This article will analyze the Volkswagen case in the viewpoint of corporate governance. As the scandal
came up to the scene, Volkswagen defrauded in emission tests and make the improper cars pass from
the tests in the “normal mode” rather than the “best case” scenario which also is not suitable for US
emission standards. As a result, 11million cars were recalled, VW lost 20 billion dollars and especially 80
years of good reputation of the brand is suddenly collapsed. 1
This reputational loss is a big issue on which means the cost of excluding from the industry and be the
one who doesn’t want to be traded with. This requires some down actions to the company like
decreasing the prices, …show more content…
But the reality of the
numbers is opposite to these explanations since a very huge number of cars were delivered for 7 years.
Company is claiming that senior management couldn’t recognize the 7-year period of corruption which
seems not possible. The situation seems like a “passive management”.
According to the many C-level or board member sayings that it is true that corporates in Germany
generally have corporate governance problems. Germany corporate governance problem is an globally
known term which is called as “co-determination”. Co-determination is a governance method which
means representatives of workforce must have place in the supervisory board and also their votes are
counted as twice in case of conflict. 2 The aim of codetermination is minimizing labor tension by the
power of representation on the board but in many years, experts claiming that this method is decreasing
the company’s productivity in case of unbalanced distribution of votes. This makes an environment
which creates many problems in case of supervisory board make a mistake. As a more brief explanation,
Germany governance model formed by dual board structure. This integrated board does not …show more content…
experiencing the less effective nature of crowded decision-making meetings, co-determined companies
found a way to two-layered discussions meetings of which labor-representatives firstly discussed the
issue among themselves and then came to the supervisory board.
As an overall summary, dominant shareholder percentage of Porsche and Piech families comes to the
stage with a big and powerful conflict of interest. Other than this, governmental share is the major part
of the organization. And lastly, co-determination method of governance totally pressured the labor
representation power which at the end leads the company to the single-way viewpoint dominance.
One of the most important lesson in the VW case is keeping the “conflict of interest between managers
and shareholders” and “corporate governance issues” separate is crucial. And one of the key weakness
at the company is the lack of diversity of