Teaching activity

Curing Corporate Culture at VW

Penny Brooks

14th January 2017

There is an interesting article in the FT written by Robert Armstrong who admits that, despite having huge experience as a corporate analyst with capacity for reaching 'economic conclusions', he is puzzled by corporate cultures and how to improve them.

There has been plenty of evidence of a culture at VW which encouraged engineers to design software which would defeat emissions tests which their cars would otherwise fail.

Read: The Volkswagen scandal shows that corporate culture matters (requires subscription)

As Armstrong says, the implication is that the miscreants at VW thought subverting the law was in their best interests, that this must have been a widespread conviction in order for the system to become an integral part of the vehicle's design and manufacture, and that a response to this to impose heavy punitive fines in order to discourage others from attempting the same thing.

In the US, the company has been fined $4.3bn, agreed to plead guilty to criminal charges - and six executives are facing charges. But in the long term, businesses have to ensure that they have a system of corporate governance that prevents such an 'immoral' approach from developing throughout the organisation.

There are plenty of articles in the press which trace how the story developed, and this provides a great opportunity for business students to analyse and propose methods of changing the corporate culture.

Unless you have a subscription to the FT, you may be unable to access the article referred above, but this one on the BBC website is easily accessible. It uses VW's "Statement of Facts" which it presented to the US authorities, which trace the story back to 2006. The article makes it clear that many people were involved, at least some of them in positions of authority, and deliberate attempts were made to cover up wrongdoing.

With this as stimulus material, can students identify how the illegal activity developed, problems which the organisation faces now, and recommend a programme which could be used to implement a new corporate culture at VW?

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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