Volkswagen's scandal: A grey November

After all the topics about M&A, dividend, CAPM, and stock efficiency, I decided to talk about business ethics which I think it is the most important topic in the financial market. There are a lot of successful smart leaders like Bill Gates, Mark Zuckerberg, Steve Jobs and more in the world, but they would not be so successful if they do not have business ethics in their mind. Business ethics is very important to a company because it will affect the reputation of the company which how the image is form in the public. It also builds trust with shareholder and stakeholders. If the reputation of the company is bad, it will definitely affect the value of the company and the shareholder and stakeholders will choose to bail out or sell off the shares because they do not trust the company.

I believe that everyone have heard of the recent news which talk about the Volkswagen’s scandal in the market. Since the beginning of November 2015, the bad news about Volkswagen does not stop. It is a grey November to Volkswagen due to the decrease of sales in Volkswagen. First, the company is found cheating by installing the software that was used to cheat on emissions tests. Volkswagen has also admitted that 11 million of its vehicles were equipped with software that was used to cheat on emissions tests which is kind of disappointed when I heard the news. After the scandal has been announced, Martin Winterkorn said that his company had broken the trust of their customers and the public. He decided to resign from the company and was replaced by Matthias Muller, the former boss of Porsche. However, it does not make any big changes to the company because the public does not trust the brand of Volkswagen anymore. As what I have mentioned, the reputation of a company is very important in the market. According to BBC news, the scandal has caused the Volkswagen sales fall 20% in the UK market. It may took a long time to build the trust between the customer and the company but the trust can be destroy in just a second if the company is found out doing illegal practice in the market. In addition, the Volkswagen scandal has affected the company’s debt downgraded as well.

 

After the scandal was found out in US, it has spread to countries like UK, Italy, France, South Korea, Canada and, of course, Germany, have opened investigations. Throughout the world, politicians, regulators and environmental groups are questioning the legitimacy of Volkswagen's emissions testing. Volkswagen respond that they will recall 8.5 million cars in Europe, including 2.4 million in Germany and 1.2 million in the UK, and 500,000 in the US as a result of the emissions scandal. Moreover, Volkswagen is one of the largest car maker in Germany and due to that it has also affect the car maker's shares fallen by about a third since the scandal broke.

After all, do you think it is worth to do illegal practice because the company wanted to earn more profit? This is the punishment that Volkswagen got after they were found cheating to pass the emission test. I am not sure how long will Volkswagen take to overcome this problem and to rebuild the trust of their customers. Do you agree with me that business ethics is so important to a company? Please leave some comment and share your opinion with me.