Volkswagen AG

Tolerance or support of illegal activities can create scandals like the one that rocked Volkswagen AG starting in September $2015.$ The details of "Diesel gate" $($as the affair came to be known$)$ revealed that for years, the automaker had deliberately and systematically rigged engine emission equipment in its cars to manipulate pollution test results in the U$.$S$.$ and Europe.

Volkswagen saw its stock shed nearly half its value in the days following the start of the scandal. Its global sales in the first full month following the news fell $4\mathrm{.}5\%.$

VW$\text{'}$s board structure facilitated the emissions rigging and was a reason it wasn't caught earlier. In contrast to a one$-$tier board system common to most U$.$S$.$ companies, VW had a two$-$tier board system consisting of a management board and a supervisory board, in keeping with the Continental Model of corporate governance.

The supervisory board was meant to monitor management and approve corporate decisions. However, it lacked the independence and authority to carry out these roles appropriately.

The supervisory board included a large portion of shareholders. Ninety percent of shareholder voting rights were controlled by members of the board. There was no real independent supervisor. As a result, shareholders were in control and negated the purpose of the supervisory board, which was to oversee management and employees, and how they operated. This allowed the rigged emissions to occur.

a$)$ Explain the pillars of Governance that Volkswagen AG did not consider.

b$)$ You are hired as a new manager at Volkswagen AG$.$ Discuss dimensions of governance you would consider citing the benefit of each dimension.

c$)$ Discuss the negative impact of bad governance at Volkswagen AG