COMMENT: German auto industry must get its house in order

Corruption charges damage business

Arjen Bongard is editor of Automotive News Europe. He is acting editor for Automobilwoche after Franz W. Rother left the company.

The current corruption cases are the last thing that German automakers need right now.

The scandals are distracting managers from their daily business.

That's especially true for Volkswagen and DaimlerChrysler. They are both working hard to restore core brands to their past glory.

But corruption charges are also hitting the luxury carmaker BMW, a brand accustomed to success.

Corruption and bribery is no more prevalent in the auto industry than in other sectors. In fact, auto firms are rather small fish in Germany's sea of corruption.

Likewise, scandals aren't just hitting private industry. Last week, the United Nations charged a former employee with pocketing $150,000 in bribes.

German manufacturers are just adopting their first measures to take stronger action against illegal practices.

To get control of corruption, heads of companies need to enforce strong moral guidelines. And they need to rework their codes of behavior and punish misconduct more strongly.

To prevent abuses, managers should not be allowed to own shares of companies they are doing business with.

Government must help

But the industry cannot free itself from the morass of bribery by itself. The government and oversight authorities have to play their part as well.

It was only 1999 that Germany agreed to follow guidelines laid down by the Organization for Economic Co-operation and Development, the international organization that helps governments tackle the economic, social and governance challenges of a globalized economy. Since then, bribery of foreign officials has been a crime in this country.

Germany's federal justice ministry is proceeding under the assumption that its current powers of prosecution are sufficient to handle corporate corruption. But the current incidents show that the current legislation is hardly a deterrent.

We should consider whether not only the responsible persons, as has been the case until now, but also the affected companies can be called to account for crooked business practices.

The German auto industry, locked in international competition, has an extremely serious problem. As its reputation suffers from corruption scandals, so does its business.

That's one good reason to put corporate governance at the top of the agenda.

Tags: Automakers

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