Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success

Problems at Daimler

How many companies have brands that stand for quality more than Mercedes Benz? Perhaps surprisingly, the company found itself in the middle of a scandal, with media reports saying Daimler admitted to having engaged in a massive and pervasive bribery scheme and agreed to pay $185 million to settle charges. And this wasn't information the company volunteered, but rather the result of a lengthy government investigation.

According to the reports, this wasn't just a one-time event—not by a long shot. Rather, hundreds of bribes totaling tens of millions of dollars were paid in no less than 22 countries over a 10-year period. In a number of instances so-called cash desks were used to pay currency directly to government officials. In other instances the company used foreign bank accounts of shell companies to hide payments. Daimler reportedly also jacked up invoices for cars to generate still other payments.

What's perhaps most disturbing is that the reports say this wasn't a lower and middle management activity, but that it involved important executives including heads of overseas sales divisions and, more unsettling, even the company's internal audit office. The Department of Justice complaint speaks to Daimler's longstanding violations of bribery rules and a “corporate culture that tolerated and/or encouraged bribery.” The reports also say the complaint points to “a lack of central oversight over foreign operations.”

It's well known that the United States Justice ...