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GERMANY: Volkswagen forced to stop paying salaries to ex-workers in politics

by Bertrand BenoitFinancial Times
January 14th, 2005

Volkswagen, the German carmaker, bowed to public pressure yesterday, saying it would abolish its controversial practice of paying salaries to employees who leave work for full-time politics. The state-controlled group said it had 373 elected representatives on its payroll, including four regional parliamentarians and two members of the Bundestag, the federal parliament's lower house, all six from the Social Democratic party. Many are town councillors. The announcement came as Bernd Pischetsrieder, VW's chief executive, sought to counter accusations that the carmaker had been buying itself a lobbying network inside the nation's debating chambers. VW is the latest company to react to a string of scandals that has shaken Germans' faith in their representatives. The SPD, leader of the ruling coalition, has promised a review of the rules governing parliamentarians' extra-curricular activities. The questionable practices of some companies surfaced last month when Hermann-Josef Arentz, a CDU member of the North Rhine-Westphalian parliament, was expelled from his party's top executive for pocketing a yearly €60,000 (£42,000) from RWE though he had not worked for the energy group for years. Later that month, the spotlight moved to VW after three members of the Lower Saxony parliament were found to be on the carmaker's payroll. Two were forced to quit their jobs after failing to provide evidence that they had done work for the group. In a statement, VW said its management board would vote next Tuesday to scrap a 1990 guideline on pay, which states that employees who become elected representatives should receive full salaries regardless of how much work they did. "This guideline gave parliamentarians maximum flexibility in shaping their work," the group said. "This flexibility . . . was meant to preserve their independence in the exercise of their mandates." Critics, however, said the payments not only compromised the representatives' independence but also breached the parliamentary rules of Lower Saxony, which state that members should not receive any payment except in exchange for bona fide work. "Parliamentarians who willingly trade their independence are as guilty as the companies that pay them," Anke Martiny, a former member of the Bundestag and now board member of Transparency International, the Berlin-based anti-corruption organisation, said. One person close to VW said employees seeking a political mandate would now have two options: to have their pay suspended or to receive part of their salaries in exchange for completing a defined task. While other companies, from Siemens to Dresdner Bank, have also admitted having elected officials on their staff, VW and RWE have attracted special attention because of their links with the state. VW is 18.2 per cent owned by the state of Lower Saxony. Gerhard Schroder, chancellor, was a VW supervisory board member as state premier of Lower Saxony from 1990 to 1998, and has defended the group against attacks by the European Commission on the Volkswagen law. When Mr Schroder decided to overhaul the labour market in 2002, he tasked Peter Hartz, VW's board member for personnel, to develop a reform blueprint. The ensuing bills are referred to as Hartz I to IV.

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