Wednesday, March 24, 2010

The bribery mess at Daimler

The bribery mess at Daimler makes sorry reading. Every party involved is showing up in the worst possible manner. Whatever promoted a global corporation of the standing of Daimler to be in this situation ?

The case is as follows. Daimler is accused by the US authorities of paying bribes of tens of millions of dollars in over 22 countries over a 10 year period. Daimler, it is reported, has agreed to pay a $185 m fine to settle civil and criminal charges. Daimler, it is alleged, set up shell companies to channelise the bribes, Bribes have included gifting an armoured car to a Turkmenistan official, siphoning of funds to the bank account of the wife of an official in China, 10% kickback to Iraqi government under Saddam Hussein, and so on and so on. It makes sordid reading.

First culprit is Daimler , of course. This has been going on systematically over a number of years. A lot of people have turned a blind eye to the goings on. At best, this can be calculated ignorance, and at worst, active encouragement. The amount of money involved has not been much. It is estimated that through all this bribery Daimler earned a profit of $50 m which is a drop in the ocean that Daimler is. Did this really matter so much to stoop to the level of blatant bribery. Why did they do this ?? Why on earth would an organization of the stature of Daimler take such risks for such a measly reward ?

The affair came to light through a whistle blower, in the then Chrysler wing of Daimler. An internal auditor at Chrysler blew the whistle. He went to his boss. His boss told him to keep quiet. He went to his boss’s boss. Who also did nothing. In due course, he was transferred and then sacked. Classic fate of whistle blowers. So much for whistle blowing mechanisms, hotlines, Sarbanes Oxley provisions, etc etc. Total muck on the faces of the people who handled the whistle blower. And equal muck on the face of those responsible for running Daimler’s ethics practices.

Lets turn to the position of the German government. Normally the German authorities are at the forefront of actions against bribery and corruption. They acted famously in a case involving Siemens a few years ago. Daimler is a German company. But they have been prosecuted by the US government. The German authorities have not yet brought any charges. What were they doing. A charitable explanation is that they were sleeping. At the very least they should look sheepish – a German headquartered corporation’s behaviour in 22 countries has been acted against in the US, not Germany.

The only party coming out of this without a stink is the US authorities. They are usually very rigorous in pursuing acts of wrong doing relating to bribery and corruption. They went after Daimler through a variety of laws that gave them jurisdiction, even though Daimler is German company and these acts happened outside the US. Other countries would do well to emulate the US authorities who simply do not compromise on such matters.

This affair makes this writer wring his hands in despair. Multinational companies are accused of all sorts of things all over the world. The very world multinational is construed to be a very dirty world. The majority of such accusations are blatantly false. They are the product of jealousy, misguided nationalism and downright lies. For the large part, multinationals behave honourably across the world and often much better than their local counterparts. I have some credentials to say so – I have worked in multinationals all through my career, and seen very many of them operating across many countries. But then there are also cases like Daimler. They deserve to be given exemplary punishment – not only because of the shame of what they did, but also because mud sticks on very many other more responsible companies because of their actions.