Volkswagen’s Scandal: Ending All Corruptions?

The shocking details of Volkswagen’s sex-and-bribery scandal have shaken Germany Incorporated in the summer of 2005. Volkswagen’s former Chief of Personnel, Peter Hartz paid $2.5 million dollars in illegal bribes for over nine years to the company’s labor boss just to have the support of the management plans. The alleged illicit payments were used by Volkswagen’s Works’ Council Chief Klaus Volkert to finance his lavish foreign trips, parties, prostitutes, and luxury hotels in Brazils and Lisbon. And all of these are disguised as business expenses.

The big question is: who is behind this corrupt scheme? Did former Chief Executive and now Chairman Ferdinand Piech approve the operation? And what about the labor leaders in Frankfurt? What do they have to say about all this?

Volkswagen’s Rotten Apple
For now Germany will still have to wait for the answers though there are speculations that Piech is going to be dragged in the scandal. Inside the courtroom just last week , the 65-year-old Hartz has admitted making the illegal payments of $2.5 million between the year 1994 and 2005 to Volkert while an additional $518,000 goes to Volkert’s Brazilina lover, Adriana Barros. The sex junket that happens on January 25 was claimed by Hartz as his own doing and that he has no accomplice whatsoever.

Hartz is facing ten years of imprisonment but due to his confession he will be able to negotiate for a lighter sentence. He was able to receive a suspended jail term of two years and a fine of $750,000. Likewise the state prosecutor has also dropped charges pertaining to Hartz’s misused of funds by participating in the travels and the sex parties explaining that the said episode have minimal damage to Volkswagen.

The scandal that happens in Volkswagen has prompted the German public to doubt their country’s post war system of corporate governance. They have also questioned the system’s openness to serious abuse. Under the system called codetermination, labor representatives are granted by law to obtain half the seats on a company’s supervisory board. This in turn gives them significant control over management decisions. The only problem with this system is that it gives those in positions all the opportunities to abuse the power vested on them resulting to corruption. And that is not all; the chairman is given an extra vote which gives him the power to tip the scales in votes that usually ends with the splitting of the labor and management.

Such type of system normally gives the shareholder representatives the advantage in close boardroom battles. Unfortunately Piech has long ironed out everything and this includes weaving a close relationship with the labor at the Volkswagen empire. What is the significance of this? Piech with the labor at his side will be able to disgruntled shareholder representatives on his board.

At the recent Detroit Auto Show, Volkswagen’s new Works Council Chief Bernd Osterloh commented that their labor leaders would support Piech’s reelection as supervisory board chairman in May, if he desires to go on with it.

More Trials to Come
Peter Hartz is the first of the four Volkswagen’s managers that are to be put on trial. Similarly, Hans-Jürgen Uhl, a member of the German Parliament for the center-left Social Democrats was also charged with giving false statements and for being an accessory to breach of trust over his alleged participation in the sex junkets. The trial for Uhl case is due later this year.

Volkswagen’s History
Many would probably ask, was Volkswagen’s executives corrupt in the past? The German automaker’s history is one that pictures success amidst trials. And so a great part of its history mainly focuses on its wonderful creations and not so on its executives.

Volkswagen the largest German automaker and brand of high quality auto parts like Volkswagen brake booster, is considered to be an icon of the twentieth century. As a fact only a few car manufacturers can parallel the legendary cars created by the German automaker. Volkswagen’s The Beetle has become the automaker’s trademark. This “Bug” has also become one of the world’s best selling cars of all time.

Aside from The Beetle, the Volkswagen bus has also made a name for its own and today viewed by many as a symbol of a generation. The Golf is another Volkswagen’s masterpiece and similarly sells pretty well in the market.

Volkswagen does not only produce machines made of steel but creates masterpieces that become an indelible part of the cultural and personal lives of millions.

Volkswagen was born in an era that can be termed as “of the privilege few”. And during those times Volkswagen was conceived as an affordable and reliable means of transport for many of those whose average income is not enough to purchase other brands of cars. It was in the year 1934 when Ferdinand Porsche has created the concept of first peoples’ car for Europe. The first working prototype was launched in just a year.

By the end of 1942 Volkswagen was able to produced 70,000 vehicles and in 1945 in a shift recovery after the war the automaker was able to produce 2,000 vehicles but this time it was for the Allied Forces and the new German Post Office. By 1948, the German automaker has once again produced 25,000 vehicles plus two Beetles which are shipped to the USA. A year after, the German automaker was able to build 25,000 more vehicles including the Volkswagen Karmann convertible which became the best-selling convertible in the world.

1955 came and a million Volkswagens were built. This was the start of the company’s growth. From company it has grown into a world corporation, building factories and working communities in countries like United Sates, Brazil, Canada and in some major centres in Western Europe.