Lee White: Corruption - the next business battleground

Who knew that Volkswagen, famous for some of the iconic cars of our time and a symbol of the efficiency and engineering acumen of Germany's formidable economy - would also be famous for cheating?

As the world's second largest automotive manufacturing company, selling iconic cars ranging from Volkswagens through to Audis, Porsche, Skoda and Bugatti - Volkswagen's admission that it cheated on pollution emission tests in the United States could cost it up to US$18 billion.

But, it's not just about the money and grave reputational damage. It's about people, business ethics, behaviour and values. While Volkswagen cheated behind the scenes with its deceptive emissions software, it also publicly espoused virtue. And the scandal has shaken not just Volkswagen, but the whole auto industry - particularly harsh for Germany, where one in seven workers is employed directly or indirectly by the auto industry.

READ MORE:
• VW close to diesel fix as sales of rigged cars halted
• VW details brands affected by scandal; fix due in Oct

The CEO has resigned claiming that he "had no knowledge of the manipulation of emissions data" which begs the question why did such high-risk information not filter up to top management and board level?

Indeed, what sort of company culture hampers internal communication to the extent that fraud and corruption can creep in? Why did no Volkswagen employee step forward? What happened to the whistle-blowers? Why did the measures and checks that any organisation of that size have in place - such as governance and risk management systems - not detect the fraud? Why were senior executives not focussed on 'doing the right thing'?

All businesses should be asking these questions. The Volkswagen scandal should be a wake-up call to businesses to review and assess their own systems and processes, ensuring that corrupt behaviour is anathema to the culture and met with zero tolerance.

Last week we launched a paper called "Are Australia and New Zealand Corrupt". This outlined a ten point plan to mitigate corruption, including a call to reward whistle-blowers. We also called for corruption to be one of the top risks discussed by the board.

But, worryingly, the reality is that boards simply don't see this as a priority.

When it is discussed, there is agreement to the 'concept' but the over-riding sense is that "it won't happen to us particularly with all of the processes and controls we have in place". This is a gamble which we cannot take.

Already, Australia and New Zealand are falling down Transparency International's corruption perception index. We are heading in the wrong direction. It will be hard to reverse this trend.

We need to be proactive and start to make changes before corrupt behaviour destroys our global reputation and restricts our economic growth.

It's also an issue that our Government should have on its priority list because it's not just about business, it's also damaging our nation's international reputation.

We believe that if our ten point plan is adopted, it could help improve the standing of Australia and New Zealand in the global fight against corruption, and who knows, it could help prevent another another Volkswagen type scandal.