Lessons for Leaders from the Volkswagen Scandal
The Volkswagen Saga is a story of deliberate corporate malfeasance that has impacted the automaker’s car brands, leadership structure, governance, corporate reputation, current and future financial results, and its corporate culture.
As showcased in our book Leadership Lessons from the Volkswagen Saga, this is a story full of leadership lessons on corporate governance, branding, crisis communications, business ethics, corporate responsibility, and individual accountability relevant to leaders of any size organization.
To date, Volkswagen has been assessed or agreed to over $24B in fines, penalties, and compensatory payments to car owners. One Volkswagen employee is serving an 18-month jail term in South Korea. Another is awaiting sentencing in the U.S. after a plea bargain arrangement. A third sits in a U.S. jail thousands of miles away from his home in Germany pending his own trail or plea bargain agreement. Five of their colleagues in Germany have been indicted on felony charges by a U.S. grand jury and have been warned not to leave the country.
Iconic investor Warren Buffet once said, “It takes 20 years to build a reputation and only five minutes to ruin it.” Poetically, the EPA announcement of Volkswagen’s emission test cheating takes approximately five minutes to read.
Throughout the lengthy investigative, settlement, and corrective process that is now over a year old, millions of Volkswagen vehicles continue to over pollute in cities and countries around the world. As things stand now, this will not change for many more months to come.
There are four things to remember when thinking about the leadership lessons and implications emanating from this story:
This was not corporate negligence or a correctable mistake that took place, but rather deliberate malfeasance on a grand scale and over a seven year period of time (in fact it most likely would be continuing today had it not been for the testing conducting by West Virginia University).
Volkswagen did not overlook something in production and take a risk assessment that the cost of recalls outweighed fixing the problem during manufacturing. Rather, engineers at the company deliberately installed software into the management systems of over 11 million vehicles whose sole purpose appears to be to cheat the known procedures of emissions testing.
Despite lengthy internal and external investigations, or perhaps because of, only eight people have been charged, prosecuted, or arrested to date. And only one person has been sentenced to jail time, this being one poor Volkswagen soul in Korea.
Millions of Volkswagen vehicles on the road continue to spew dangerous nitrogen oxide (NOx) into the air we breathe almost three years after the excessive emissions were revealed by the on-road testing performed by the International Council on Clean Transportation and the scientists at West Virginia University.
Approximately 18 months after the scandal became publicly known, many questions remain, including:
Why did Volkswagen purposefully cheat on diesel emissions tests?
Will regulators in Europe or elsewhere penalize Volkswagen financially to the extent that U.S. regulators have?
Will anyone serve jail time for their criminal acts, other than the one person in South Korea serving an 18-month sentence?
And perhaps the two most important questions: Will Volkswagen survive? Is Volkswagen too big to be allowed to fail and collapse as a corporate entity?
The answer to the last question is undoubtedly: probably.
Volkswagen does employ over 610,000 workers around the world, which means well over a half million families would be hurt if the company collapsed. Plus there are thousands of dealers, suppliers, and business partners, all employing their own staffs and workers — and all having families of their own — whose economic futures would be bleak if the Volkswagen Group went under or was broken up into little pieces to be incorporated into other vehicle manufacturing conglomerates.
In many ways it will be best if Volkswagen does continue to survive (though perhaps not thrive) in the coming years and decades. Doing so will serve as a powerful reminder of the many leadership lessons the Volkswagen scandal has provided.
Without a doubt, the Volkswagen saga is a huge wake-up call for leaders at all levels of any company or organization. And it will continue to be so for years to come.
Leadership Lessons from the Volkswagen Saga is available on Amazon in paperback ($18.88) and Kindle formats ($8.88). It is also available on all global Amazon websites in local currency prices.