Volkswagen Emissions Research Articles

Legal Personhood and Liability for Flawed Corporate Cultures

A number of recent corporate law scandals (including the Wells Fargo fraudulent accounts scandal, the Volkswagen emissions scandal, sexual harassment claims at Fox News and CBS, and various banking scandals currently under investigation in a high profile Australian Royal Commission) epitomize the danger posed by flawed corporate cultures. These scandals demonstrate that such organizational cultures can inflict damage on stakeholders, communities and society as a whole. The aim of this study is to explore, from a theoretical and comparative perspective, the issue of accountability for misconduct arising from flawed corporate cultures. This situation raises unique questions as to whom the law should target for misconduct in these circumstances. The research paper examines two specific types of liability which may be relevant in the context of misconduct arising from defective corporate cultures – (i) entity criminal liability and (ii) personal liability of directors and officers for breach of duty to their company. The study compares these forms of liability in the United States, the United Kingdom and Australia, to assess the extent to which they are well-suited to providing accountability for misconduct arising from flawed corporate cultures. As this comparative analysis shows, there are significant jurisdictional differences in these areas of law, which, in some cases, make such forms of liability ill-suited to achieve such accountability.

Firms and Collective Reputation: A Study of the Volkswagen Emissions Scandal

This paper uses the 2015 Volkswagen (VW) emissions scandal as a natural experiment to provide evidence that collective reputation externalities are economically significant. Using a combination of difference-in-differences and demand estimation approaches, we document a spillover effect from the scandal to the non-VW German auto manufacturers. The spillover amounts to an average drop of $2,057 in consumer valuations of these manufacturers’ vehicles and to a 34.6% reduction in their annual sales. We substantiate our interpretation that the estimates reflect a reputation spillover using data on internet search behavior and direct measures of consumer sentiment from Twitter.

Overstated product sustainability: real cases and a game-theoretical analysis

In this paper, we examine the impact of manufacturers’ dishonest reports of product sustainability. We first investigate the Volkswagen emissions scandal and Wal-Mart fake organic food scandal in terms of the overstatement of product sustainability. Based on these two cases, we construct a two-echelon supply chain model consisting of one manufacturer and one retailer. The supply chain members can use inspections or deferred payments in trading. We find that the inspection and deferred payment mechanisms do not always help reduce the overstatements of sustainability. With the inspection mechanism, when the basic demand is higher (lower) than the threshold, inspections can (cannot) effectively reduce the levels of overstatement. With the deferred payment mechanism, when the manufacturer’s expected proportion of payments is sufficiently small (large), the deferred payments can (cannot) help reduce the levels of overstatement. Moreover, we find that when overstatements are difficult (easy) to identify by the retailer, the deferred payment (inspection) mechanism is the more effective means for the retailer to reduce overstatements. Furthermore, our numerical results indicate that when a third party organization perceives a low probability of product overstatement, the manufacturer and the retailer use neither inspections nor the deferred payment mechanism. In contrast, when a third party organization perceives a high probability of product overstatement, the inspection mechanism is more beneficial to the manufacturer, while the deferred payment is more beneficial to the retailer. The managerial implications of our findings are discussed.

CSR in automotive sector - leaders or deceivers? The case of Audi AG

Car production is a kind of activity that affects environment, society and global economy to a large degree. The most negative impact can be observed in the first of mentioned fields. Every day automotive companies consume big amount of energy and resources. What is more, their final products are considered as one of the main pollution sources. Nevertheless many car producers made effort to minimize negative external effects of their businesses. Year by year various CSR classifications and rankings showed that those efforts were resultful but Volkswagen emissions scandal and anti-diesel lobby shed new light on car industry in the terms of CSR. The aim of the article is to review CSR activities undertaken by Audi AG. Literature review and report analysis performed within the case study shows that the company is active in the field of ecology, society and corporate governance. In many terms Audi AG can be considered as the one of global CSR leaders. It is characterized by wide range of long term initiatives, high employee satisfaction and constant dialogue with stakeholders. On the other hand Audi AG can not be seen as a responsible company in the light of misleading customers to raise sales volume.

Corporate Culture: Changing Board Responsibilities and Changing Governance Rhetoric

The UK’s Financial Reporting Council is telling directors that they should not wait for a crisis before they focus on company culture. The board must set culture, embed it, assess it and report on it. This paper traces the company’s formal legal liability for corporate culture as imposed in Australia and the UK and investigates the new focus on corporate culture in the wake of some notable corporate crises. It uses the Volkswagen emissions scandal as an example of cultural misalignment where the company and individual employees below board level (rather than a board collectively, or board members individually) have been the ones to be found liable despite the increase in rhetoric about the directors’ responsibility for corporate culture. This critique is put into the context of decades of Management research in the field of Corporate Culture that has produced theory, empirical results and an array of practitioner tools, but has also ignited debates so intense as to be labeled the “culture wars”. The paper points up the care that will be needed as legal liability for corporate culture increases before there is a consensus among management scholars on what it means and how it can be measured or assessed.

What the German Auto Scandal Teaches Us About the Consumer Welfare Standard

There is a vibrant debate going on right now about the proper role of antitrust and whether this role is best served by the consumer welfare standard. Many of those that would support a new standard do so because of a belief that antitrust law should do more to shape our economy under a broader policy mandate. These calls should be rejected. Expanding the policy goals of antitrust law would not only lead us into areas where we do antitrust policy does not have the proper tools, it would also intrude into other policy areas are a better fit for these problems. The fallout from “Dieselgate” or the Volkswagen emissions scandal provides a good test case for how the consumer welfare standard grounds antitrust policy.

Spillover Effects from the Volkswagen Emissions Scandal: A Comprehensive Analysis of Stock, Corporate Bond, and Credit Default Swap Markets

The Volkswagen emissions scandal is by far the largest case of emissions cheating in automotive history and had wide-reaching consequences for the industry throughout the world. This study examines the spillover effects to competitors and suppliers following Volkswagen’s public admission of manipulating their diesel engines to cheat regulatory emission tests. We analyze stocks, bonds, and credit default swaps beyond the usually measured losses in equity market value only. Our findings indicate negative spillover effects for competitors and suppliers worldwide. Distinguishing between European and non-European firms, we find negative spillover for European firms whereas non-European firms partly show positive (but mostly insignificant) effects. Our findings emphasize that both the equity and debt of a firm should be considered when estimating firm value losses due to spillover effects.

Mass Harm Litigation in Ireland and Multi-Party Actions

In recent years there have been a number of cases of mass harm in Ireland, including contaminated blood products, army deafness, asbestos-related ill health, Pyrite damage, the Volkswagen emissions scandal and the recent tracker mortgage rate abuse by banks. It is natural that victims of such mass harm might seek a legal remedy through the courts. Ireland, however, is a common law jurisdiction that does not yet have an effective mechanism for multi-party litigation of mass harm. This is despite recommendations in 2005 by the Irish Law Reform Commission (LRC) , Ireland’s principal public body for the investigation of law reform, for the introduction of a new litigation procedure in the form of a multi-party action (MPA). Instead, occasionally the courts use a confusing array of alternative methods in cases where an MPA mechanism would have had an obvious role. This paper explores the phenomenon of mass harm and the role multi-party actions as a potential route to redress for such harm. It gives an overview of the current Irish mechanisms for dealing with mass harm and is illustrated by a number of cases exemplifying the problems associated with mass harm litigation. The implications that these difficulties entail for access to justice in Ireland are evaluated and the practical aspects of this procedural lacuna are illustrated. These are explored in light of the LRC Report on multi party litigations and its recommendations. Finally, there is an examination of what may potentially lie ahead for multi-party litigation having regard to ongoing developments in other jurisdictions and European Union initiatives, together with the implications of the Aarhus Convention and related aspects of human rights. The paper concludes that optimum way of achieving collective redress requires a modern holisitic approach. This requires an integrated model comprising a combination of tools from a range of solutions including regulation, ADR, courts, ombudsmen, among others. It would appear that MPA litigation is necessary as a remedy of last resort to deal with mass harm where other techniques fail to deliver collective redress and where there is therefore no alternative to the courts.

Is professional practice at risk following the Volkswagen and Tesla revelations?

With the world in economic crisis the headlong drive for efficiency and effectiveness together with resulting profit is the watchword. Such pressure might have resulted in real gains but has also led to unscrupulous or reckless actions. The tempering of such drive with ethical consideration is often neglected until there is a detrimental event causing public outcry which in turn places pressure on the actors to account for the reasons the event had occurred. This cause and effect map is commonplace. The Volkswagen emissions scandal and Tesla Motors public beta testing of the Autopilot software in their cars illustrate the drive for efficiency and effectiveness without proper ethical consideration. This paper focuses on the role of software engineers in such situations. An ethical analysis of the two cases is presented using the Software Engineering Code of Ethics and Professional Practice. The findings, together with previously published analyses, are used to draw general conclusions and recommendations about the efficacy of the software engineering profession.

'Don't Ask, Don't Tell' Corporate Crime

As illustrated by the 2015-17 Volkswagen emissions scandal and other large-scale corporate wrongdoing, we have created a ‘don’t ask, don’t tell’ system for corporate crime. By relying on disclosure-based regulation for prosecutions, we teach business organizations and top executives with disclosure duties to be willfully blind to what is happening inside their organizations. Under pressure for results without inquiry into methods, middle management is able to coordinate large-scale wrongdoing without consequence. Meanwhile, increasingly diverse and mandatory disclosure requirements, which place an enormous financial burden on companies, are not actually giving us the results that we want. This Article proposes a new approach to prevent large-scale corporate wrongdoing. Instead of businesses, regulators should have the financial obligation of analyzing information about large-scale crimes, and in exchange have access to patterns in reports suppressed or not necessarily available at the entity level.

FMA Roundtable on New Developments in European Corporate Governance

In this discussion that took place in Helsinki last June, three European financial economists and a leading authority on U.S. corporate governance consider the relative strengths and weaknesses of the world's two main corporate financing and governance systems: the Anglo‐American market‐based system, with its dispersed share ownership, lots of takeovers, and an otherwise vigorous market for corporate control; and the relationship‐based, or “main bank,” system associated with Japan, Germany, and continental Europe generally. The distinguishing features of the relationship‐based system are large controlling shareholders, including the main banks themselves, and few takeovers or other signs of a well‐functioning corporate control market. Given the steady increase in the globalization of business and international diversification by large institutional investors, the panelists were asked to address the question: can we expect one of these two systems to prevail over time, or will both systems continue to coexist, while seeking to adopt some of the most valuable aspects of the other?The consensus was that, in Germany as well as continental Europe, corporate financing and governance practices have already begun to look much like those in the U.S. and U.K., with much less reliance on bank loans and greater use of bonds and public equity. And these financing changes have resulted in major changes in ownership structures that have seen local main banks largely supplanted by foreign institutional investors—some of whom have demanded a greater voice in how companies are run. Moreover, Finnish economist Tom Berglund may well have provided a blueprint for the dominant European governance system of the future in describing the “Nordic model” asa compromise between the Anglo‐American and German models—one that maintains a strict hierarchy of interests putting the shareholders at the top, with strong minority shareholder protection, and gives shareholders the right to convene meetings with the board and executive management.But even with this movement toward the market‐based system, the remarkable persistence of family‐controlled publicly traded companies in Germany and much of continental Europe appears to reflect deep‐seated cultural attitudes and practices that are expected to continue to resist the incursion of Anglo‐American principles and methods. The widespread use of dual‐class stock, the pervasiveness of stateowned enterprises, and even the German practice of labor representation on boards (known as “codetermination”) are all seen as likely to persist—even though one member of the panel views each of these three practices as having played a major role in the Volkswagen emissions scandal. And given the surprising resurgence of one of these features in the U.S.—that is, the dual‐class ownership structures created by the IPOs of companies like Google and Facebook—no one was confident in predicting their disappearance. Like many of today's listed German companies that have been owned and operated by the same family for centuries, some of America's most promising and successful companies also appear to feel the need for at least some protection against the “vagaries” of the market.

Is professional practice at risk following the Volkswagen and Tesla motors revelations?

With the world in economic crisis the headlong drive for efficiency and effectiveness together with resulting profit is the watchword. Such pressure might have resulted in real gains but has also led to unscrupulous or reckless actions. The tempering of such drive with ethical consideration is often neglected until there is a detrimental event causing public outcry which in turn places pressure on the actors to account for the reasons the event had occurred. This cause and effect map is commonplace. The Volkswagen emissions scandal and Tesla Motors public beta testing of the Autopilot software in their cars illustrate the drive for efficiency and effectiveness without proper ethical consideration. This paper focuses on the role of software engineers in such situations. An ethical analysis of the two cases is presented using the Software Engineering Code of Ethics and Professional Practice. The findings, together with previously published analyses, are used to draw general conclusions and recommendations about the efficacy of the software engineering profession.

The Volkswagen Emissions Scandal

In September 2015, VW had admitted to United States regulators that it had deliberately installed “defeat devices” in many of its diesel cars, which enabled the cars to cheat on federal and state emissions tests, making them able to pass the tests and hit ambitious mileage and performance targets while actually emitting up to 40 times more hazardous gases into the atmosphere than legally allowed. The discovery had prompted the U.S. Environmental Protection Agency (EPA) to halt final certification of VW's 2016 diesel models, and VW itself had halted sales of its 2015 models. As fallout from the defeat devices developed, VW posted its first quarterly loss in more than 15 years, and its stock plummeted. Top executives were replaced, and VW abandoned its goal of becoming the world's largest automaker. Stakeholders around the world had been asking since the scandal broke: “How could this have happened at Volkswagen?” Excerpt UVA-S-0267 Rev. Oct. 30, 2018 The Volkswagen Emissions Scandal In October 2015, Mathias Muller became CEO of Volkswagen (VW), the 78-year-old economic jewel of Germany. His predecessor, Martin Winterkorn, who had led VW for eight years, had resigned suddenly in the midst of one of the biggest scandals to ever hit VW and the auto industry. In September, VW had admitted to United States regulators that it had deliberately installed “defeat devices” in many of its diesel cars, which enabled the cars to cheat on federal and state emissions tests, making them able to pass the tests and hit ambitious mileage and performance targets while actually emitting up to 40 times more hazardous gases into the atmosphere than legally allowed. The discovery had prompted the US Environmental Protection Agency (EPA) to halt final certification of VW's 2016 diesel models, and VW itself had halted sales of its 2015 models. As fallout from the defeat devices developed, VW posted its first quarterly loss in more than 15 years, and its stock plummeted. Winterkorn and several other top executives were replaced, and VW abandoned its goal of becoming the world's largest automaker. In addition to significant financial implications, VW was rapidly losing its prized reputation as a trustworthy company capable of outstanding engineering feats. Volkswagen Background: The Power of German Engineering In 1937, VW was founded in Germany under the Nazi regime by the labor unions with the help of Ferdinand Porsche, the inventor of the Beetle (the people's car). Tasked with making a car that was affordable for all consumers, VW's flagship car, the compact and iconic Beetle, first rolled off the manufacturing floor in 1945, and by 1949, half of all passenger cars produced in West Germany were built by VW. The company began exporting cars in the late 1940s, and by 1955, the company had sold over one million Beetles worldwide. The Beetle would eventually surpass Ford's Model T as the highest-selling model ever built, reaching sales of more than 15 million by 1972. When sales of the Beetle began to decline in the late 1970s, VW branched into other models, including the Passat, Jetta, Golf, and Polo. The VW brand eventually folded into a broader public holding company, Volkswagen AG, which by 2014 owned 12 subsidiaries, including VW passenger cars, Audi, Porsche, and Bentley. . . .

When do unethical brand perceptions spill over to competitors?

We examine whether the unethical actions of marketplace brands (e.g., the Volkswagen emissions scandal) hurt the ethical perceptions of competing brands (e.g., Ford, BMW). Across two studies, we find evidence for this unethical spillover effect and show that it can negatively affect consumers’ liking and purchase intentions for a competing brand. The results show that the spillover effect (1) only occurs for similar competitors and (2) is moderated by construal level (CL). Specifically, the spillover effect is more likely to occur when consumers focus on the finer details of the unethical brand’s transgression (i.e., low CL) but not when they focus on the bigger picture of the transgression (i.e., high CL). Thus, while it is intuitively appealing to assume that brands may benefit from a competitor’s foible, this research indicates that competitors may be hurt by a similar brand’s wrongdoing.

Democratic Business Ethics: Volkswagen’s Emissions Scandal and the Disruption of Corporate Sovereignty

There is an established body of politically informed scholarly work that offers a sustained critique of how corporate business ethics is a form of organizing that acts as a subterfuge to facilitate the expansion of corporate sovereignty. This paper contributes to that work by using its critique as the basis for theorizing an alternative form of ethics for corporations. Using the case of the 2015 Volkswagen emissions scandal as an illustrative example, the paper theorizes an ethics that locates corporations in the democratic sphere so as to defy their professed ability to organize ethics in a self-sufficient and autonomous manner. The Volkswagen scandal shows how established organizational practices of corporate business ethics are no barrier to, and can even serve to enable, the rampant pursuit of business self-interest through well-orchestrated and large-scale conspiracies involving lying, cheating, fraud and lawlessness. The case also shows how society, represented by individuals and institutions, is able to effectively resist such corporate malfeasance. The ‘democratic business ethics’ that this epitomizes is one where civil society holds corporations to account for their actions, and in so doing disrupts corporate sovereignty. This ethics finds practical purchase in forms of dissent that redirect power away from centres of organized wealth and capital, returning it to its democratically rightful place with the people, with society.

What cliff is your business headed for? Are you listening and are the right people talking?

Purpose This paper addresses one particular type of cliff edge – “Unknown Knowns” that organizations are often headed for and suggests ways in which it can be avoided. Design/methodology/approach The paper reports lessons learned through the author’s experience and draws on relevant literature. Findings Apparently unforeseen cliffs are actually well known about, deep in the organization, well ahead of time and either nobody is talking or nobody is listening. Practical Implications People need to change their cultures to ensure that the “Cassandras” (people who can be seen as “negative” and problem rather than solution focused) are genuinely listened to. Originality/value New scandals break every month. At the time of writing, the latest is Volkswagen (VW) emissions testing, itself a classic example of an unknown-known cliff.

The Criminal Bug: Volkswagen's Middle Management

Not only does the 2015-16 Volkswagen emissions cheating scandal have the potential to destroy a $227 billion-dollar multinational company, but it contains eerie echoes of other recent white collar scandals that have claimed lives and cost the public trillions of dollars. Through a case study of Volkswagen, this Essay pioneers a new way to look at these scandals by focusing on their common element: the growing insulation and entrenchment of middle management to coordinate such large-scale wrongdoing.

Looking into Software Transparency

A recent Volkswagen emissions incident has raised calls for greater transparency of the software on which much of modern life depends. The argument posed is that if the emissions control system code had been available for public scrutiny, someone would have seen the relevant segment and blown the whistle. However, this reasoning is faulty.

"Democracy, Business Ethics and the Volkswagen Emissions Scandal (WITHDRAWN)"

There is an established body of politically informed scholarly work that offers a sustained critique of how practices of ethics by corporations can act as a subterfuge that facilitates the expansio...

Impact of the Volkswagen emissions control defeat device on US public health

The US Environmental Protection Agency (EPA) has alleged that Volkswagen Group of America (VW) violated the Clean Air Act (CAA) by developing and installing emissions control system ‘defeat devices’ (software) in model year 2009–2015 vehicles with 2.0 litre diesel engines. VW has admitted the inclusion of defeat devices. On-road emissions testing suggests that in-use NOx emissions for these vehicles are a factor of 10 to 40 above the EPA standard. In this paper we quantify the human health impacts and associated costs of the excess emissions. We propagate uncertainties throughout the analysis. A distribution function for excess emissions is estimated based on available in-use NOx emissions measurements. We then use vehicle sales data and the STEP vehicle fleet model to estimate vehicle distance traveled per year for the fleet. The excess NOx emissions are allocated on a 50 km grid using an EPA estimate of the light duty diesel vehicle NOx emissions distribution. We apply a GEOS-Chem adjoint-based rapid air pollution exposure model to produce estimates of particulate matter and ozone exposure due to the spatially resolved excess NOx emissions. A set of concentration-response functions is applied to estimate mortality and morbidity outcomes. Integrated over the sales period (2008–2015) we estimate that the excess emissions will cause 59 (95% CI: 10 to 150) early deaths in the US. When monetizing premature mortality using EPA-recommended data, we find a social cost of ∼$450m over the sales period. For the current fleet, we estimate that a return to compliance for all affected vehicles by the end of 2016 will avert ∼130 early deaths and avoid ∼$840m in social costs compared to a counterfactual case without recall.