Ethics and Business Corruption. Siemens - Essay Example

? Business Ethics Siemens was one of the biggest electronic manufacturing companies in the 90s and had a slogan ‘be inspired’ to help motivate the people and the consumers. However, a number of scandals have affected the company and this has resulted into the deterioration of the company’s financial situation and company’s image. Bribery and corruption plunged the company in 2008 and these incidences are reflective of the business theories learnt and earlier explained. The baring bank scandal occurred earlier than the Siemens bribery and corruption incidence and this resulted to the collapse of the bank. In this incident, Nick Lesson lost over $1.3 billion through engaging in speculative investments targeting future contracts while operating in the bank’s office in Singapore. The different business ethics theories will be evaluated with a reflection of these two scandals to evaluate to what extent the malpractices can be related to the theories. These include the theories of Utilitarianism, Kohlberg’s theory of moral development, Shareholder value theory VS stakeholder theory and egoism among other theories (Slater, 2008). The unethical behavior in the Siemens saga with the Greece government involved advanced levels of corruption and bribery affecting both the two parties. Siemens advanced bribes of over $100 million to the government official’s in order to be awarded the contracts in the short run and secure a chance to control the country’s electronic market. Virtues and ethical reasoning places a lot of consideration on a person’s individual character to chose the best way of performing a task in a way devoid of ethical issues. Utilitarian ethical theory compares the cost benefits ratio of a given management decision with the benefits that can be derived from such with little or no cost impacts (Matussek, 2008). This theory however does not comprehensively evaluate the situation within Siemens as it considers the gains of the decision. Any actions made by the management of the company thus affect the ethical values of the people and erodes the public confidence in it. The managers’ value according to this theory serves as model to other employees of the organization (Dietz and Nicole, 2012). The actions taken by a single individual can also be analysed using the utilitarianism theory to help weigh whether the consequences can be bad or good. Such an angle can be used to critically evaluate the events of baring bank and how the actions of Leeson led to the death and closure of one of London’s best merchant banks. The actions of Leeson can be considered as foreclosure as he preempted the value of contracts and invested in them hoping to raise more benefits from such an action (Mitchell, 2000). Leeson’s actions when considered in isolation can be shown as an example of utilitarian as foreclosure in this situation caused more damage and pain as compared to foreclosing. Foreclosing can however be considered as the ethical behavior of banks as they rely on this to lend money to customers and make gains from the refunds. The action of Leeson provided less social good to the business and the stakeholders and is thus considered as unethical based on utilitarian theory (Slater, 2008). The main source of unethical allegations that were levied against Siemens stemmed from lack of proper knowledge of international ethical code of conduct. Most of these claims involved Russia and Siemens German, reflecting the different social backgrounds of the two countries as highlighted in the utilitarianism theory. Bribery is considered highly unethical because it does not provide equal opportunities for other players in the industry. This applies to the German culture, a situation which cannot be reflected in Russia (Becker, 2009). This bribery case was handled by the securities and exchange commission of the United States in 2007 due to a scheme in which a $1 billion government contract in Argentina was cancelled due to the cases of bribery. This case was also blamed on the porous Argentinean environment that allowed the politicians to interfere with the contract process. Winning this contract will have improved the value of the stakeholders claim on the company due to the profits and market value they would have gained from it. For Siemens employees, winning this contract would have improved the financial status of the business thus improving their claim and remuneration. This however did not materialize due to the unethical behaviour of the management, a situation that significantly affected the business public image (Mar quart, 2008). On the theory of ethical leadership, it is proper to argue that the management did not demonstrate ethical behaviour in their actions in line with the theory of ethical leadership. As people that hold senior management and decision making positions, the management had the powers to revert this situation and redeem the image of the company, a thing they significantly failed to do resulting in the loses. Action is needed to shape ethical behaviour in an organization, but this failed terribly to come from the part of the leaders of Siemens and this culminated into this situation (Matisse, 2008). Baring bank was closed in 1995 when issues of unethical behaviours became rampant and the bank was subjected to a judicial review by the banking federation. When nick Lesson joined the baring bank, the bank was on a profitable trend and had significant in the country’s banking system. However, in 1994, the business tide changed and the business fortunes nosedived, a situation that forced lesson to request for more allocations to help salvage the bank situation. He tried to remove his personality from the scandal that had plunged the dank, a situation that is ethically incorrect. This behaviour is described under the leadership ethics theory in which an n individual under a position of influence like lesson had the power to change the situation but he failed. Thus, it is conclusive to say that the actions of leeson or his inactions contributed to this situation and thus affected the business image of the company (Millman, 2002). Personal reflection and recommendation From the situation above, I can comfortably argue that the lack of basic understanding of the various business ethics principles can have catastrophic results to both the business and the various stakeholders. The Baring bank and Siemens Inc stumbled from lack of proper leadership ethics from the management and the lack of proper culture the breed integrity. As a multinational that has stakes in major economies in the world, the Siemens leadership should have understood the basics of practising in an ethical environment that offers equal opportunities to all without corrupt under dealings. To remedy this situation, the two companies should lay a proper foundation based on leadership ethics and an understanding of the shareholder v. Stakeholder theory and how these theories affect a business (Lynn, 2004). Business ethics is an area that has formed the basis for a number of research works and this has resulted into the development of different theories to explain the different business misbehaviours. All scandals that befell both Siemens and baring inks fall under the different business ethics theories. The failure of the baring bank and Siemens multinational are thus attributed to the lack of leadership ethics and the inability of the two businesses to take into account the interest of the stakeholders in their actions as stated in the stakeholder theory. The cultural and social setup of the different businesses can also be attributed to this failure as it had the grounds for the ethical misconducts of the businesses (Marquart, 2008). As a company that has lost public confidence and trust, Siemens should adopt a structural overhaul of its management structure, leadership structure and culture to ensure that ethical behaviour is integrated in their actions. As compared to the BBC phone scandal, this response should also involve adoption of a good corporate social responsibility approach aimed at winning the trust of the public and the stakeholders. The company should thus put in place a system that will ensure the prevention and detection of any level of unethical practise and misconduct that may taint the image of the both organisation and to serve as a benchmark to be emulated by other companies. References Becker, G. (2009). Moral leadership in business. Journal of international business ethics, 2, 231-231. Dietz, G and Nicole, N. (2012). The recovery of trust: Case studies of organisational failures and trust repair. London: the institute of business. Lynn, D. (2004). Ethics, governance and risk management: lesson from group newspaper and baring bank. Journal of business ethics, 53, 257-266. Marquart, M. (2008). Reinhard Siekaczek, former Siemens AG manager, testifies at corruption trial: bribery and slush funds. The Huffington Post. Retrieved from http://www.huffingtonpost.com Matussek, K. (2008). Ex-Siemens manager is convicted at corruption trial. Bloomberg. Retrieved from http://www.bloomberg.com/ Millman, G. J. (2002). New scandals, old lessons: financial ethics after Enron. Financial Executive. 18 (5), Journal of International Business Ethics, 2, 16-19. Mitchell, C (2000). International Business Cultures. Petaluma: World Trade Press. A Case Study of Siemens’ Violation of Business Ethics in Argentine Based On Stakeholder Theory Slater, D. (2008). Siemens bribery scandal getting rooted out from the inside. The wall street journal. Retrieved from http://blogs.wsj.com/law/2008/03/05/siemens-bribery-scandal-getting-rooted-out-from-the-inside/ Zhu, W. (2012). A case study of Siemens violation of business ethics in Argentina based on stakeholder theory, global journal of management, 12, 523-531. Read More