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The road ahead for VW after its emissions deception

Now that the world knows of Volkswagen’s deception about the emissions of its diesel cars, it should follow the model of reform of another German engineering giant, Siemens, after it was caught in a corruption scandal.

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Volkswagen's logo is seen on a diesel engine of a car in Zurich, Switzerland, Sept. 22. Volkswagen shares plunged after news that the German carmaker had rigged U.S. emissions tests.

Reuters

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In the long history of corporate corruption, the Volkswagen scandal exposed last week by the US Environmental Protection Agency is hard to beat for the scale. The German giant deceived both customers and governments about the emissions and fuel-efficiency of 11 million diesel cars worldwide. Penalties could run into the billions because of VW’s secret software that tricked regulators. A drop in sales could now end the company’s goal to become the world’s top automaker.

That’s the bad news. What makes this scandal worth watching is to recall what happened to another German engineering giant that suffered a similar massive corruption scandal nearly a decade ago. Siemens, which specializes in big energy equipment, was found to have given bribes totaling $1.4 billion to government officials on four continents to win contracts from 2001 to 2007. A German judge called it “organized irresponsibility.” The company has since seen the light and tried to create a culture of integrity among its more than 300,000 employees.

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Siemens, in fact, is now closely watched as a model for running a large-scale system for compliance with regulations and laws. Hotlines are available for whistle-blowers. A compliance chief has direct access to the company board. Incentives and ethics training help employees avoid the temptation to take shortcuts. And to lessen the commercial pressure to bribe, the company works with competitors and an independent mediator to set guidelines for fair bidding on projects.

Even with that, Siemens still finds it difficult to keep on top of every country’s rules and codes of behavior. It must deal with hundreds of internal complaints about potential illegal activity. Instilling the values of honesty and accountability takes constant effort, even a culture of self-reflection on the moral principles necessary to serve customers and society and not only stockholders. A workplace of integrity can help drive long-term financial value, as Siemens has had to learn.

Martin Winterkorn, VW’s chief executive, admitted that the company has “broken the trust of our customers and the public.” Once investigators get to the bottom of this scandal, VW can follow Siemens out of a dark tunnel and see the light of operating as an honest business. VW drivers might even once again wave to each other.