The axes will become compressed or stretched when changing the Vertical exaggeration value in the Viewer Window module because the Vertical exaggeration control is stretching the entire screen graph display in the Z direction. When the Vertical exaggeration is changed, it sets the ratio of X and Y scale over the Z scale. Using this control is typically used for a quick view of a project that requires some vertical exaggeration or when the Axes modules are not necessary or not being displayed. The stretching affect is shown below.
On way to account for this effect is to use a Transform module to scale the model instead of the Vertical exaggeration control. The Transform module performs that scaling on the data instead of stretching the entire scene in the Z direction. The same project is shown below but is scaled using the Transform module instead of the Vertical exaggeration control; notice the difference in the way the axes are being displayed.
Updated October 14, 2016