Wire Card scandal: Lessons for Corporate Governance

Abstract

This article is a commentary on the Wirecard scandal. Wirecard AG (Wirecard) is a German processing and financial services company that was among the most valuable companies listed on the German Stock Exchange between 2010 and 2018. Between 2010 and 2018, Wirecard reported consistent revenue growth and profitability. However, Wirecard’s success story unravelled in late 2019 when the Financial Times started raising questions about its accounting practices. In 2020, it was revealed that Euros1.9 billion was missing from its balance sheet. Investigations that followed uncovered a massive accounting fraud that had lasted years and Wirecard eventually filed for bankruptcy. Wirecard’s executives were charged with fraud and market manipulation, and Wirecard’s auditors, credit-rating agencies, indexes and the German Stock Exchange regulator were criticised for failing to detect and prevent fraud. The aim of this article is therefore to highlight the governance difficulties that emanate from the emergence of Fintech companies in the financial sector. It begins by describing the Wirecard scandal, an examination of how internal and external corporate governance mechanisms failed to prevent the Wirecard scandal follows and culminates with stating the corporate governance lessons that can be learnt from this scandal.