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“Why should I care about the shareholders, who I see once a year at the general meeting. It is much more important that I care about the employees; I see them every day.” – Attributed to the CEO of Volkswagen in 1983.
Sample Answer
The Importance of Stakeholder Management in Corporate Governance: A Case Study of Volkswagen
1. Introduction
In the realm of corporate governance, the treatment of stakeholders is a critical aspect that shapes the ethical and operational framework of an organization. The statement attributed to the CEO of Volkswagen in 1983, questioning the importance of shareholders compared to employees, sets the stage for a deeper exploration of stakeholder management within corporate governance.
2. Organisational Profile
Volkswagen, at the time of the crisis in question, was a leading automotive company known for its innovative engineering and global presence. The company’s reputation was tarnished when it was revealed that they had engaged in emissions cheating, violating regulatory standards and deceiving both consumers and authorities.
3. The Circumstances and Contributing Factors Leading up to the Crisis
3.1 Expropriation Evidences
The scandal at Volkswagen involved the deliberate installation of software in diesel vehicles to manipulate emissions tests, showcasing a blatant disregard for environmental regulations and public health concerns.
3.2 Volkswagen Board Structure
Volkswagen’s two-tier corporate structure, common in German companies, may have contributed to a lack of oversight and accountability, allowing misconduct to go unchecked.
3.3 Anti-Director Index
The Anti-Director Index could have indicated potential governance issues within Volkswagen, highlighting red flags that might have been overlooked.
4. The Key Actors Involved in the Case Crisis and Their Culpability
Key executives and engineers at Volkswagen were implicated in the emissions scandal, with evidence pointing towards a systemic culture of deception and non-compliance with regulations.
5. The Organisation’s Response to the Crisis
Volkswagen faced severe backlash from regulators, consumers, and investors. The company issued apologies, recalled affected vehicles, and implemented changes to prevent similar incidents in the future. However, the damage to their reputation was significant.
6. The Broader Governance Lessons to be Learned
6.1 Lawful Consideration (Expropriation)
The Volkswagen case underscores the importance of ethical conduct and compliance with laws and regulations. Ignoring legal boundaries can have severe consequences for both the organization and its stakeholders.
6.2 Managerial Compensation
Linking executive compensation to ethical performance and long-term sustainability could incentivize responsible behavior and discourage unethical practices within corporations.
7. Conclusion
In conclusion, the Volkswagen emissions scandal serves as a cautionary tale about the implications of prioritizing short-term gains over long-term ethical considerations. Stakeholder management, encompassing shareholders, employees, consumers, and the community at large, is essential for sustainable and responsible corporate governance.
8. References
– Please refer to the Chicago Referencing Style for a comprehensive list of sources supporting the arguments presented in this essay.
By examining the Volkswagen case through the lens of stakeholder management, we can extract valuable insights into the complexities of corporate governance and the enduring impact of organizational decisions on various stakeholders.
