The Bribery Scandal at Siemens AG - Case Study Example

? International Management This paper discusses the impacts of bribing that was discovered at Siemens AG between 2006/2007. In essence, company employees bribed foreign officials to secure contracts, over and above, bribing labor representatives to gain support on their policies. In addition, it expounds on the illegal and unethical issues that is associated with the bribery scandal. Introduction Siemens AG is the largest multinational engineering and electronics conglomerate that is based in the Germany. The company has fundamental activities in the field of energy, industry, transportation and health care. In essence, it offers a wide variety of electrical engineering and electronic –related products and services. However, between 2006 and 2007 Siemens AG was involved in numerous scandals that entailed the company’s employees bribing foreign officials to as they would gain contracts and creates slush funds. Moreover, Siemens AG was alleged to have bribed labour representatives in relation to the supervisory board for the specific reason of gaining support for their policies. This led to a conduct of a raid by the German authorities in the main office and Siemens AG in various countries like the United States of America, Greece, Italy and Switzerland for likely misconduct (Dierks, 2006). Bribery as Unethical and Illegal Basically, the bribery scandal at Siemens critically demonstrates how employees were involved with unethical behaviours, which led to an irrevocable damage to the company’s reputation and the ultimate profitability and success (Marsh, 2007). Founded in 1847, the company made their listing in the New York Stock Exchange in 2001, where they were rated as the most efficient and profitable company. Never the less, the business world fell in 2006 when around 30 Siemens’ offices and private homes were raided based on the notion of bribery, fund embezzlement, and evasion of taxes, a raid that led to the uncover of what is said to be the world’s largest corporate bribery scandals. It was evident that Siemens had involved itself in bribery and other related business malpractices. In essence, three main issues focus on failure of employees to hold fast on the ethical standards in relation to personal communication and cross cultural business relationships. First, the lack of cultural sensitivity, over and above, unfamiliar global practises greatly contributed to an abundant environment in which exploitation and manipulation of other companies was witnessed. Second, short time focus on making the deal through contract negotiation, and special bribes pulled out poor decision process from the managers of the company. In addition, there was lack of accountability, compliance, and transparency by management, a situation that permitted Siemens’ employees to involve themselves in fraudulent behaviour (Sims, 2007). Ethical Contemplation According to utilitarian approach on ethical matters actions are right once they achieve maximum good for maximum number of people. Although not all people will be favoured by the decision made, the overall is that everyone will be in a better position as compared to the previous situation. Needless to mention, that the act of bribery at the time seemed to be a cost effective issue as the company was able to secure some of the important contracts through the use of bribery that acted as the fraction of the monetary funds that the company expected in relation to the whole deal. Of important to note is that, there was dire need to keep the company in business and the use of bribery facilitated it survival, over and above been able to continue with their operations and provide of the society in term of social responsibility, employment opportunities, as well as, paying taxes (Thiel, 2007). Conversely, Siemens AG bribery scandal has a permanent impact on the owners and or shareholders and the company itself which may not be easily realised. In essence, the reputation and credibility of the company would be compromised a situation that would be hard to reverse. Besides, the contribution of the shareholders was affected respectively, and it was evidently clear that it was difficult for Siemens to resist demands of bribery and other related malpractices, which was pushed further by the increased interference from bribery takers. Of most important was the bribery consequence that entailed Siemen’s dependence on the bribery, a situation that resulted to undermining the advancement of lasting advantages in competition. The economy is alleged to have significantly reduced. The bribery scandal generated a bad image in German society, which is alleged to have lost many competitive contractors companies in general. Simply, the act of corruption through bribery caused destruction in multiple ways and has more shortcoming than gains (Thiel, 2007). In light of this, bribery is no doubt unethical as it robs away the fairness that is crucial in ant business transactions between parties in a contract. It also had negative impact on competition as it permits oligopolies and monopolies to emerge in the business industry. On the other hand, the legality of bribing especially in Germany states that bribing official for m other countries contributes to illegality. Hence, Siemens was guilty when it bribed employees of the Italian company to gain the alleged contract. Options to gain contracts without bribing Apparently, large companies such as Siemens are aware of the reputations that are associated with bribery. It is only wise that they contemplate on the importance of having an anti –bribery programme in their given companies. Mainly, a reputation of a business that trades ethically widens international chances of supply and better access to international markets. Having a good record of integrity give companies higher chance of acquiring huge contracts from government oriented business. The presence of a clear anti-bribery programme in place ensures those companies and their associates are secured from legal penalties, withdrawal of licenses, and or black listing (Thiel, 2007). Moreover, companies with ethical standards are best to work for as they are said to encourage cordial working relationships and morale. The companies even become more attractive to financial organization over and above being able to have enormous turn over for the company and the world of business. Companies should emphasize in business principles that strictly counter bribery. The Board’s decision with regard to Kleinfeld fate as the CEO The board’s decision in not extending the contract for Kleinfeld was arguably not best at the time. Essentially, Kleinfeld is one of the Chief Executive Officers (C.E.O) who was known to be instrumental in turning Siemens around and bringing it back into profit after the company had drifted into no profit in the previous two years. He had been able to recapture the glory through the building of credibility with the capital markets. Kleinfeld had risen from an advertising manager of the Siemens’ company to the CEO through his determination in bring back the company to the market in reference to the impact in the business world (Sims, 2007). Apparently, the decision of the board meant that those who were involved in the bribery had to leave the company indefinitely. Of importance to note is that Kleinfeld was not directly involved in the scandal, a situation that clearly signified that he did not participate in the alleged crime. None the less, what was not clear is how possible it was for employees and the financial department to cash in huge amount of money to the foreign company under the watch of an independent auditor (KPMG) and Kleinfeld as one of the top managers. This situation has been argues as one where the ignorance of the top management seemed doubtful. All things considered, the Supervisory board mandated in sorting the bribery scandal was hell bent giving out a signal towards change in leadership to break away from the past (Thiel, 2007). The Possible Impacts of Kleinfeld’s departure from Siemens AG The departure of Kleinfeld for the company will no doubt be detrimental especially now that improvement has continuously been noted for the past two years. For instance, when he inherited the company, employees had a net income of less than a fifth of General Electric Co. Additionally, mobile -phone units were unprofitable and losing ground to their rivals. Half of the main division also lagged behind in relation to targets, improvement that grew in a span of two years. To him, the company would only be able to survive, as soon as, it was able to clear all the bribery allegations and would not further tolerate breaching of its business conduct rules (Sims, 2007). In contrast, the proposers’ that the contract for Kleinfeld should not be extended thought that his departure would bring in a new breed of people to restore the image of the company after the bribery probe more so the Chief Executive Officer (C.E.O) who is perceives to carries the image of the company. Eventually, the individual would be able to handle the company with the inclusion of the scandal in a more professional manner as compared to Kleinfeld. However, the truth was that the incoming C.E.O would meet the same challenges witnessed by his predecessor (Morgan, 2007). Siemens Actual Fate It is argued that bribery is a necessary evil for doing business. Most countries all over the world are alleged to apply it in order to expand more in the business world especially now that competition grows stiffer by the minute. This automatically calls for short time advantages and is destructive. In light of this, it is more evident that Siemens was at fault, and the unfortunate act of being caught followed suit. As one of the largest companies in Germany, it was shame that it emerged in the list if those caught in bribing. In view of the fact that, the company made a decision to bribe their ways into what they thought as more profitable business ventures, they were rather conscious of the penalty of being caught. In the end, Siemens AG acted illegally by making a choice of paying no attention to its corporate social responsibility, over and above, abiding by the rules of Germany which dictates that bribery is illegal. Hence, Siemens AG made a fault by taking a risk which eventually backfired (Dierks, 2006). Conclusion Siemens AG is the largest multinational engineering and electronics conglomerate that is based in the Germany. However, between 2006 and 2007 Siemens AG was involved in numerous scandals that entailed the company’s employees bribing foreign officials to as they would gain contracts and creates slush funds. Moreover, the company was accused of bribing labor representatives on the supervisory board for the specific reason of gaining support for their policies. Although not all people will be favoured by the decision made, the overall is that everyone will be in a better position as compared to the previous situation. Never the less, it is only wise that they contemplate on the importance of having an anti –bribery programme in their given companies. Mainly, a reputation of a business that trades ethically widens international chances of supply and better access to international markets. References: Dierks, B. (2006).“Corruption Probe Reaches Ever Higher at Siemens. Retrived on 26th Mar, 2013 from: http://business.guardian.co.uk. Marsh, S. (2007). Sleazy Business. Retrived on 26th Mar, 2013 from: http//www.timesonline.co.uk. Morgan, S. (2007). Siemens’ New CEO Could Face Uphill Struggle. Retrived on 26th Mar, 2013 from: http//www.industryweek.com. Sims, G. (2007). “Siemens Scandal Threatens to Ensnare Leadership,” Retrived on 26th Mar, 2013 from: http//www.iht.com. Thiel, S. (2007).Siemens Investors Grill Management on Bribery Charges,” Retrived on 26th Mar, 2013 from: http//www.iht.com. Read More