Volkswagen (VW) the global automaker governed by F. Porsche’s descendants, the German state government and labor unions, admitted that 11 million cars were equipped with software useful in cheating emissions tests.
Contributor: Dr. PAVLOS VLACHOS
Academic Director of The ALBA MBA
Associate Professor of Marketing
Outlet: BUSINESS PARTNERS
In simple words, when VW cars were on the road vs. the test lab they emitted pollutants up to 40 times above what is permitted in the U.S. More interesting: at the same time VW’s cars were fitted with the “defeat” device the company was aggressively trumpeting its car’s low emissions. Importantly, VW’s top management team in America were aware of these issues in 2014.
The VW scandal is an example of so called Corporate Social Irresponsibility (CSiR), which researchers have largely examined independently from the phenomenon of Corporate Social Responsibility (CSR). Interestingly, before the scandal, VW was (said to be) a leader in CSR (ranked 11th best company globally for its CSR work and 1st in the auto industry for its commitment to environmental protection). No wonder that now many equate CSR with rubbish, positing that the $19bn spent on CSR to be directly paid out in salaries and dividends and not ceremonial organizational citizenship.
Taking a calmer view of the case, however, suggests that VW did what individuals do, namely, act unethically in light of previous ethicality. This is called the moral self-licensing effect and it occurs when not only the self but also in-group members engaging in virtuous acts (e.g., colleagues; employer). For example, when people endorse a black politician (e.g., Barack Obama) this increases their willingness to favor whites over blacks. Additionally, people who perform good deeds early in a day typically perform fewer good deeds and more bad deeds later that day.
Therefore, it is unfair to accuse firms for something that most of us daily perform. Obviously, moral licensing is not an excuse and big companies are expected to be more rational than individuals, right? But companies—according to upper echelons theory—are a reflection of their top management; therefore, when CEO’s are doing good via CSR acts then they are more likely to be freed to do bad. This is shown in research using a sample of CEOs in 49 Fortune 500 companies.
Several additional reasons can be also offered as explanations to the VW scandal (e.g., a cutthroat, insular, power culture; the role of CEO’s beating financial analysts’ expectations, namely the simple idea that goals lead people to cheat). In sum, a complex web of motives made VW’s executives “totally screw up” as Michael Horn, the CEO of Volkswagen Group of America said, and these can be explained by social psychology. The easy way is to always accuse companies of course (because of stereotypes); but we should bear in mind that companies are a reflection of individuals and before we start criticizing (which is great) one should be aware of his/her own psychological impulses that makes him/her not necessarily better than CEOs. Next time we all criticize, let’s first start by criticizing our small everyday acts. This will improve ourselves and in turn the businesses we run.
Effron, D. A., & Conway, P. (in press). When Virtue Leads to Villainy: Advances in Research on Moral Self-Licensing. Current Opinion in Psychology.
Hotten, R. (December 10, 2015). Volkswagen: The Scandal Explained. Retrieved 7 January, 2016, from http://www.bbc.com/news/business-34324772
Lynn, M. (September 28, 2015). Corporate Social Responsibility had become a racket-and a dangerous one, from http://www.telegraph.co.uk/finance/newsbysector/industry/11896546/Corporate-Social-Responsibility-has-become-a-racket-and-a-dangerous-one.html
Ormiston, M. E., & Wong, E. M. (2013). License to ill: The effects of corporate social responsibility and CEO moral identity on corporate social irresponsibility. Personnel Psychology, 66(4), 861-893.