Heroes or traitors: Whistleblowers in German business | Business| Economy and finance news from a German perspective | DW | 09.10.2015
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Heroes or traitors: Whistleblowers in German business

Whistleblowers have had a hard time in Germany for cultural and legal reasons alike. A small organization and a software maker are trying to change that and bring about a change of corporate culture.

An employee at Volkswagen informed management about faked emission tests at the German carmaker, but the matter was not looked into, said Johannes Ludwig. He's an emeritus business professor and director of the Whistleblower Network, a German organization set up to support those who expose illegal or unethical actions in companies and public administration.

"VW's company culture is all about hierarchy and fear," Ludwig tells DW, refering to the case of Holger Spengler to illustrate. For years Spengler, a mechanic at VW's plant in Kassel, had adverted superiors, the audit department and management to cases of fraud, misappropriation of funds, inflated expense accounts and other problems - but in vain. When Spengler contacted the company's shareholders and supervisory board in 2003, he was fired.

Whistleblowers often take big risks. "Most of them work on the lower rungs of a company's hierarchy," says Ludwig. Officially, employees at most publicly traded companies are required to signal irregularities to their superiors and auditors. But when they do, they are often regarded as traitors and shunned by their colleagues, followed by a dip in their careers, mobbing or even dismissal.

A change of culture and law

The barriers to report irregularities tend to be lower in companies where managers and coworkers adhere to an ethical code of conduct, according to the Cologne Institute for Economic Research (IW). Johannes Ludwig's Whistleblower Network also campaigns for better legal protection of those who turn to the media or the authorities after they failed to find somebody who listened within their company.

In Germany, no specific legislation exists to protect whistleblowers from dismissal, unlike in the USA, where they are protected by the 2002 Sarbanes-Oxley Act. In 2011, the European Court of Human Rights in Strasbourg ruled that Germany had violated the right to freedom of expression after German courts upheld the dismissal of a geriatric nurse who had publicly criticized staffing levels and the quality of care in a nursing home.

Despite noble intentions, most whistleblowers shy away from publicity. There's a number of ways to report anonymously, for example through specially set-up telephone hotlines. But trust in them eroded after some companies had tried to identify callers with voice-recognition devices.

Some big companies, government offices and law enforcement agencies use a software solution called Business Keeper Monitoring System (BKMS). It's a web portal which takes anonymous hints and forwards them to supervisory authorities.

An electronic dead letter box

Informants using BKMS have to enter detailed information about the organization, department and project in question. This is to keep people from reporting on a whim. The system does not save IP-addresses, so the device accessing the web portal cannot be identified.

Each informant can create a dead letter box in BKMS and respond anonymously to further questions resulting from the initial hint. But despite all the safety precautions, there is no absolute certainty for a whistleblower to remain anonymous. In some cases, only a very small number of employees might have access to certain information.

The German Federal Cartel Offices uses BKMS to get information on price fixing and other illegal activities by companies. "Cartels usually operate in secret," says Andreas Mundt, the office's president. "Inside information is essential for exposing and breaking them up."

Within three years, the cartel office has received 996 hints "of a certain relevance." In more than half of these cases, the informants were willing to communicate with investigators via electronic dead letter boxes. Not all hints are useful and lead to investigations. But the office claims the mere possibility of anonymous tip-offs destabilizes cartels, because the risk of exposure increases.

Currently, the cartel office investigates several cases on the basis of hints received through BKMS. "Before we start an official investigation, we check that the information is correct and sufficiently detailed," says Mundt. "We also need to substantiate the claims by additional material or research."

In June this year, the cartel office closed its first case that involved tip-offs through BKMS. Five companies producing "acoustically effective components" for carmakers were fined 75 million euros for illegal price fixing.

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