The Philanthropy of a Corporate Cheat: Volkswagen

The scandal of Volkswagen, the German automaker, and its intentional marketing of diesel cars with fraudulent pollution measuring and monitoring software meant to circumvent polluting exhaust standards, has trumped the General Motors ignition defect scandal as potentially the worst example of corporate dishonesty in recent years. The brazenness of the company is breathtaking. Mary Barra’s General Motors, with 124 deaths caused by an ignition defect, looks like an inconsequential corporate felon compared VW with the untold numbers of people who may have had their lives shortened by having to breathe the toxic fumes emitted by diesel VWs and Audis designed to cheat U.S. environmental regulations.

Unlike GM’s Barra, who wasn’t in charge of GM at the time of the ignition defect scandal (although senior people at GM knew what the defect was and had done nothing), VW’s CEO, Martin Winkerkorn, was clearly in charge at the time when VW engineers concocted the software cheat. Winkerkorn resigned, taking metaphorical responsibility for the diesel car scandal, though it’s unlikely that he or other VW executives in the know will voluntarily admit the kind of individual responsibility that makes one eligible for residence in a jail cell. In the GM case, Barra’s GM settled with the Justice Department with a $900 million payment, with a quid pro quo that no GM executives would be criminally prosecuted.

Volkswagen is a mammoth German company, employing 270,000 people in the country, a third of all Germans working in the automotive industry, and 600,000 people worldwide. Some Volkswagen cars are manufactured in other countries, however, including in the U.S. at plants in Chattanooga, Tennessee, for VW Passat cars and in New Stanton, Pennsylvania, near Pittsburgh, for the manufacture of VW Rabbit and Jetta cars. The U.S. headquarters of Volkswagen is in Herndon, Virginia.

With significant manufacturing and other corporate activities in the U.S., Volkswagen is also a corporate grantmaker. What does the grantmaking of the nation’s foremost corporate cheater look like? The Volkswagen Group of America webpage describes elements of their corporate philanthropy strategy in the U.S.:

• Aside from corporate matching contributions of employee giving (for “300 Team members”) and 25 percent of the VW workforce engaged in corporate-endorsed volunteering (participants get one paid day off from work for volunteering every year), the website highlights the company’s relationship with Best Buddies, the nonprofit that creates one-to-one relationships for volunteers to connect with people with developmental disabilities. (Audi is “exclusive sponsor and vehicle of choice of Best Buddies.”)
• Amidst many stories about volunteer activities, the company touts its donation of $1 million to the Martin Luther King Jr. National Memorial.
• Volkswagen Group of America’s 2013 corporate social responsibility report ballyhooed $10 million charitable funding and in-kind donations (including Haiti relief) to groups such as Best Buddies International, the American Red Cross, the Boys and Girls Club of America, and Habitat for Humanity, plus $7 million in contributions to education programs in Tennessee and Virginia.
• The company’s interim 2015 CSR statement trumpeted its work with the Surfrider Foundation on beach preservation, the Trust for Public Land on land conservation and preservation, and People for Bikes on creating bike-friendly cities while taking credit, ironically in retrospect, for having pioneered clean diesel technology.
• The 2015 report also referenced Volkswagen’s five-year $2.1 “Partners in Education” program with schools in the Washington, D.C. area plus the announcement of an additional $2 million for automotive technician and business management education.

On its Form 990PFs, the Volkswagen Group of America Foundation shows the following levels of its corporate philanthropy activity:

The Volkswagen Group of America Foundation presumably gets to post zeroes as its giving for some years due to carryovers from more-than-required grantmaking levels in prior years, but the foundation’s grant totals above zero are hardly large numbers for a massive international corporation. One suspects that some of what the company’s social responsibility reports highlight is charitable contributions made by VW employees through their own workplace giving that were matched by the company, or corporate contributions made directly by the corporation without using the company’s philanthropic foundation arm. Increasingly, corporations are choosing to bypass their corporate foundations, which are required to detail their grantmaking on 990PF submissions to the IRS, in favor of direct grants from corporate headquarters marketing departments, which are not subject to that kind of public disclosure.

The ultimate brazen irony in the Volkswagen Group of America’s self-congratulatory statements about its philanthropy and charity is the company’s “giving back” commitment to the environment. The guiding principle of the company’s giving-back practices, the company says, are a commitment for “American values like respect for hard work, diversity, social responsibility and active sustainability.” On the company’s giving-back link to “green” activities is this striking statement:

In the 2010 comprehensive environmental rankings published by the Union of Concerned Scientists, an alliance of more than 250,000 citizens and scientists are working for a healthy environment. Volkswagen tied Toyota for the lowest smog-forming pollutant emissions. According to the report, “The newer and cleaner diesel models that Volkswagen now offers will be technologies to watch—especially to see if they can beat out other companies’ hybrids.”

Interpretation? VW is touting its having snookered one of the nation’s top environmental nonprofits along with state and federal officials across the nation. The Volkswagen Group of America environmental mission brands itself with this: “We know what it means to be green.” Considering that the software to falsify emissions readings began with cars manufactured in 2009, perhaps even in 2008, involving 500,000 sold in the U.S. and 11 million worldwide, Volkswagen must be credited with amazing audacity and cheek for keeping this summary on its website:

Even before we were recognized as “the most environmentally friendly car company selling in the USA” by J.D. Power and Associates, even before winning the 2010 World Green Car, the 2010 Green Car of the Year and 2009 Green Car of the Year awards, we’ve been green.

For VW, Winkerkorn, and other executives, they might find that it’s not easy being ersatz green. The various environmental nonprofits and others that have been the beneficiaries of Volkswagen philanthropy might have special standing to call out the Volkswagen corporate cheats and stand with both the 500,000 Americans who bought diesel Jettas, Passats, and other now-proven defective models and the people throughout the country whose quality of life has been harmed by having to breathe the toxic nitrogen oxide emissions from these supposedly “clean” diesel-powered cars.—Rick Cohen

Correction: This article has been altered from its original form. References to the Volkswagen Stiftung have been removed, as the foundation has no current connection to the modern automobile manufacturer. We regret the error.