References

Lunenburg, Fred C. (2012). Organizational Structure: Mintzbergs Framework. Retrieved from

http://www.nationalforum.com/Electronic Journal Volumes/
VW chief promises 'ruthless' crackdown on culprits of emissions scandal.(2015, October 28).
Retrieved from http://www.theguardian.com/business/2015/oct/28/volkswagen-posts-firstquarterly-loss-in-15-years/
How could VW be so dumb? Blame the unethical culture endemic
in business.(2015, September 26). Retrieved from
http://theconversation.com/how-could-vw-be-so-dumb-blame-the-unethicalculture-endemic-in-business-48137/
Engineers, Ethics, and the VW Scandal.(2015, September 25). Retrieved from
http://spectrum.ieee.org/cars-that-think/at-work/education/vw-scandalshocking-but-not-surprising-ethicists-say
The Morality of Suicide.(2012, April 16). Retrieved from
https://bizgovsociii.wordpress.com/2012/04/16/the-morality-of-suicide/
Volkswagen Group announces new management. (2015, October 01).
Retrieved from http://www.audime.com/me/brand/en/tools/news/pool/2015/10/management.html
4 Questions About Volkswagens Massive Emissions Cheating Scandal That Still Need Answers.
(2015, September 23).Retrieved from
http://thinkprogress.org/climate/2015/09/23/3704257/volkswagen-emissionscheating-unanswered-questions/

VWs culture of blind obedience: What went wrong and how to fix it .(2015,
September 26). Retrieved from http://www.msnbc.com/msnbc/vws-cultureblind-obedience-what-went-wrong-and-how-fix-it
Germany is Not Volkswagen it .(2015, October 12). Retrieved from
http://bruegel.org/2015/10/germany-is-not-volkswagen/

Theories of ethics

Consequentialist ethical theory

Consequentialism is an ethical theory that holds that an actions morality is based on the
outcomes or consequences of the action. Essentially a morally right action is the action that will
produce a good outcome. One of the most used examples of consequentialism is if one breaks a
promise. The actual act of breaking the promise is neither good or bad, it solely is dependent on
the outcome of this action. Volkswagen decided and installed a software defeat device in 11
million Volkswagen and Audi diesel vehicles sold worldwide to cheat the emissions testing. The
consequence was harshly negative.
Within few days of this publicity, there were 34 class-action lawsuits filed in the U.S. and
Canada on behalf of Volkswagen and Audi owners, claiming fraud and breach of contract. The
resale value of affected model cars in the U.S. was down from 5 to nearly 16 percent depending
on model as compiled by Black Book and Kelley Blue Book based on used car auction prices,
the volume of which was also down. The stock prices, which mainly denotes the public
sentiments, the stock value suddenly suffered a 2-day cumulative decline of 32% after this
unethical deed got to be known proving that the whole decision of cheating was grossly wrong.

Rule-Based or Utilitarian Ethical Theory

The theory emphasizes consequences of an action on the stakeholders. The stakeholders are
those parties affected by the outcome of an action. Utilitarian recognize that trade-offs exist in
decision-making. Utilitarian theory is concerned with making decisions that maximize net
benefits and minimize overall harms for all stakeholders. It is similar to cost-benefit analysis
decision-making. The ultimate rule to follow is the Greatest Good for the Greatest Number.
In this case this very theory was drastically violated. Volkswagen intentionally programmed
thousands of its diesel automobiles to cheat emissions testing which affected the stakeholders
badly and the company suffered huge losses ,not just financially, but also lost its good will in the
market worldwide. The automobile engines emitted nitrogen oxide pollutants up to 40 times
above what is allowed in the US affecting the climate and its people and the trust of the
customers too. The company had to take a 6.7bn charge to cover the cost of recalling 11 million
vehicle, the stock prices plummeted causing severe loss affecting the investors too. The company
posted its first quarterly loss for 15 years of 2.5bn in late October 2015.The action of breaching
of govt. rules and policies was the main cause of this negative impact.

Mintzberg's Five Types of Organizational Structure

Henry Mintzberg is a renowned management theorist who developed a list of five basic
organizational types. He identified the various organizations as a result of their blend of strategy,
environmental forces and the organizational structure. The five organizational types are
entrepreneurial, machine, professional, divisional and innovative.
Entrepreneurial
An entrepreneurial company has a loose organizational structure and is typically driven by
entrepreneurial-minded or creative types of leaders. Startup companies managed by their
founders commonly exemplify this organizational type. Forward-thinking ideals, energy and
enthusiasm are common strengths. Limited structure, poor task discipline, inefficiency and
controlling management are potential drawbacks or risks if emphasis isn't placed on defined
work processes.
Professional
The professional organization type has a similar level of bureaucracy to the machine type.
However, it is characterized by a high degree of professional, competent knowledge workers
who drive the economic engine. These technically skilled workers usually have specialized skills
and autonomy in their work, making for more decentralized decision making than is prevalent in
the machine type.
Divisional
A divisional structure is most common in large corporations with multiple business units and
product lines. In some cases, companies divide their businesses and products into divisions to
promote specific management of each division. Centralized control is common in this format
with divisional vice presidents overseeing all facets of the work within their respective divisions.
Innovative
An organizational type that allows for cutting-edge leadership is the innovative type. This is
common in new industries or with companies that want to become innovative leaders.
Decentralized decision making is a key trait as talent leaders are allowed to make judgments with
efficiency in mind. The potential for leadership conflict and uncertainty over authority are
drawbacks.
Machine
Machine bureaucracy has the techno structure as its key part, uses standardization of work
processes as its prime coordinating mechanism, and employs limited horizontal decentralization.
Machine bureaucracy has many of the characteristics of Webers(1947) ideal bureaucracy and
resembles Hages (1965) mechanistic organization. It has a high degree of formalization and
work specialization. Decisions are centralized. machine bureaucracy has a large techno structure

and support staff. The environment for a machine bureaucracy is typically stable, and the goal is
to achieve internal efficiency.
The structural configuration of Volkswagen is close to that of Machine bureaucracy.

The company had the process of giving a lot of emphasis on technical ability more than
managerial qualities. In January 1996, Winterkorn started off as the Member of the Brand Board
of Management for "Technical Development" for the Volkswagen brand and became the
chairman of the board of management of Audi AG in March 2002.
Apart from that, as the machine structure says in case of Volkswagen, rather than decentralizing
power, CEO Martin Winterkorn sat at the head of a centralized, command-and-control
organization in which he acted as a patriarch. His desire to take the company to the very top of
the global car industry, surpassing Toyota, put enormous strain on his managers to deliver
growth. The result a decision to cheat on emissions tests goes against Germanys culture of
manufacturing than about rot at the car company, beginning at the very top.
After the scam Volkswagen , the company decided to bring changes in its organization structure.
According to the case, Volkswagen had decided to decentralize decision making, putting more
power in the hands of regional brands like Skoda and Seat in Europe. According to the fresh
amendments, U.S. operations will report to a newly-formed North American group. Is is
expected that the Volkswagen new boss Matthias Mller shall consider acknowledging,
however, that those who acted improperly may have done so from a misguided perception from
senior executives of what Volkswagen views as acceptable or expected behavior for which
Volkswagen management bears responsibility and which Volkswagen will change.
Benoit Tiers, Managing Director of Audi Volkswagen Middle East, had announced a new
management structure for the company. The brands Volkswagen and Audi are to be led by
dedicated division heads Enrico Atanasio , appointed new Director of Audi Middle East Benoit
Tiers, emphasizing more on the concept of decentralization, with an attempt to move away from
its original closed structure.