In Brief

Germany Cracks Down on Corruption

In recent months, several senior executives have resigned, been fired or, in a few incidents, faced criminal investigations

By John Blau

October 01, 2005 — CSO — In recent months, several senior executives have resigned, been fired or, in a few incidents, faced criminal investigations after allegations and admissions of corporate crimes at German carmakers BMW, DaimlerChrysler and Volkswagen, as well as the German chip manufacturer Infineon Technologies and Commerzbank.

The scandals have raised the question of whether corruption in Europe'slargest economy is more widespread than previously thought.

"These incidents are only the tip of the iceberg," says Peter vonBlomberg, deputy chairman of Transparency International Deutschland eV, ananticorruption watchdog group. "Only a small fraction of corruption, maybearound 5 to 10 percent, ever gets exposed."

But von Blomberg is quick to point out that he and his colleagues don'tview the recent scandals as an indication of a general rise in corporate crime.They see it as the result of efforts to increase transparency to regulatoryagencies, shareholders and the public.

In fact, Germany is ranked one of the 20 least corrupt countries in the worldaccordingto Transparency International's annual index of corporate corruption.(For the complete index, visit www.csoonline.com/printlinks.)

Why are these scandals surfacing now? Pressure from lawmakers and the mediais encouraging companies to make a greater effort to prevent and stop corruption,instead of just covering it up, says Maren Möhring, communications directorwith Business Keeper, which supplies software to track corporate complaintsinternally.

Efforts to stop corruption in Germany began in the '90s, after a seriesof scandals. One such effort was the formation of BaFin, a financial watchdoggroup, to monitor publicly listed companies. Also, new corporate governancerules require companies to provide authorities with requested information quickly.And some companies, such as the federal railroad company Deutsche Bahn, haveintroduced ombudsmen to deal with complaints from whistle-blowers about allegedwrongdoing.