Management Problems in Siemens Company - Term Paper Example

The Bribery Scandal at Siemens AG Question In 2006, in raids to offices and private homes, police realized that Siemens AG executives had involved themselves in bribery and embezzlement of funds through crooked contracts transactions. The investigation done about the case discovered that Siemens AG had made payment of €420 million over a period of seven years to an external consultant. This issue provoked a probe to different company executives, and police took some employees into custody so that they could give information about the scandals that had taken place since 1999. In relation to the issues, some people analyzed different things that they could use as ways of justification of the events of the scandals and assumed that it was not a serious issue. For instance, Siemens AG officials did not accept that they had involved themselves in a case of bribery by saying that the money went to the payment of an external consultant. Otherwise, the court determined the case that the money coincided with procurement of some equipment from various international markets during the period. One of the most notable cases in the contract scandals involved €6 million, which some Siemens AG management had paid to some foreign officials involved in a natural gas turbine contract, which Siemens AG wanted to win. Siemens AG had involved itself in several other scandals in Germany and in other countries between 2005 and 2006, and some other cases were under investigations and not yet clarified. In defense, the convicted employees argued that the action was not a violation of any law because it never was for a personal gain, and said that it was a plan to secure a productive deal the company needed, and the money was part of the bid. The defense the Siemens employees raised was a misinterpretation of the law because they based their arguments on the issue that, it is the custom of multinational companies, to establish their businesses on bribery and corruption, to win international contracts. This was a deviation from the ethical laws which requires companies to exercise what is right in coming up with business deals that are related to the work they are doing. According to business ethics for multinational companies, an action is moral if doing it does not contravene the culture or the wellbeing of the host country. Although there are differences in culture, in different places in the world, a wrong act remains so regardless of the place of origin of the doer and the people who do it and the perceived benefits to the trading company (Boatright 335). In some cases, differences in culture have influenced the conduct of the people in the business relations because the individuals in the context depend on the perspective of the residents of country in which they trade. Many companies practice double standards which make them neglect some ethical standards they bear from their home countries and in conforming to the standards of the foreign countries, do illegal activities (Boatright 335). This could be the reason why Siemens AG involved itself in different scandals in various countries in order to secure some opportunities in the market, and ensure their competitiveness. Question 2 In failing to extend the term of service of Klaus Kleinfeld, who was the Chief Executive officer (CEO) of Siemens AG, the supervisory board did not do the right thing. The board generalized the issues of the scandals without a clear focus to the criminals in the management in an attempt to clean up the name of the company in the world market. Despite the fact that the supervisory board of Siemens AG did not get anything to implicate directly on Kleinfeld in any of the scandals; he was an active person in establishing the company as a profitable business (Krishna and Purkayastha 11). The way of thinking of the supervisory board members to clean up the top management without considering the personal contribution of those individuals was a bad generalization. This is because the integrity of the whole group does not imply the same to all the individuals working in the organization and neither is the opposite true. The step taken to lay off Kleinfeld is not justifiable under any situation because the company ought to have dealt with the people who were involved in tarnishing its name but not the people who were in leadership. The responsibilities of Kleinfeld were not in procurement of contracts but establishing strategies that would increase the competitive advantage of Siemens AG in the market and to ensure that it made profit (Krishna and Purkayastha 8). In doing as per his responsibilities, the company thrived and maintained its profitability regardless of the scandals, which made it lose a substantial amount to embezzlement and fraud. In quoting the Co-determination law or Mitbestimmung in Germany, critic of replacement of Kleinfeld felt that each company ought to have a two-tier system of management, with the supervisory and the management board, with the former overseeing the latter (Krishna and Purkayastha 13). This means that if the supervisory board did not find anything with which they would condemn Kleinfeld earlier before the scandals, then, it was not there. This means that the decision to lay him off was just inconsiderate and not right because it overlooked very many things that were necessary in the life of the company. Kleinfeld was a man of virtue and was committed to the positive contribution of the company in regard to promoting the wellbeing of the company. Kleinfeld was a hardworking man as could be seen in the sentiments of the critics of his replacement, who said that he had done many things to establish Siemens AG in profitability (Krishna and Purkayastha 8). On the other hand, the supervisory board did not link him, either directly or indirectly with any of the numerous scandals that affected the company. According to the critics of the replacement of Kleinfeld, he had stood out in demonstrating the perfect creativity in performance of Siemens AG. For example, he out stood out in his work and people associated him with the name Jack Welch, a famous business executive and CEO of GE Company in America in whose tenure the company’s value rose to 4000%. This indicates that Kleinfeld was not just a CEO but was a remarkably innovative person and one who could bring a company to great profitability. Question 3 According to the German Co-determination law or Mitbestimmung, a two-tier management system should oversee the business of any registered company, which means that the definition of responsibilities of different individuals in the company would be easy. Mitbestimmung clarifies that a registered company should have the supervisory and the management board, which should commit themselves to the organization of their company. This governance system is critical if implemented because it leads to regulation of the strategies of the company so that they can refine them for exceptional success to come. According to the Mitbestmmung, all individuals in the labor department of the company should be represented in the supervisory board and contribute to the different activities of the company in which they are working. This gives them the right to suggest things and express their views in different situations that involve the organization of the company for its benefits. According to the consequentialist ethical theory, this action to involve the different people in management of the company would be right in that it will influence the behavior and conduct of employees. In another angle, involving the deontology ethical theory will be a perspective to look at the conduct of the different individual in an organization in which, the purpose they will serve will be termed ethical if it meets the moral requirement. This means different people in the various boards in the organization will have an obligation to produce benefit for the organization in their oversight activities that ensure proper conduct of each other. In Siemens AG, the problem arose when the supervisory board failed to implement their duties of overseeing the management board so that they could prevent them from failing and engaging in bribery. In the context of Siemens AG, the failure of the supervisory board implies an unethical act in which, people failed to serve their duty which would produce a common good to the reputation of the company and their own. In relation to the consequentialist theory of ethics, the supervisory board members ought to have known that their participation in overseeing the management board would have had positive impacts on the company. In this respect, failure to do their duty resulted to negative consequences to the company and therefore, the supervisory board of the company was unethical because it resulted to failure of the company. On the other hand, failure of the supervisory board to do their work; is from the perspective of the deontological ethical theory, unethical because the members failed to do their moral duty. As a recommendation to rebuilding, improving and sustaining the reputation Siemens AG, they should set all the departments working to help them implement their responsibilities. The company should formulate and implement policies on doing the work that will help to define the various duties each worker will have towards the company. On the other hand, ethical policies ought to be in place so that employees will take their responsibilities without failure, and this will enable them to participate in the business. Works Cited Boatright, John. Ethics and the Conduct of Business: International Edition. 7th ed. [S.l.]: Pearson Education, 2012. Print. Krishna, Bharath and Purkayastha, Debapratim. The bribery Scandal at Siemens AG. ICMR, 2010, print. Read More