The Diesel Scandal: What It Shows About Targets and Corporate Culture

Why an emissions scandal teaches something about targets in your business

Targets are the most important management tool in many businesses: sales targets, production deadlines, purchasing cost targets. Mostly they work as intended. The diesel scandal shows what can happen when a target is publicly promised, seems technically unreachable, and nobody wants or is able to say so openly.

This article therefore asks: What does the diesel scandal show about the interplay of targets and corporate culture, and how does a business prevent targets from becoming a reason for deception? To answer it, we first recount the documented facts, then explain the stretch-goal model, weigh two readings, and derive rules for handling targets.

What happened: the documented facts

1. 2007 to 2008: the growth target

   With its Strategy 2018, the group sets itself the goal of becoming the world's largest carmaker by 2018. US sales are to rise sharply, partly with diesel vehicles marketed as clean and economical.

2. 2014: the on-road measurement

   Researchers at West Virginia University, commissioned by an environmental organization, measure significantly higher nitrogen oxide emissions on the road than on the test bench for two VW diesel models and inform the authorities.

3. September 18, 2015: the allegation

   The EPA accuses the group of installing a defeat device in around 500,000 VW and Audi diesel vehicles sold in the US between 2009 and 2015. The software recognized the test bench and switched emission control fully on only there.

4. September 2015: admission and resignation

   The group announces that around eleven million vehicles worldwide contain the software in question. CEO Martin Winterkorn resigns and denies personal responsibility.

5. 2016 to 2017: settlements in the US

   The group agrees with authorities and customers on payments of more than 15 billion US dollars and pleads guilty in a US criminal case in 2017.

6. 2025 to 2026: proceedings in Germany

   In May 2025, the Braunschweig Regional Court convicts four former employees. Further criminal proceedings are ongoing; according to press reports, the case against Winterkorn has been provisionally discontinued because he is unfit to stand trial. A model case by investors with an amount in dispute of around 4.3 billion euros is pending at the Braunschweig Higher Regional Court.

The Braunschweig verdict of May 26, 2025, concerned the former head of diesel engine development, who received four and a half years in prison, the former head of drive electronics with two years and seven months, and two other former managers with suspended sentences. The court stressed that responsibility was not limited to those convicted. The verdict is not final; until then, the presumption of innocence applies to everyone involved.

The thinking model: the paradox of stretch goals

A stretch goal is a target that seems barely or not at all achievable with existing means and methods. Sitkin, See, Miller, Lawless, and Carton (2011) described that such goals produce good results only under certain conditions: when the organization has been successful before and has slack resources. Without these conditions, they tend to lead to fear, shortcuts, and risky decisions.

Gaim, Clegg, and Cunha (2021) applied the model to the diesel scandal. They analyzed 338 articles from major British and American newspapers from 2015 to 2017, plus US congressional hearings, press releases, and documentaries. Their finding: the promise of a diesel car that is fast, cheap, and clean at the same time contained a contradiction. A more efficient diesel engine emits more nitrogen oxides, and cleaning them costs money and performance. Instead of resolving the contradiction, by their analysis it was overcome only in appearance: through software that produced the desired picture on the test bench.

The authors speak of a gap between promise and practice. When a target is publicly tied to the leadership's reputation, there are two ways out: admit failure or embellish the presentation. The greater the loss of face from admitting it, the more attractive the second way becomes. The authors stress a limit: their analysis relies on media reports and public sources, not on insight into internal decisions.

An analogy from school makes this tangible. If a student must achieve a grade he cannot reach with the material, and nobody at home accepts a lower grade, copying becomes the obvious solution. That does not excuse the copying. But it explains why stricter supervision alone does not solve the problem.

A target that may not be missed will eventually be achieved on paper.

What the scandal cost, others too

The costs did not fall on the group alone. Bachmann, Ehrlich, Fan, Ruzic, and Leard (2023) examined how the scandal affected US sales of other German manufacturers that were not involved. Reputation in a crisis presents the study in detail.

The finding shows that a reputation does not belong solely to the company that squanders it. One manufacturer's deception damaged trust in an entire country-of-origin label. For a supplier or dealer, this means: the culture of a large customer or partner is also your own risk.

Two readings: engineers under pressure or culture from the top?

General research also supports the second reading. In a meta-analysis of twelve studies with 6,892 employees, Harun and Taib (2026) found a moderate link between unethical leadership and unethical pro-organizational behavior, meaning rule violations employees commit because they believe they benefit the company. The studies come mainly from Asia and the US, so transferability is limited.

I consider both readings correct, but on different levels. The criminal question is a question about persons, and it belongs in court. The business question is one about conditions, and it belongs in every company that sets targets. If you only ask the first, you find culprits and keep the target system. Boeing 737 MAX describes the same pattern of cost pressure and a dwindling culture of dissent.

The target test: rules for targets in your own business

A small business has no test bench and no environmental agency that re-measures. But it has targets that create pressure: sales per salesperson, deadlines per project, savings per purchase. From the case I derive the target test, four questions you ask of every important target before announcing it.

1. Is the path known?

   Ask whether there is a known path to the target or whether the team must first invent it. If unknown, the target is a stretch goal and needs resources, time, and permission to fail. Planning sales targets shows how to plan targets from the bottom up.

2. Do sub-targets contradict each other?

   Check whether the target demands several things at once that work against each other, such as faster, cheaper, and more thorough. Decide which one takes precedence in case of doubt.

3. May someone say it cannot be done?

   Agree a fixed date on which the team may openly report that a target cannot be achieved this way, without disadvantage. Whistleblower protection describes how tips arrive safely.

4. How is the result measured?

   Measure a target by what reaches the customer, not by what is easiest to present. If bonuses are tied to a target, this applies doubly. Sales compensation compares how pay in sales can be designed.

Transferability and limits

The case shows a rule that applies equally to corporations and small businesses: a target is not just a number but a promise by leadership. Whoever sets it is also responsible for ensuring that missing it can be reported. Where that is not possible, the gap between promise and reality is closed in other ways. Greenwashing discusses why environmental claims are particularly risky here. Errors as process signals describes why repeated errors rarely lie with individuals.

The limits of the analysis are clear. The studies rely on public sources and cannot trace internal decision paths. The criminal proceedings have not been concluded, and courts decide what individuals knew. Whether a different target culture would have prevented the scandal cannot be proven, only reasonably assumed.

Conclusion: targets need a culture that allows them to be missed

To the guiding question: the diesel scandal shows that targets and corporate culture do not act separately. A publicly announced target that contained a technical contradiction met a culture in which dissent was apparently riskier than deception. The stretch-goal model explains why under such conditions the presentation is embellished instead of failure being admitted. Courts clarify the responsibility of individuals; every leadership can change the conditions itself.

A business does not prevent deception through stricter targets, but through achievable paths, clear rules of precedence, and a safe place for the news that something cannot be done.

• Test the three most important targets of the year against the four questions of the target test.
• For each target, decide which measure takes precedence in a conflict.
• Set up a fixed monthly meeting at which unreachable targets are reported openly.
• Check whether bonuses reward paid, defect-free sales rather than booked sales.