In case you were too distracted by the Pope, you probably noticed that Volkswagen has been caught red-handed in a massive scandal involving cheating on the emissions testing of 11 million diesel-powered cars sold in recent years. The costs to the company may be as much as eighteen billion dollars in the US alone. This is by far the biggest of the many automotive scandals—the fiery Pinto, GM’s deadly ignition switches, Toyota’s self-accelerating cars or Ford-Firestone’s exploding tires—in scope, if not in public policy impact.
Diesel is more popular in Europe than in America, in large part because of environmental testing standards. Gasoline engines emit more carbon dioxide, diesel engines, which are more efficient fuel-wise, emit far more nitrogen oxides (NOx) than gasoline engines. Since the introduction of the US Clean Air Act of 1970, NOx emissions are subjected to more stringent controls than CO₂ emissions here, while across the pond, CO₂ is more tightly controlled than NOx. Thus diesel automobiles make up one third of the passenger vehicle fleet in Europe, but are a relative rarity in the U.S. The sales of diesel cars has been on the rise in recent years, however. Now we know why.
Volkswagen, which manufactures many of the beasts, devised and installed a code functioning as a “defeat device” to sense when one of its diesel vehicles was being tested for nitrogen oxide emissions. test. Once a test was detected, the software would reduce torque and NOx emissions, while under normal conditions, that is, when the vehicle was not being tested for emissions, the car would be guided by a separate program that would increase acceleration, torque, and fuel economy.
Clever! Also unethical and, obviously, illegal.
A European non-profit, the International Council for Clean Transportation, was puzzled at how Volkswagen diesels were suddenly passing all the tests, and contacted researchers at the Center for Alternative Fuels and Engine Emissions (CAFEE) at West Virginia University. CAFFEE tested Passats, Jettas, and Golfs, and found that even though the cars passed U.S. emissions tests, the engines were actually non-compliant. After CAFEE released its results in 2014, Volkswagen issued a voluntary recall to address this issue, and attempted to lie its way out of the problem, suggesting that technical issues could explain the increased emissions on the road. The EPA wasn’t fooled, and VW was informed that its 2016 model year diesels would not be certified as compliant until there were plausible answers. Shockingly, Volkswagen told the truth, and confessed that it had designed and installed the “defeat device.”
There are 400,000 VW diesels on U.S.roads that have the defeat device. The company faces EPA penalties of up to $37,500 for each vehicle not in compliance with regulations. Volkswagen stock has dropped 20%, and the CEO has resigned. There is an investigation beginning by the U.S. Department of Justice. Congress will hold hearings on the issue. All of which means the company got caught.
What else does it mean? What’s going on here? The episode means that people in positions of authority at Volkswagen devised this scheme, that engineers knowingly signed off on code that would defeat the purpose of EPA and Clean Air Act regulations, and that the massive cheat was allowed to continue for seven years until it was finally detected. This can only happen in a company that is ethically corrupt from the inside out, rooted in an ethics-free, the ends justify the means culture, and yet, before this, no one suspected that VW was more unethical than any other large company. Is it?
How many other large corporations, not merely in the automotive industry but in others, are similarly corrupt? Bernie Sanders, and not only he, would have us believe that all of them are. I think he’s wrong, but this fiasco hardly bolsters my confidence.
Of course, thanks to the ethics and compliance industry that got rolling here around 1990, we have the security of knowing that U.S. companies are required to approve, implement and teach a Code of Ethics that includes passages like this one, which is typical:
Each of our employees obeys the laws, regulations, and internal rules applicable to their working environment and acts in accordance with Group values and the Code of Conduct.
Each of our employees who do not conduct themselves consistently with the Code must expect appropriate consequences within the scope of statutory regulations and company rules that can extend to termination of the employment relationship and claims for damages.
Each superior ensures that the employees in their area know and comply with the Code of Conduct. Furthermore, Group Auditing will review compliance on a case-by- case and/or random basis as part of the auditing program approved by the Chairman of the Board of Management…
The initial point of contact for each of our employees who has questions or uncertainties regarding the Code of Conduct is his or her superior. Every employee may also contact the Works Council. In addition, every employee has the following contact at Compliance available for further questions…:complaints and tips in connection with existing Company rules can also be directed to the responsible, specialized offices.
This kind of guidance provides an ethics backbone for corporations, strengthening the ethical culture and making it far less likely that…oh, wait.
That’s from the Volkswagen Code of Ethics.