In 2012 in a small lab in the town of West Virginia a group of researchers from the West Virginia University won a grant of $50,000 from the International Council on Clean Transportation to test the performance and emission levels on diesel cars. Little did they know that the research they were to carry out would cause a car manufacturer embarrassment and a potential $18 billion in fines and payouts.
Volkswagen, one of the largest manufacturers of cars in the world was the subject of their research. When the team tested Volkswagen’s clean diesel cars, they discovered discrepancies of up to 40 times more than the expected emission levels. However nothing was done about these findings even though the information had been in the public domain for almost two years.
Volkswagen denied any wrong doing when questioned by the California Air Resources Board (CARB) and insisted these discrepancies were due to technical issues. They only budged when the Environmental Protection Agency (EPA) threatened not to approve their 2016 clean diesel model for sale in the United States.
It has since been discovered that VW fitted their cars with ‘defeat devices’ software meant to reduce emission levels by cutting the cars Nitrogen Oxide (NOx) when the car is in a certification test mode. The EPA ordered VW to recall 482,000 affected cars in the United States. The EPA said: “We intend to hold Volkswagen responsible. We expected better from VW. Using a defeat device in cars to evade clean-air standards is illegal and a threat to public health.” The agency warned that VW could face a maximum fine of up to $37,500 per vehicle, or $18bn in total.
Volkswagen after accepting culpability announced that the number of vehicles affected worldwide is close to 11 million and that the company had set aside $7.2 billion to fix the problem. On Monday after the announcement Volkswagen shares dropped by 30% on the Frankfurt Stock Exchange, with the company losing 15 billion Euros of its value.
Volkswagen would survive the scandal. Ratings agency Fitch says VW should be able to absorb potential penalties that may arise, even as they went on to praise VW’s financial structure and robust free cash flow generation. Despite the scandal and the potential losses analysts are still positive on the outlook for Volkswagen shares.
On Friday, Matthias Mueller, the Chief Executive Officer of its Porsche division was named by the board as the new CEO of Volkswagen after Winterkorn resigned. Volkswagen could face criminal charges even as several class action suits have been instituted in the US and Canada by furious car owners. David M. Uhlmann a professor of law at the University of Michigan believes criminal charges are “almost certain”. He said, “if there is sufficient evidence to show that Volkswagen intentionally programmed its vehicles to override the emission control devices, the company and any individuals involved could face criminal charges under the Clean Air Act, and for conspiracy, fraud and false statements.”
Too often, business leaders in Nigeria wanting to increase the profitability of their companies by any means necessary resort to unethical practices. Only in Nigeria is a CEO resigning after a scandal an exception rather than the norm. In more developed climes, political and business leaders step down after scandals. A few of these leaders are not culpable and can continue to lead, but they do it anyway. The reason for this is simple; there is honour in resigning in such situations.
In times past and even recently, banks, stock broking firms and other institutions have had their licences withdrawn due to unethical practices by top members of management. In these cases however, the CEO backed by the board will fight and claw and lobby to get back said licence despite various anomalies and corrupt allegations levelled against them. This raises questions about corporate governance structures in Nigerian organisations and the ability of the boards to actually check the management of the company.
Business leaders in Nigeria must note that times are changing. The change in leadership at the top has made governmental agencies keen to work, whether their reasons be to get in the good books of the President or otherwise, the fact remains they are more attentive than ever. Regulatory bodies will be at the top of their game, ready to prosecute as many offenders as possible. Gone are the days when bribery was the order of the day and when a blind eye was turned to discrepancies. The day has come when anyone can be used as a scapegoat. The power and importance of social media cannot be overemphasized. Once news gets into the public domain there is immense pressure on the regulatory bodies to carry out investigations and punish offenders accordingly.
Finally, it would seem that Nigeria as a country, has got to the stage where it is easier to play by the books and avoid consequences of illegal actions; something she hasn’t done in years.