Monday, March 06, 2006

Business German-style

It is always nice to know that our European Union trading partners are such splendid chaps, no more so than the DaimlerChrysler group, one of the largest industrial and financial conglomerates in Germany.

Better known as world's fifth largest auto manufacturer and supplier of fine Mercedes automobiles to the likes of Kofi Annan (father of Kojo) and the EU commission, DaimlerCrysler also owns 30.2 percent of EADS, the European aerospace and defence manufacturer, one of the parent companies of Airbus.

We are shocked, therefore, that such a prestige and valued partner has admitted that it has paid bribes on three continents and that "several" employees have been fired or suspended over bribes paid in eastern Europe, Africa and Asia which could break US and German law.

The company has announced that it has "discovered" improper payments – i.e., bribes, often hidden in inflated commissions - going back at least 12 years, after a year-long internal investigation. This includes payment of a kickback to secure a contract for an armoured car under the Iraq oil-for-food sanctions regime, although the company is playing down its involvement, on that, arguing that the bribe was only €6,950.

The admissions could lead to heavy fines and possibly even criminal action in both the US and Germany. The Securities and Exchange Commission and Department of Justice in the US are both examining the bribes following allegations by a dismissed employee.

Daimler officials say Dieter Zetsche, the new chief executive, has now put his weight behind to a campaign to promote ethical behaviour by staff, which includes a new code of conduct and an "ethics hotline" for queries.

Nevertheless, this new code of conduct does not extend to admitting how many people were involved in the bribery or in which countries. However, the company has cut €222m from the previously published balance sheet for 2003, a sum which also takes account of under-paid taxes for the period.

A separate discovery that the company had under-paid tax for expatriate employees over the same period led to an €84m reduction in shareholders’ equity in 2003, and a further €25m charge against last year's net income.

However, we are much assured by Daimler's statement that it has "initiated improvements in our business processes as well as in compliance, control and training activities in order to foster a culture defined by openness and honesty."

There is no truth in the rumour that the company has appointed consultants from the EU commission to help it in this task.

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