Breaking News & Views for the Progressive Community
We Can't Do It Without You!  
Home | About Us | Donate | Signup | Archives | Search

Printer Friendly Version E-Mail This Article
Germany's Schroeder Says US Corporate Scandals 'Iceberg Tip'
Published on Tuesday, July 9, 2002 by Reuters
Germany's Schroeder Says US Corporate Scandals 'Iceberg Tip'
by Steven Silber

LUDWIGSHAFEN, Germany - German Chancellor Gerhard Schroeder blamed U.S. corporate culture for recent accounting scandals and lauded Europe's model on Tuesday as President Bush launched new penalties for such abuses.

Faced with a raft of accounting abuses, including at energy firm Enron and telecoms giant WorldCom, Bush unveiled a number of proposals on Tuesday aimed at fighting fraud and rebuilding confidence in corporate America's finances.

A senior European Union official also blasted U.S. corporate practice saying American accounting rules had been used to raise share prices rather than reflect fair company values.

Addressing employees at chemical giant BASF in the town of Ludwigshafen, Schroeder defended the German corporate system which encourages workers and employers to cooperate on the supervisory boards that steer the direction of their companies.

"Now it has been revealed that egotism practiced at the top under the catchphrase 'shareholder value' is worth less in macroeconomic terms, but also as far as the companies themselves are concerned, than a system based on a fair balance between the interests of workers and employers," he said.

Schroeder, who has often rejected calls to adopt what he calls U.S. "hire and fire" practices to help create more jobs in Germany, said the scandals at Enron and WorldCom showed that the American economic model should not always be emulated in Europe.

"That is presumably just the tip of the iceberg and it has to do with a corporate culture which is different from here. There the individual employee is not valued and shareholder value is everything," he said.

"Egoism at the top does not suffice to have lasting economic success," he said. "It must perhaps lie in the structure and not just individual lapses."

Among Bush's proposals were doubling the maximum jail term for fraud, stronger laws against document shredding -- as accountants Andersen did at Enron -- boosting oversight of corporate pay and auditing, and setting up a fraud task force.


Asked to respond to Bush's speech to Wall Street leaders, European Union Commission spokesman for internal markets Jonathan Todd said the EU's executive body had been active on the corporate governance front for many years.

"Ever since the 1970s, it has been a requirement under EU law to ensure that accounts give a fair view of what is the true value of a company," he said.

"One has the impression that accounting rules in the U.S. have been used as a tool to push up share prices rather than to reflect the fair value of a company."

Todd said an EU action plan on financial services reform was geared to boosting investors confidence by concrete means such as the planned introduction of international accounting standards and rules on independent auditors.

In France, Michel Prada, head of the COB stock market watchdog, said he doubted there were similar cases of financial fraud in France.

He told France 2 television he could not say that French firms had been under more pressure in recent years from shareholders to produce strong results.

"That's not the impression I have," he said. "I think we have to be very careful not to compare an American situation in which some companies had cases of real fraud with the situation on the French markets.

"We have good reasons to think that the transparency and pertinence of information provided by French companies are well controlled. So I would like to warn against the temptation to think that what happens four or five thousand kilometers from here would be happening in France."

Prada said the COB conducts about 90 investigations of company finances per year, with about 10 to 15 resulting in charges against the firms in question.

"This is not more than we used to have," he said.

Copyright © 2002 Reuters Ltd


Printer Friendly Version E-Mail This Article

  is an Internet-based progressive news and grassroots activism organization, founded in 1997.
We are a nonprofit, progressive, independent and nonpartisan organization.

Home | About Us | Donate | Signup | Archives | Search

To inform. To inspire. To ignite change for the common good.

Copyrighted 1997-2011