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CAPinsideMärkte3 MIN READING TIME2018-05-17

How corrupt is the German economy?

Eighteen percent of German companies stated that within the past two years a relevant case of fraud became known in their own company.

Compliance plays an increasingly important role for a majority of German companies and yet more and more corruption cases are being detected among German companies. Already in the past, the exhaust gas scandal at Volkswagen and at other car manufacturers shows distrust among the population. But other industries are increasingly revealing cases of corruption as well as breaches of rules.

Survey of managers indicates increasing prevalence of corruption

Already the scandal about falsified emissions, which is the headline news for Volkswagen and other car makers, points to the trend towards increasing corruption . In addition, the headlines in other sectors make it clear that corruption is a constantly growing topic for companies. The consulting firm EY.Pro Land carried out a survey in which 2,550 companies surveyed in 55 different countries . On average, around 50 companies per country were asked to assess the current situation with regard to corruption and fraud. Some of the results were known in principle, whereas other results are more likely to have a surprising effect. In the survey, managers were asked to rate corrupt methods in everyday business . This is a conventional approach, especially in Brazil , with 96 percent of respondents confirming this fact. Even in Italy , the level of corruption is particularly high at 68 percent. In Germany, on the other hand, managers regard corruption as part of day-to-day business as being ruled out.

This assessment of the companies is surprising, especially considering the known corruption cases. Eighteen percent of German companies stated that within the past two years a relevant case of fraud became known in their own company. Taking into account the identical study, which was carried out only two years earlier, a significant increase can be observed. At that time, only 14 percent of companies said they were aware of a corruption case. Thus, this development corresponds to an increase of more than 25 percent. Overall, Germany is thus just behind Russia , where 20 percent of the respondents announced a fraud case in their own company.

Current level of corruption is not a problem

On the other hand, the opinion of the German managers must be considered somewhat differentiated because they state that corrupt methods do not play a relevant role in Germany. The fact that cases of corruption and fraud have risen sharply is clearly in line with this statement. Correspondingly, corruption is not a relevant problem for German companies. In Russia , on the other hand, 28 percent of companies surveyed said that corrupt practices are normal in everyday business. Especially in Italy and Brazil, managers see a fundamental problem. Twelve percent of managers in Japan also see a corruption problem.

According to Stefan Heißner, head of the department dealing with corruption in German companies, the comparatively high number of corruption cases among German companies is not a sign of a high level of crime . Rather, this figure shows that systems for detecting and tracking these cases are effective. Especially in regions where these systems work efficiently and effectively , more cases of fraud are identified. However, that does not mean that there are more such corruption cases. However, this is different in Russia or Brazil , because there are only a few cases officially discovered. However, the managers know that the local economy lives from corruption .

But even German companies would rely on entertainment services when it comes to avoiding a downturn. These include food invitations, sporting events or other events at the expense of the company . About 16 percent of the respondents would use such means to influence the business partner . This is a popular approach, especially in countries with passive negotiation . In Brazil or Russia, on the other hand, this approach is less promising as direct negotiation methods are preferred.

Hardly penalties for top managers

According to Heißner, the situation should nevertheless be criticized, because the general interest in fraud cases is comparatively low . Particularly protected are top managers who are rarely sanctioned , especially in the context of extensive fraud cases. In addition, it takes an above-average time until a fraud case has consequences. Only if the media and the prosecutor are involved, then no stone will be left on the other. If this is the case, then all communication data are examined and corresponding documents are analyzed. In China, Russia or Brazil this is not a typical procedure. For German companies, this means that internal controls need to be expanded and made more efficient. Especially medium-sized companies suffer from this fact . In addition, Dax companies must employ hundreds of employees to answer the relevant questions.