We have said it before and we will say it again: if you run a company, best not to participate in bribery, illicit sex and company-paid shopping sprees. Even if everyone else at your firm is doing it. Unfortunately, these guys clearly neglected to read our Web site.

Rarely have so many top auto executives been summoned to talk about something other than cars.

On Tuesday, the former chief executive of Volkswagen, Bernd Pischetsrieder, and the chief executive of Audi, Rupert Stadler, reported to a courtroom in this northern German city to testify in a corruption case at Volkswagen involving charges of bribery, illicit sex and company-paid shopping sprees.

Both men told the court they knew nothing about the reported abuses, echoing the testimony last week of Volkswagen’s chairman, Ferdinand K. Piëch, who said he had no idea his company had set up a secret multimillion-dollar slush fund to pay off powerful employee representatives.

With its seamy details — a Volkswagen secretary testified that she had been ordered to rent an apartment for officials to use for romps with prostitutes — the scandal was bound to arouse prurient interest.

But by exposing the underside of German-style labor relations, it has struck a deep chord in Germany. Under a system known as co-determination, employees wield considerable influence in the boardroom through representatives who are guaranteed the same number of board seats as shareholders and who are paid like senior executives.

Nowhere is this system more entrenched than at Volkswagen, Germany’s largest carmaker, which is still partly owned by the state and has long been viewed as a bulwark of workers’ rights.

With German companies becoming more international, however, critics say the country’s labor practices will have to change. Porsche, which owns 31 percent of Volkswagen and is close to a takeover, plans to weaken the role of VW workers on the board of its new holding company.

“The Volkswagen story may be a wake-up call for other German companies,” said Michael Fichter, an expert in labor relations at the Free University of Berlin. “It points out the problems that can arise from employee representatives getting too cozy with management.”

At Volkswagen, these ties are said to have included payoffs, pleasure trips to Portugal and elsewhere, and sex; visits to prostitutes by Volkswagen employee representatives were common, as were gift certificates at expensive boutiques for wives…

(Continue reading on The New York Times)

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