of the exploited workers were international students whose visas allowed them to work for only twenty hours for each week. Evidence shows that these students were often blackmailed by their franchisee (Briton, 2015). The franchisee threatened the students that should they decide to the Fair Work Australia; the students would be reported to the government authorities for not adhering to the visa regulations. Essentially, the franchisee was threatening these international students with deportation (Fraser, 2016; Briton, 2015).

As revealed by the Fairfax and Four Corners, these systematic issues surrounding exploitation of workers for the past six years. The Fair Work Australia has also confirmed this exploitation of workers by the 7-Eleven (Fraser, 2016). It is paramount to point out that when the issues of employee exploitation cropped up, the company denied its knowledge. In fact, 7-Eleven Australia trashed the allegations arguing that these exploitations are as result of few number of the franchisee. The Fairfax and the ABC Four Corners reiterated that the exploitations were not in just a small number of Franchisees (Briton, 2015). Most of these workers were immigrants from different parts of the world. The investigation suggested that 7-Eleven should not operate within Australia as a result of continued exploitation. The Australian labor laws prohibit employee exploitation. All employees should be treated fairly and equally.

7-Eleven Australian stores always open for twenty-four hours in a week. There are reports that six employees were paid a total of sixty-four thousand dollars. Indeed, the company was making huge profits at the expense of the employees (Sivaraman, and Turner, 2016). This behavior is unethical and leaves workers a lot more frustrated. It suffices to point out that employees are assets and must be protected from any form of exploitation. Several reports have argued that even if the law does not catch up with the company for exploitation, the marketplace will hold the leadership of the company responsible (MacDonald, 2016; Shin, Sung, Choi, and Kim, 2015).

It is a fact that companies should not engage in unethical behavior in fostering their activities. It is apparent that the law seemed reluctant to take the stern action against the leaders of the company; the leaders cannot run away from their ethical failures (Terry-Armstrong, 2016). The leaders of 7-Eleven knowingly presided over the systematic exploitation of the employees. These employees were negative affected.

There are several reasons why businesses make unethical decisions. Most of the situations are characterized by the applications of personal ethics. It is prudent to point out that business ethics cannot be separated from an individual's ethics (Briton, 2015). The personal ethics influence the accepted principles by what is wrong and right. As a matter of fact, people develop particular perception right from their early stages of life (Shin, Sung, Choi, and Kim, 2015). It is arguable that the behavior of the business leaders’ actions can be a reflection of their personal ethics.

Importance of Business Ethics

Studies have shown that business leaders with weak personal ethics have a greater propensity to behave in an unethical way (Briton, 2015). It is important to note that when business leaders are placed under pressure to perform, they end up engaging in unethical decisions. Further, there are instances when the moral judgments of business leaders on what is right and wrong are lacking. As a result of this, these leaders end up failing to recognize the critical aspects of these decisions (Frisch, and Huppenbauer, 2014). From the case study, 7-Eleven franchise holders engaged in the exploitation of employing thinking it was the right thing to do. To them, by exploiting the workers, they remained in the business (Shin, Sung, Choi, and Kim, 2015).

This report poses that if the survival of the company is dependent on ignoring ethical standards, the propensity to engage in unethical activities will be strong. Some studies have revealed that unethical behaviors are more common in small franchises where the profit margin is low, and the chances of survival are slim just like in the case of 7-Eleven. The dominant organizational cultures cause unethical decision in businesses. The corporate culture influences the direction in which business leaders make decisions. This is well illustrated in the case of Volkswagen and 7-Eleven companies. The organization culture stressed so much on making huge profits irrespective of the existing laws and regulations (MacDonald, 2016).

Indeed, organization culture refers to the constellation of the norms and values that are supposed to bring employees together through sharing the culture (Fernando, 2016). Studies have revealed that in companies where the culture stresses on the value of personal performance for promotion, the majority of workers may engage in unethical behaviors (Briton, 2015). Both Volkswagen and 7-Eleven are companies that were built on values that entirely stressed on deception and greed before the scandals. The deceit and greed drove these companies to engage in unethical business activities. In fact, Volkswagen had to pay hefty fines in addition to negative publicity. The 7-Eleven equally suffered significant damages to its reputation as a result of employee exploitation.

It is worth noting that the desire to make huge profit margins have led to unethical behaviors among companies. Despite that fact that the primary reason for engaging in business activities is to make the profit, maximization of such profits unethical is not allowed (Shin, Sung, Choi, and Kim, 2015). In the case of Volkswagen and 7-Eleven, the motivation was making a lot of profit. The desire to achieve this goal drove the leadership of the two companies to engage in an unethical business environment. For the case of Volkswagen, the leaders cheated on emission tests as they wanted to make huge sale volumes. In fact, millions of cars were already sold before investigations revealed the massive fraud. On the other hand, 7-Eleven resorted to blackmailing its employees and paying them small wages. The workers were forced to work for longer hours against the law.

The advent of globalization has increased the levels of competitions (Shin, Sung, Choi, and Kim, 2015). Each and company is striving to maintain a competitive advantage in the global market. Some companies have come up with ways of evading the standard procedures for doing business. It is common knowledge that the automobile industry is very competitive. There are firms with better technologies and produce quality cars. The leaders at Volkswagen were therefore persuaded to engage in unethical business decisions. According to them, the only that the company would increase its sales volume was through cheating on their carbon emissions. Similarly, 7-Eleven opted to exploit workers as a way of keeping huge profit margins. All these decisions were unethical and only served the interests of the two companies (Shin, Sung, Choi, and Kim, 2015).

Compliance with Laws and Regulations

Life is fraught with challenges that people have to overcome by making good decisions (Shapiro, and Stefkovich, 2016). Ethical decision-making that brings favorable outcomes is the hallmark of a good leader (Othman, and Rahman, 2014). In this regard, good leaders need to be observant of guidelines that can aid in making better ethical choices. Ethics is about moral values and the highest standing in the society. The cases of Volkswagen and 7-Eleven confirm that good leader are ethical leaders. Indeed, the leaders of the two companies failed to observe ethical consideration and landed their companies into trouble (Shin, Sung, Choi, and Kim, 2015). There is no way a leader can be good without ethics.

Additionally, it is worth noting that ethical leaders can create a connection between the societal legitimacy and the primary value propositions to the stakeholder support (Othman, and Rahman, 2014). In this case, leaders think by business strategy and not separating the company from the realms of ethics. Ideally, there is the need to link the society expectations and the spirit of the firm. A classical example of such a connection is when Lee Scott (Chief Executive Officer at Wall-Mart) was able to get approval to build a store in Chicago in 2004 (Olsen, 2016). Lee won that approval despite that opposition from other groups just because he listened and engaged all stakeholders who would benefit from the store.

It is clear that business leaders who are trustworthy aid organization to achieve positive results in their dealings and operations. Trustworthy brings success to companies in the most ethical manner (Yidong, and Xinxin, 2013). Indeed, a leader who is trustworthy undertakes his/her responsibility without engaging in unethical behavior or complaining (Shin, Sung, Choi, and Kim, 2015). Further, trustworthy leaders have the integrity to ensure that all company operations are carried out within the set standards. As a matter of fact, integrity is crucial in ensuring that activities and actions in business are conducted with ethical considerations (Walumbwa, Hartnell, and Misati, 2015). Violating the provisions of the company constitutes unethical decisions.

Ethical leaders should always desire to effectively serve people under them in a positive and good manner (Othman, and Rahman, 2014). As a matter of fact, an ethical leader is one who can serve that interests of other even if his/her interest is not catered for. Ethical leaders should never be self-centered or egocentric (Mulhearn et al., 2016). As such, good leaders should be in a position to sacrifice personal benefits for those of the majority. A true leader will bring positive outcome and changes in the company (Vriend, Jordan, and Janssen, 2016).

Furthermore, leaders who always observe ethical considerations are deemed to be pragmatic and sensitive to the plight of their subjects and the public. Ethical leadership entails having a holistic approach towards making decisions (Shin, Sung, Choi, and Kim, 2015). Decisions that are made by a single leader affect the majority. An ethical leader is one relies on facts and data to make decisions. Unethical leaders are characterized by greed and deception in their decisions (Röbel, 2016). As such, a good leader must be guided by ethics. Ethics is universal, and hence a leader can act in a manner that is acceptable to everybody.


However, it is critical t point out that not all good leaders are ethical leaders. Taking the cases of Volkswagen and 7-Eleven are the example of good leaders only as far the companies are concerned. Volkswagen and the 7-Eleven cases point out to the fact that companies were achieving greater sale volumes though unethical (Rhodes, 2016). They were only serving the interests of the companies while ignoring those of the public and employees. In a nutshell, the assertion that good leaders are ethical leaders is true (Yukl et al., 2013).

There are some ways in which the organizational can be modified to encourage ethical behavior. Some of the strategies are delineated hereunder.

Organizations need to encapsulate ethical codes into their cultures. It is vital to mention that several business issue statements of values and standards meant to guide the behavior (Yukl et al., 2013). However, the behaviors of most of these companies do not reflect these ethical codes. In fact, one would be more skeptical as far as these statements are concerned (Frisch, and Huppenbauer, 2014). Volkswagen is a company that pledges to partake in climate protection actively. They engaged in cheating about their carbon emission. On the other hand, 7-Eleven rides on respect for all but exploits its workers. This paper asserts that codes of ethics are more likely to be productive if they are specific. The specificity of these codes will improve adherence to then.

There is the need to engage in moral training. Indeed, business leadership should be trained on the implementation of ethical codes (Terry-Armstrong, 2016). Continuous training will enable these leaders to approach decision-making from wider perspectives. If the leaders of the two companies underwent training, perhaps they could have seen sense in acting ethically. There is evidence that numerous companies have organized ethical training for their employees since these scandals were exposed. However, some scholars opine that it is hard to assess the impacts of these training (Röbel, 2016; Vriend, Jordan, and Janssen, 2016). This paper is of the opinion that ethical training is valuable as it encourages workers to spot ethical dilemmas and learn how to overcome them.

Transparency is seen by many as a vital factor in encouraging ethical behavior. The public should be empowered to monitors companies that operate within their localities (Frisch, and Huppenbauer, 2014). The public can only judge whether companies are ethical or unethical if they are provided the necessary data. With these data, they can be able to counter-check the actual activities and behaviors within companies (MacDonald, 2016). For instance, in the case of 7-Eleven where employees were being exploited, the public could have been able to spot any inconsistencies with the labor laws of Australia and reported to the Fair Work Commission of Australia. By so doing the company would not have engaged in unethical conduct. Indeed, the reports on scandals in both 7-Eleven and Volkswagen should encourage the public, governments and business leaders develop situations where ethical behavior is the norm (MacDonald, 2016).

In conclusion, the scandals that bedeviled both Volkswagen and 7-Eleven are a clear indication that the ethical behavior is indeed compatible with the corporate logic. Some scholars have argued that is a fallacy to think businesses can be ethical (Olsen, 2016). However, this assertion will not go down well with business individuals who conduct their businesses ethically and always adhere to ethical considerations (Shin, Sung, Choi, and Kim, 2015). It suffices to point out that unethical practices are bad for businesses if the cases of Volkswagen and 7-Eleven are anything to go by. Volkswagen was made to pay billions in fines while 7-Eleven’s founding chairman was forced to resign. In essence, businesses should develop the corporate culture that nurtures respectful relations with consumers and the employees, honesty, and increased investment in protecting the environment.


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