Strictly speaking, no company should engage in unethical strategic behavior, if it values its reputation. However, notions of business ethics differ from one country to another. What is considered wrong in the West may be considered common practice in countries such as Russia and China. In most cases, it is not the question of when it is right or wrong to practice unethical behavior, but whether or not the company can get away with it.
The latest example of unethical behavior in business revolves around the scandal regarding Volkswagen – a large German automobile concern, falsifying data on fuel consumption and CO emissions on their latest engine models in order to benefit from the environmentalist trend in the market and improving their competitive strengths. The reasons for such actions were clear – Volkswagen has been struggling to compete in the environmental sector. Its engineers were unable to find a solution to the emissions problem within the allocated timeframe, which served as an incentive to falsify the reports in order to keep the production going.
The resulting scandal caused a tremendous dent in the company’s reputation, as it was discovered that hundreds of managers, as well as rank-and-file employees, had knowledge of the deception. Aside from legal charges, sanctions, and loss of face, the company suffered a plummet in revenues, which lasted throughout the entire 2016 and the first half of 2017. In addition, the company had to repurchase over 500,000 vehicles and replace their engines – an effort that cost over 6.8 billion dollars.