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Business Ethics

Will Hoeness verdict tarnish Bayern's investors?

The resignation of Uli Hoeness from his post as Bayern Munich president before going to jail over tax evasion has had repercussions in business circles. Top managers have been under fire for their approach to the case.

Be it Audi, Adidas or Allianz - it's top German companies standing behind German Bundesliga heavyweight Bayern Munich.

The aforementioned carmaker, sportswear giant and insurer each hold an 8 percent stake in the soccer club, with three quarters of shares being possessed by the club itself and managed through a stock corporation whose chief used to be Uli Hoeness until he stepped down. Bayern Munich's main sponsors are Deutsche Telekom, Hypovereinsbank and Volkswagen.

After Hoeness was convicted of evading more than 27 million euros ($37.4 million) in taxes, prompting his resignation as FCB president, the question is to what extent the image of the club's closest partners has also been tarnished, with compliance being the buzzword, notably the public adherence to a set of rules for the good of the corporate world.

Resolute decisions in demand

Adidas CEO Herbert Hainer 
Photo: picture alliance / Robert Schlesinger

Hainer on the road to becoming FCB supervisory board chief

The managers of the top companies in question will have to think about a past-Hoeness reorientation.

"By not just offering his resignation, but actually enforcing his resignation, Uli Hoeness has shown top managers what decisive action is all about - managers who've cowardly kept an extremely low profile in the matter to date," said Manuel Theisen, a professor for business economics at the Ludwig Maximilian University of Munich.

Adding that he respected the decision, Theisen said: "Hoeness has shown all the fine people in the corridors of DAX-listed companies how to act fast and do the right thing without delay. Now those people look crestfallen on the supervisory board and have to find a way of getting their act together."

Top managers need to act

The names appearing on Bayern Munich's supervisory board read like a Who's Who of the German economy. Herbert Hainer, chief of Adidas, who will take over as acting FCB president, Audi CEO Rupert Stadler, Telekom chief Timotheus Höttges and VW Chief Executive Martin Winterkorn.

Adidas CEO new Bayern boss

A representative of insurer Allianz, which obtained a package of shares in February, will be elected to the board in 2015.

Company leaders had long failed to comment on the tax evasion trial against Hoeness. In January, when Hoeness turned himself in to authorities, the supervisory board had thrown its weight behind him, saying the man's resignation was out of the question.

Only a couple of days ago, Hypovereinsbank chief Theodor Weimar attacked journalists for what he called their sensationalizing of the courtroom reporting.

"I don't think for a second the relationship between Bayern Munich and us will in any way be harmed by the Hoeness trial," he said.

Hypovereinsbank has cooperated with the FCB for a decade, offering among other things debit and credit cards specifically for the club's fans.

Between fealty and a damaged image

Uli Hoeness surrounded by awards
Photo: Marc Müller/dpa

A picture from better times when Hoeness was still happy guarding awards

The failure to react in time was a big mistake, Theisen said. "Companies have become a laughing-stock with their compliance guidelines." He said managers had not just delayed a decision against Hoeness, but they never made up their minds at all, Theisen said.

But they can't go on keeping such a low profile now, he argued, following Hoeness' resignation as a consequence of his tax scandal.

Companies could have avoided having their names being mentioned in the same breath with that of a tax evader, Theisen said, but they just didn't distance themselves at all.

They may have to live with their companies being associated with Hoeness and tax evasion for quite some time to come, Theisen said, adding the result would be a serious dent in their image, albeit one that would not be easy to gauge in euros and cents.

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