Corporate Corruption: Scandal at Germany-based Volkswagen

Introduction

Corruption is “the misuse of entrusted power for private gain (Deutsche Welle).” Misuse of power occurs when people in positions of power willfully deviate from established procedures for their personal gain, at the expense of public welfare. Europe’s biggest automobile maker, Germany’s Volkswagen AG, became embroiled in corruption scandals in the summer of 2005. German state prosecutors confirmed on June 30, 2005 that they had opened an investigation into possible fraud and corruption by managers and labor representatives at the car giant (Edmondson p 52). Uwe Dolata, spokesman for the German Association of Detectives (BDK) and an expert in white-collar crime, says, “Corruption is so inherent in German business that the police have created a special division to deal with it (Deutsche Welle).” The Volkswagen scandal case is a classic illustration of what happens when there is failure of corporate governance.
History of Volkswagen The word “Volkswagen” means “people’s car”. In Germany there had been many efforts to create simple cars that everyone could afford, but none had met with much success. Even if they were simple enough for the average person, the cars still ended up costing more than the average worker’s yearly wage. In 1930, Ferdinand Porsche set up an automotive design company in Stuttgart, which became known as the Porsche Buro. After much trial and error and more than a few different prototypes he finally created a prototype, which was named KDF Wagen by Hitler, who had shown much interest in these creations. The name was taken from the slogan “Kraft Durch Freude” meaning “strength through joy”. In Berlin at the car exhibition in 1938, Hitler announced that the building of the new factory for the production of the cars would commence, however only a few