Business leaders and lawyers are lobbying to avert a new corporate law aimed at punishing companies for wrongdoing, such as emissions cheating in the auto industry or dividend-stripping, a form of tax avoidance in the financial sector.
The BDI Federation of German Industry has appealed to the justice ministry to drop the plan, arguing that it would punish firms disproportionately and hurt innocent parties such as employees, suppliers and customers.
At present Germany, unlike the US or Britain and most other European countries, doesn’t have a corporate criminal law. That means only individual employees can be punished for wrongdoing, but not entire firms, even when a company is systematically breaking the law.
Currently, the so-called Administrative Offenses Act is the only vehicle to punish companies but punishments vary by region since individual state prosecutors and authorities determine the fines.
That’s why the conservatives and Social Democrats agreed in their coalition deal to create a uniform nationwide procedure for tackling errant companies. The size of the fine would relate to the size of the company, rising to an upper limit of 10 percent of annual revenue for firms with revenue exceeding €100 million ($116 million). Companies could also be named and shamed, or barred from public contracts. In extreme cases, a company could even be dissolved.
The German Corporate Lawyers Association (BUJ) has written federal Justice Minister Katarina Barley urging her to avoid a “blanket criminalization of corporate activity” and to opt instead for preventative measures.
It said the new law should show leniency towards firms that have introduced compliance systems. “Germany has no legal incentive system to encourage companies to invest in compliance measures,” the BUJ wrote. “If firms with compliance management systems are spared fines or are fined less, that would create such an incentive.”
In an editorial for a law magazine, Ms. Barley said it was time Germany found a way to punish companies that promote criminal behavior.
“For cases in which fraud, corruption or environmental offenses aren’t the work of individual employees but arise from a system, we are creating possibilities to prosecute the company itself — instead of just individual people who are only little cogs in a big machine,” she wrote. “If sanctions hit the owners of a company they will develop their very own interest in taking suitable steps to nip fraud in the bud.”
Heike Anger is a correspondent in the parliamentary office of Handelsblatt in Berlin. To contact the author: firstname.lastname@example.org.