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Last Updated: Wednesday, 21 January, 2004, 07:47 GMT
Trial puts business culture in dock

By Ray Furlong
BBC correspondent in Dusseldorf

US dollars
The size of the "bonuses" shocked Germany
The Mannesmann embankment, a sweeping promenade by the side of the Rhine, still bears the name of Germany's former mobile phone empire.

But the company's former headquarters, centred on a thin grey tower block nearby, has long since been crested with the word "Vodafone" in bright red letters.

The British company's takeover of Mannesmann four years ago sent shock-waves through Germany's business and political establishment.

It had once seemed unthinkable that an icon of this country's economic success could fall victim to a hostile foreign bid.

Now, a courtroom epilogue is beginning.

Culture clash

Six former Mannesmann directors are facing charges of breach of trust concerning payments made to five of them worth almost 60m euros ($75.6m).

The payments were made as "bonuses" and compensation to the executives after they dropped their opposition to the takeover.

But what might appear at first sight a simple case of boardroom fat-cats being brought to book is, according to many observers, actually a clash of cultures.

Many Germans still think in terms of old Prussian values, like thriftiness. They still have to get accustomed to these amounts of money
Joachim Jahn
Journalist for Frankfurter Allgemeine Zeitung
"We have this fight between the German and the Anglo-American economic models," says Bernhard May from the German Economic Institute (DIW).

"We still have the model here in Germany that you're responsible for the whole company, including the people working there, while the American and maybe the British model is more that the CEO is responsible to the shareholders.

"Here you can see that selling Mannesmann took care of the shareholders while knowing that the workers would lose their jobs."

Bonus or bribe?

The men in the dock include some big names: Josef Ackermann, currently head of Deutsche Bank; Klaus Esser, the chief executive of Mannesmann at the time; and Klaus Zwickel, former head of the huge IG Metall trade union.

Josef Ackermann, former director of telecoms firm Mannesmann
Big names: the current head of the Deutsche Bank is in the dock
A key question for the court will be whether the men received inappropriately large bonuses, another area where cultural differences come into play.

Mr Esser's 30m euros are a German record, for example, but generally the amount of money paid was not outstanding by Anglo-American business standards.

"Many Germans still think in terms of old Prussian values, like thriftiness. They still have to get accustomed to these amounts of money," says Joachim Jahn, who is covering the case for the German daily the Frankfurter Allgemeine Zeitung.

The most important suspect didn't actually receive any of the bonuses. Mr Ackermann merely approved them.

'Market economy'

His lawyer, Eberhard Kempf, points out that the payments were also backed by a majority of shareholders.

"In the worst case scenario, if there's a conviction, this sends a signal to all potential investors in Germany - that the state prosecutors can have a say in managerial payment decisions," he says.

"This goes against my basic understanding of what a market economy is."

Lawyers for the prosecution declined to be interviewed for this article.

But two private lawyers from Stuttgart who originally instigated the case, Martin Sorg and Mark Binz, have argued in earlier remarks that the breach of trust law forbids an "improper use" of company funds - and that this had happened in this case.

Before presiding Judge Brigitte Koppenhoeffer decides, she is expected to sit through several months of complex testimony.

Her decision will affect not only the executives on trial - but also have a huge influence on future German business practice.

German bank chief to face trial
19 Sep 03  |  Business
Vodafone hits back at bonus claims
21 Aug 01  |  Business
Germany awaits Mannesmann trial
21 Jan 04  |  Business


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