Corporate Failure Examples: Corporate Governance

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Corporate Governance MGMT512 Exam I - Corporate Failure Example Koç University Modular MBA Spring 2017 Istanbul, Turkey May 27, 2016 Instructor: Aymelek Kozikoğlu Student: Denizhan Maden I choose Volkswagen emissions scandal for my exam which is started on 18 September 2015 with a issuance of a notice of violation of the Clean Air Act to Volkswagen Group by the United States Environmental Protection Agency (EPA)(1). Volkswagen Group was accused to cheat the laboratory emissions testing by programming one of the most popular engine of the Group Turbocharged Direct Injection (TDI). Cars that have this type of engines are programmed such that cars can realize the emissions testing take…show more content…
According to United Officials, the cheater software system turned down during regular driving, most likely due to fuel saving concerns and/or increase the performance level of the car (2). EPA reports state that approximately 500,000 polluting vehicles were sold starting from 2008 and 2015 in the United States (3). After the investigation on Volkswagen Group by United States Government, Group has agreed to pay $4.3 billion which is the largest ever levied by US Government against an automaker. In addition to this penalty, Group was suffered from repairing or buying back the polluting vehicles from the market which is forecasted at $ 21 billion by research/market analysts (4). After the announcement of the scandal to the news Volkswagen’s stock price fell in value by a third immediately. Although the Group’s CEO Martin Winterkorn initially resisted calls to step down from his leadership role, he was resigned due to the pressure after all. In addition to this resign several executives from Volkswagen Group were suspended due to accusations (5). In order to understand and/or analyze the corporate governance issues that had missed during this scandal one can review the interviews of the key members of the Group’s…show more content…
In order to decrease the fuel consumption of cars or increase the torque and acceleration, Volkswagen seems to overlook higher carbon emission levels. Root causes of this scandal should have been analyzed by Volkswagen Group and announced to public. Otherwise as it is the case now, there have been different views (which I mentioned mine above) and ongoing rumors about the topic which create uneasiness in the market. In my opinion Volkswagen Group can take more to do point actions than they do after this scandal. Group seems to focus heavily on United States as EPA started the investigation in US. At the first stage this focus was inevitable but after the scandal news were spread to all around the world, Group should have communicate its customers from over 150 countries in one tone of voice. However the case was different, for instance in Turkey Doğuş Group who is the official distributor of the Volkswagen Group cars, declared an announcement from their website which was far away from self-explanatory (9). It seems that Volkswagen Group does not determine one strategy for all countries that they operate, they instead free their

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