Volkswagen Emission Scandal. Management Research Paper
Please read all the attached instructions before you start the paper. The professor prefers students use any resources that he provided only. So please find references from the articles he provided only. Use simple grammar and vocabulary. Please let me know if you can't open any files I sent you.
You can chose any topic from the options but "Climate Change" and "(walmart) Corporate Social Responsibility"
because I already wrote them.
MGT 330 Final Paper Guidelines
The final paper is due Dec. 16th at noon. Late papers are likely to incur an incomplete grade, as I probably will not be able to grade them in time for the university deadline.
The purpose of the final paper is to undertake a more in-depth research project, in a small group. The paper should be based on a topic closely related to one on the syllabus, but should not be identical to the class topics that anyone in your group has written in your shorter papers. The topics can cover diversity, environmental issues, trends in work and technology (e.g. the gig economy), the financial crisis, etc. You should draw from the same conceptual frameworks – market failures, CSR, trade and national competitiveness (including business clusters), and corporate strategies in facing social pressures. E.g. if you tackle CSR, you could look at Fairtrade, corporate sustainability policies, labor conditions in electronics assembly (Foxconn), recent concerns about privacy, etc. – instead of Walmart and Rana Plaza, the cases we focused on in class. On climate change, you could look more at current policies to promote clean energy, or climate adaptation.
You need to conduct further research (5-6 sources, including longer reports and academic articles), and write up a 9-12 page paper (2-3 people in a group). This provides an opportunity for developmental writing and to investigate an issue in more depth.
To ensure that you are on the right track, you need to prepare a 2-page outline of the final paper and bring to class/email by Nov. 20th. Earlier is more likely to get more feedback from me, especially if via email. The outline should provide (1) the structure of the paper, i.e. an outline of the argument with headings and some bullet points under each heading, (2) the concepts from the course you will apply (can be multiple ones), (3) how the concepts help you analyze the case, and (4) sources you will use. The headings can be similar to the guideline questions we have used – i.e. each paragraph can address a question – what is happening? Why? What are the implications? What are the opposing views? What can we (the company, the public/consumers, activists, or the government) do about it? An analytical paper draws from a conceptual framework to make logical arguments to address a question. Try to make causal linkages clear e.g. how ‘tragedy of the commons’ leads to excessive greenhouse gas emissions.
The final paper should be about 9-12 pages long (towards 9 for groups of 2), double-spaced, and use appropriate formatting and citations. You need to indicate how the group divided up the work - who wrote which sections (or made other contributions, such as searching for relevant sources). Maximum group size is 3. The paper needs to be well integrated, and involve discussions among the students in the group – this is the key value of a group.
This should be a well-structured paper with good English. You need to research the topic in more depth and explore the issue from at least two conceptual standpoints, e.g. market failures, CSR and stakeholders, the role of corporate power, or role of technology and globalization. You will find that at least two of these conceptual frames can be applied to the various topics.
It is important is that you do not just write up everything that you find on the issue – a “data dump”; instead, you need to organize the information conceptually using analytical tools and concepts, and illustrate briefly with relevant data and examples. Explore the different sides of the issue, make clear and coherent analytical arguments, try to be balanced, but you can come down on one side or another if you want. Try to avoid vague generalities, but also avoid lots of descriptive details without making your point clear. Be concise and clear.
Citation format:
Citation format is APA style, which uses short (author, year) references in the body of the text, with a full citation at the end of the paper. For example, as Levy (1997: 12) put it, “the relationship between business and society is essentially political” (Indicate page numbers when you include a direct quote). Or mention an idea or a statistic, and then put the author and year in brackets (Levy, 1997). Do not cite the textbook for general ideas, only for specific facts. Avoid the use of footnotes.
Bibliography example:
Korten, D. C. (1995) When corporations rule the world. West Hartford, Conn.: Kumarian Press (for a book)
Levy, D. L. (1997) Business and international environmental treaties: ozone depletion and climate change. California Management Review, 39(3), 54-71. (for an article: the numbers refer to volume, issue number, and page numbers in that order).
McCormick, J. (1993). International nongovernmental organizations: Prospects for a global environmental movement. In S. Kamieniecki (Editor), Environmental politics in the international arena . Albany, NY: SUNY Press. (for a chapter in an edited book)
For an internet site, provide the author’s name, the name of the organization running the site, the URL, and the date accessed.
++++++++++++++++++++++++++
Academic Honesty - VERY IMPORTANT!!
The University maintains that every aspect of academic life, not only formal coursework but also all relationships and interactions connected to the educational process, shall be conducted in an absolutely honest manner. The University presupposes that any submission of work for academic credit indicates that the work is the student’s own and is in compliance with university policies. In cases where academic dishonesty is discovered after completion of a course or degree program, sanctions may be imposed retroactively, up to and including revocation of the degree. Any student who reasonably believes another student has committed an act of academic dishonesty should inform the course instructor of the alleged violation.
Copying from classmates during tests and exams, and plagiarism of materials for papers will not be tolerated. Plagiarism means representing the work of another as your own. It includes copying or paraphrasing from other sources, whether on the internet, the newspapers, or a journal, without acknowledging the source. Collaborating excessively with another person and claiming the work as solely your own also constitutes plagiarism. If you are unclear about this, please ask me. Do not submit papers from other courses.
Do not weave together chunks of text from internet sources, even if you cite sources – I want to see YOUR thinking and writing. If you want to cite a sentence to emphasize a point, put it in “quotation” marks and cite the source - but keep these to a minimum. You should cite a source even if you are using a specific idea from someone else in your own words. Depending on the severity of the case, plagiarism can lead to penalties ranging from failing the assignment, failing the course, or even suspension from the university.
I am very good at detecting academic dishonesty and deal with it harshly. Plagiarism on any assignment will, at minimum, result in an "F" for the assignment, without an opportunity to ‘redo’. I reserve the right to pursue further disciplinary action if appropriate (e.g., any student caught cheating on an exam will receive an "F" for the course). In all cases, students will have a description of the incident attached to his or her academic records. For further information, refer to the Code of Student Conduct section listed in the University Catalog, the Student Handbook, or http://cdn(dot)umb(dot)edu/images/life_on_campus/Code_of_Conduct_5-14-14.pdf
Students should be aware that, at the discretion of the instructor, assignments may be submitted to plagiarism detection software programs for the purpose of detecting possible plagiarism.
Research Guide for Business and Society
Your research should combine:
1. Some general searching using the web, but beware that the web gives you lots of junk, irrelevant material, out of date information, and unreliable sources.
2. Business magazines and newspapers (see below)
3. Academic journal articles.
4. ‘Respectable’ blogs
Search for relevant sources using scholar.google.com
Some articles are available in full-text directly on the site (check on the right of a reference, to reveal other versions of the same article). You can link your library account to scholar.google to see articles for which UMass Boston has a subscription.
A good strategy is to use the citations at the end of a recent comprehensive article to find other relevant references. Try to find longer, more serious discussions of topics rather than lots of short items.
Once you have located relevant articles, you can often find the full-text versions using the Healey Library on-line databases, such as ABI-Inform. These databases also have their own search facilities, but scholar.google is much easier. Then look for the journal and find the year and issue number. Look for databases or journals from: https://www(dot)umb(dot)edu/library/journals (click on e-journals to find journals held in digital format).
You will NOT find academic journals on the general web. You can access some serious newspapers, such as the Financial Times and New York Times, on the Web, with registration, but you are limited to 5 or 10 articles a month.
The following are some suggestions for useful sources. The list is not exhaustive, of course, but will help you focus your search.
ACADEMIC JOURNALS
Academy of Management Perspectives
Harvard Business Review
Business Horizons
California Management Review
Sloan Management Review
Business and Society
NON-ACADEMIC JOURNALS
The Nation www(dot)thenation(dot)com
Dollars and Sense www(dot)dollarsandsense(dot)org
Mother Jones www(dot)mojones(dot)com
BUSINESS JOURNALS
(mostly available through UMB library)
BusinessWeek BW.com
Fortune Fortune.com
The Economist Economist.com
NEWSPAPERS
New York Times NYT.com
Financial Times FT.com
Wall Street Journal WSJ.com
Good blogs about business and society
http://craneandmatten(dot)blogspot(dot)com/
https://theconversation(dot)com/us/business (also check out the environment+energy page)
http://www(dot)commondreams(dot)org/economy
https://organizationsandsocialchange(dot)wordpress(dot)com/ Our own UMB business faculty blog!
WEBSITES (these are just some suggestions to get you started)
General Industry Information
Corporate Watch www(dot)corpwatch(dot)org
National Priorities project http://nationalpriorities(dot)org/
Domhoff’s Who Rules America http://sociology(dot)ucsc(dot)edu/whorulesamerica/
Center for Corporate Policy http://www(dot)corporatepolicy(dot)org/
Corporate Crime Reporter http://www(dot)corporatecrimereporter(dot)com/
OpenSecrets.Org http://www(dot)opensecrets(dot)org/ Lots of information on corporate lobbyin
Ethical Consumer www(dot)ethicalconsumer(dot)org
Media
Adbusters, a humorous Canadian outfit that satirizes corporate advertising www(dot)adbusters(dot)org
Environment – General
www(dot)wri(dot)org World Resources Institute
www(dot)envirolink(dot)org
www(dot)ucs(dot)usa(dot)org Union of Concerned Scientists
www(dot)tufts(dot)edu/gdae Tufts University Global Development and Environment
www(dot)greenamerica(dot)org
Climate Change – Global Warming
http://thinkprogress(dot)org/climate/issue/ Climate Progress
http://www(dot)globalwarming(dot)org/ An industry funded site, in the guise of a “neutral” information source.
www(dot)epa(dot)gov/globalwarming/ EPA global warming site
http://www(dot)realclimate(dot)org/ Blog by real climate scientists. Tough to read, but scary!
Volkswagen Emission Scandal
Student’s Name
Institution
Volkswagen Emission Scandal
Introduction
One of the most popular scandals in the automotive industry is Volkswagen’s emission scandal. In an age where sustainability issues have become an integral part of organizational practices, the company deliberately installed a software in its diesel engines to cheat on emission tests. With global warming being one of the challenges facing the planet in the 21st century, the efforts of Volkswagen to deceive emission testing systems raises key environmental and economic issues. This paper examines the company’s scandal in through the lens of externalities, information asymmetry, corporate social responsibility (CSR), and stakeholder management.
Externalities
The Volkswagen emission scandal presents an example of externalities, a negative one. According to Roach, Harris, and Codur (2015), an externality is created when a market transaction affects someone else other than the seller and the buyer. In this case, the installation of a software to cheat on emission tests by Volkswagen had an impact on third party entities, mainly the world population. As a result of the action of the company, the planet experienced elevated levels of emission of nitrogen oxide, one of the greenhouse gases contributing to global warming. It is important to recognize that even if the company was complying with the emissions limit, it would still be contributing to negative externalities. As pointed out Roach, Harris, and Codur (2015), there are numerous negative externalities created by the production and use of automobiles. Automobiles not only contribute to air pollution, but the oil that leaks from them also pollute rivers, lakes, and groundwater (Roach, Harris, & Codur, 2015). Therefore, when Volkswagen deliberately emitted forty times the limit of nitrogen oxide that is legally allowed (Dans, 2015), the negative externalities created were enormous.
As pointed out by Roach, Harris, and Codur (2015), it is difficult to put a monetary value in the cost of such externalities, but it can be deduced that such costs for the company are huge. Some of these costs include the medical expenses resulting from air pollution as well as the costs of global warming that result from changes in agriculture, storms, energy, mortality, labor, and crime. As noted by Wallace-Wells (2017), for every degree Celsius of warming, there is an associated cost of 1.2% of GDP. With global warming also resulting in mass extinctions, there are innumerable costs that the automobile industry is imposing on future generations, Volkswagen being the leader. The external costs of the company are exponentially high. According to Roach, Harris, and Codur (2015), from a social perspective, it is sensible to produce automobiles if the marginal benefit is higher than the marginal cost. In the context of Volkswagen, it can be deduced that with the low emission levels it purported to produce prior to the discovery, the marginal benefit was higher than the marginal costs. However, with the 40 times over the legal limit emission, the social marginal costs exceeded by great extend the marginal benefits. According to an article by Mathiesen and Neslen (2015), as a result of the scandal, the company emitted about 1 million tons of extra pollution annually. With the nitrogen oxides causing global warming and health problems, the costs of the externalities are immeasurable. Furthermore, it is important to note that the scandal resulted in a significant fall in the share prices of the company. This meant that the shareholders of the company also experienced loses from the scandal, presenting yet another negative externality. Given the negative externalities associated with the scandal, the society was left worse-off.
Information Asymmetry
Information asymmetry refers to an occurrence where one party possesses more information than the other prior to a transaction taking place (Rymar, 2016). As a public company, Volkswagen is owned by the shareholders. When the company decided to cheat on emission testing, the information was in the hands of a few individuals in the company and not the shareholders. Such information can affect the decisions of the shareholders on whether or not to sell their shares. The scandal, therefore, presents a perfect example of information asymmetry. The paper by Rymar (2016) examines the link between information asymmetry and the cost of capital. The author points out that the investment decisions of shareholders depend on the information they receive from the company. To decide whether to hold or sell their shares, they depend on information from the financial statement of companies, which they expect to be transparent. With the information about the cheating software in its diesel cars being in the hands of a few people in the company, it is evident that the financial statements of the company presented false information about the financial position of the company. The shareholders were not aware of some of the risks involved in holding the shares of the company. On the other hand, the few individuals in the organization that were aware of the software knew that there was a risk of holding the shares of the company if the scandal is discovered.
According to Rymar (2016), the level of disclosure of information has a significant impact on the cost of capital for a company. If a company discloses a lot of information, then the cost of capital is low because the shareholders are well-informed. Given the secrecy, which was necessary due to regulatory reasons, the information could not be shared with shareholders, translating to a high cost of capital. The entity disclosing the negative information about a company determines the impact on the cost of capital (Rymar, 2016). In the case of Volkswagen, the information about the scandal was disclosed by the Environmental Protection Agency (EPA), meaning that there was a huge effect on the cost of capital. As a result, given a third-party disclosure of the information, the cost of capital became more costly. Following the release of information about the scandal, the stocks of the company experienced a 34.15% decrease, which meant that there was a major increase in the cost of capital. In this case, the impact of information asymmetry on the cost of capital of the company is evident.
Other concepts related to information asymmetry presented by the Volkswagen emission scandal are a moral hazard and adverse selection. There is a moral hazard that emerges in the incident given that the managers, while using shareholders' wealth, increased the firm’s risk exposure as they pursued personal interests. Knowingly installing the software meant that they exposed the shareholders to increased risk without their knowledge. With the cheating software in place, the real value of the company was hidden from the shareholders. This created adverse selection because the investors did not have all the information about the operations of the firm. Therefore, information asymmetry and its consequences are exemplified in the Volkswagen scandal and its aftermath.
CSR and Stakeholders
According to Porter and Kramer (2011), it is imperative for companies operating in today’s business environment to bring society and business back together by creating shared value. This is the creation of economic value in a way that generates value for society through addressing its needs and challenges (Porter & Kramer, 2011). The authors point out that it is essential for companies to reconnect their successes with societal progress. Therefore, according to these established business authors, a company should not neglect the needs of the society it serves. The Volkswagen scandal paints a picture of a firm that is doing ...
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