Corruption report

In its 2009 Global Corruption Report the Berlin-based organization Transparency International said corruption undermines fair competition, stifles economic growth and ultimately undercuts a business's own existence.

"Fostering a culture of corporate integrity is essential to protect investment, increase commercial success and ensure the stability sought by poor and rich countries alike, particularly as we climb out of an historical crisis,” said Transparency International Chair Huguette Labelle.

The Global Corruption Report documents that in developing and emerging countries, companies paid $40 billion (27.2 billion euros) annually in bribes to polticians and government officials. Ultimately it is consumers around the globe who foot the bill. Project costs increase by at least 10 percent, according to a poll of business executives conducted by Transparency International.

Corporate integrity

"It is not just a question of tackling corruption in business -- it is also important for financial and economic stability and the ongoing reforms of the global financial architecture", the TI report said.

Another concern is the sheer economic power of some companies and business sectors, which translates into disproportionate influence on political decision-making.

The report called on companies to publish regular reports on how they are fighting corruption and to disclose information on financial support for political parties, lobbyists and governments. Transparency International also recommended that governments apply anti-corruption regulations with more vigor.

"It is time that corporations face up to the risk of paying millions in fines and the long-term loss of trust from their customers and shareholders", said Labelle.

Report discusses Siemens, Volkswagen scandals

One of the biggest corruption scandals in recent years in Germany involves the electronics giant, Siemens.

The TI report reviews the case and lists the heavy fines imposed. It notes, "with more prosecutions expected, Germany's largest post-war economic scandal is likely to dominate the news for the next few years."

However, it criticizes Germany for not learning from the scandal, noting that one of the former Siemens CEOs, who was accused of bribery and corruption, was allowed to continue as head of a major government think tank until the institution was dissolved in 2008.

The report also discusses the more recent VW corruption scandal in which an entire works council accepted large bribes as well as luxury hotel accommodation and, more embarrassingly, visits to brothels to encourage them to accept employer-friendly practices.

Indeed, further examples in the report imply that this is one of the major forms of corruption in German society - big business offering inducements to workers' representatives to push through management decisions, leading to unfair competitive practices to the detriment of the individual employee.

Concern remains over tax havens

The section of the report concentrating on Germany concludes by turning its attention away from big business to wealthy individuals and the widespread use of tax havens such as Liechtenstein.

It cites the case of former Deutsche Post CEO, Klaus Zumwinkel, who was arrested on charges of evading one million euros in taxes. As a result, Zumwinkel resigned from his post and was later convicted of tax evasion.

That investigation led to the revelation that German officials had spent over four million euros ($6 million) to obtain information about large sums deposited by wealthy Germans in secret bank accounts in Liechtenstein. It's been argued that the expense was well worthwhile because it's expected to lead to the recovery of hundreds of millions of euros in back taxes.

Transparency International complains of German inaction

Germany has been sharply criticized by TI for failing to ratify the UN Convention against Corruption during the last legislative period, failing to introduce a corruption register and for not fulfilling transparency requirements when awarding public sector contracts.

Last year Germany was listed 14th out of 180 countries in TI's annual corruption and bribery rankings.

Author: Nigel Tandy

Editor: Rick Demarest