Question

Read the following case. Apply your knowledge of the five components of the 2013 COSO IC framework as well as risk, internal controls, and any other Chapter 6 [Parts 1 & 2] topics to speculate in detail what various employees of Volkswagen could have done to prevent this internal control disaster from happening.

In an effort to circumvent various state and national clean air standards, automobile manufacturer Volkswagen installed software on a variety of automobiles equipped with diesel engines that was designed to detect when the vehicle was undergoing an emissions drive cycle test. When the software detected a set of parameters consistent with emissions testing, it would switch into a low-emissions operating mode. In total, more than 11 million Audi, Porsche, and Volkswagen diesel vehicles worldwide were equipped with the "cheater" software. When discovered by the U.S. Environmental Protection Agency and the California Air Resources Board in 2014, Volkswagen admitted to the wrongdoing. To date, Volkswagen has agreed to spend up to $22 billion in the United States to settle claims from consumers, regulators, and dealers. In January 2017, six Volkswagen executes were arrested for their part in the scandal.

Answer 1

Hello Buddy,

To begin with, the case of volkswagen is one where the entire top management always tried to say that they were not aware of the happenings in the company and that only a 'small group of engineers' were responsible for this. You and me both that it is definitely not the case.

However since the question specifically asks to speculate what the employees could've done to avert this disaster - I would start by saying that the top management could have tried and improved was the managment culture. There are various articles and reports available online which clearly state that the then CEO Mr. Martin Winterkorn had a very poor and weak management style or character. One of the common example being told is that he used to walk around with a gauge to measure car door gaps and criticized employees publicly. Volkswagen’s inner house team of investigation also raised several questions on the culture and the leadership techniques of the company.

Martin Winterkorn, said that he didn’t involve in any wrongdoings and he was unaware of the fact of the dieselgate defeat software. But the fact is: without team support and without any management, the software installation couldn’t be done in any case. So now the question raised, if the CEO was not guilty in the whole case, then there was the major issue of wrong administration which led the situation worse for the company’s reputation. The interesting fact is the top management is unaware of the facts and the engineers installed the defeated software under the nose of the management. The mistake was not just a small thing that could have been slipped from the management and it was proved also by the investigator.

Thus from the above context, it has been cleared that the company has failed to fulfil its leadership responsibility, now it doesn’t make any impact in the case, whether the CEO found guilty or not and had no involvement. This only means that the major component of the company that denotes growth strategy had been neglected by the company’s leader and made the path clear to the wrongdoers. If the CEO doesn’t know about the facts then it represents lack of management, judgement, trustable personnel and cultural behaviour problem.

He knew his work and priority but still, he failed in understanding the culture of the company and where he lacked. Rather than creating the environment full of fear and stressful, he could have helped in organising the work culture smooth and helpful for the subordinates and employees, where discussion could have been the thing done openly. Through a research, it has been proofed that the company’s working culture should be submissive it’s not important that the environment always demand innovation sometimes there should be humbleness and docility. Some leadership lessons important for any work organizations to be followed for the betterment of both company an d as well as for the employees are as follows:

• An Open Discussion Culture in Leadership: Climate plays a very crucial role in any management if it is transparent and open to speak up your mind and can share things easily in front of the superiors. Any situation can be easily handled and best figured out if it is discussed with the superiors.
• Fearless Environment: The environment of any company should be so fearless that gives power to the employees and a faith of self-reliance. Rather than reporting to the superiors, the employees report themselves first, understanding their responsibility of work primarily. This prevents any kind of misleading of management or leaders on the part of employees (Kinley, 2015).
• Distribution of power: Distribution of power is the major segment of any organisation. The structure of Volkswagen was in the hand of the CEO, no other representatives, shareholders were presented to take care of the matter. VW has total supervisory 20 seats from which 9 allocated to the workforce and shareholder representatives and also have two seats for politicians.
• Use of TQM in the organization: Total Quality Management (TQM) means with less effort greater result. Its work is continuous improvement, process and customer orientation. This process is successful in different big countries and reliable too in generating results.
• Implementing of Six Sigma: This method adopted by Motorola which purports ‘do it right’ theory. It gives the quality of work where the possibility of errors is 3.4 out of one million events. If this method had also been adopted by the VW then the possibilities of ‘Dieselgate’ might have been prevented

To conclude, If the success of a product depends on a lie, no company should want to sell it. This is not just a moral point. Lies, useful as they are, are unstable. One never knows when they will fall apart, so a strategy based on them poses grave commercial and regulatory risks. This is what makes the emissions scandal at Volkswagen so dumbfounding.

I hope the above solution is what you were looking for. For any further queries or doubts in the solution, please feel free to drop a comment. Please do leave a positive feedback, Thank you :)