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Selected Case

published: 26 Jun 2017

Abstract:
The case tells the story of the Volkswagen diesel scandal, which was made public in September 2015. At the time, Volkswagen was a much-loved brand, praised for its environmental credentials and on target to become the world’s largest car manufacturer. The scandal prompted declining sales and share price, multiple lawsuits, costs of over €16 billion, and the resignation and possible conviction of key board members, including CEO Martin Winterkorn. It sets out in detail the company context and culture in which Volkswagen took the decision to install defeat device software that deliberately circumvented emissions regulations in 11 million cars worldwide. It reveals a longstanding culture of fear, cheating and ignoring ethical concerns, exacerbated by major groups that dominated the supervisory board. It allows students to analyse the origins of the scandal, warning signs of the impending problems within, whether CEO Martin Winterkorn and the board were effective, and how Volkswagen should handle the crisis. Detailed PowerPoint slides are available and videos are embedded in the presentation The case has been taught at INSEAD in the MBA corporate governance elective course. It is equally appropriate for courses on ethics, CSR or organizational behaviour (on the topic of culture). Undergraduate, MBA and Executive Education students will find the case interesting as many will recall the crisis at this well-known company. It can also be used as background reading to evaluate different forms of corporate governance in Germany, the UK and US.

Pedagogical Objectives:
Understand how the Volkswagen diesel scandal arose and the warning signs that could have been picked up earlier. Discuss how the board handled the problem, and the subsequent challenges facing Volkswagen in regaining trust and creating a ‘fair process’ organization. Realize the importance of good corporate governance in creating long-term company value.

Keywords:
Diesel Scandal, Crisis, Value Creation, Culture, Environment, Volkswagen, Board, Sustainability, Corporate Governance, Germany, Targets, Family Business, Organization Behaviour, Ethics, Corporate Governance, Investors, Stakeholders and Accountability


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