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Home» Notes on Noble Business » Business Economics » The High Cost of Business Ethics Transgressions: Consider VW

The High Cost of Business Ethics Transgressions: Consider VW

July 5, 2016 - Business Economics, Business Strategy, Societal Evolution, The Common Good
0

In a recent Wall Street Editorial titled “The VW-Tesla Redistribution” (July 1, 2016), they report on the cost of VW’s Business Ethics transgression (“installing ‘defeat devices’ in diesel cars that overroad nitrogen-oxide controls”).

In case you’re considering cutting corners and violating business ethics, think again. And consider the costs if (and more likely “when”) you’re caught. The piece doesn’t give the total cost, but does give the various pieces of the cost, which I’ve then added up (below). It’s somewhere north of $17 billion! That’s a lot of VW cars!  Here’s a breakdown:

  • $14.7 billion settlement (not including attorney’s fees) to resolve consumer class-action lawsuit as well as charges by the EPA, the CA Air Resources Board (CARB) and the FTC
  • $583 million to settle consumer protection claims by 44 states

(As the Journal reported, “the feeding frenzy isn’t over: the EPA could still impose billions in civil fines for Clean Air violations, and the Justice Department has threatened criminal charges. The CA Public Employees’ Retirement System has sued in German court for investment losses.”)

There’s more:

$2.7 billion that VW will have to pay into an environmental mitigation trust.

That’s nearly seventeen and a half billion dollars, and as the Journal reports, there are other costs, some of which are transfers to the green energy industry:

“Owners or lessees will have the option of selling their cars back to VW for their value prior to the company’s emissions disclosures. Or they can return their cars to be modified once (and if) the EPA and CARB approve a fix.

“If consumers don’t agree to junk or fix their cars, VW will have to pay more to the slush fund. If merely 75% of consumers respond to VW’s recall, state governments get to spend an extra $985 million on green welfare.

“An additional $2 billion of the settlement will ‘support increased use of technology for Zero Emission Vehicles’ including public-awareness programs, ride-sharing, self-driving vehicles and charging stations.”

And the list (of penalties – and transfers to the green industry) goes on, but you get the gist: breaking the public trust and the law has steep penalties – and much of fines are used to support the administration’s love of green energy.

So think twice (maybe three times) before you commit an ethics violation!

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