Siemens Ag

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Executive Summary

The report will analyze the case study discussing the bribery scandal at Siemens AG. The case study raised the question of accountability of senior managers to the rampant corruption occurring in global divisions. Siemens AG is a German based company with executive offices in Munich. Siemens builds locomotives, traffic control systems and infrastructure. The company was brought up on charges of violation to the FCPA as a result of bribes of government officials. Outlining the corporate culture in Germany and how it led to wide-spread corruption in their business practice. The document will also provide a recommendation of how I would have conducted business as a manager of the foreign subsidiary. Introduction

The case “Are Top Managers Responsible When Corruption is Afoot?” discusses the degree of liability that senior managers have in corruption activities at a German company named Siemens Aktiengesellschaft. The debate presents two sides of the argument, one stating that culture of the company and senior managers are at fault and the other stating that senior managers cannot be held accountable for divisional accounting activities. The case study will address key questions and provide a thorough analysis of the each item. Finally a recommendation would be offered on how to reconcile local expectations of questionable payments with the United States Foreign Corrupt Practices Act (FCPA) with a recommendation of what I suggest Reinhardt Siekaczek should have done to explain the situation. Main Individuals and Situational Factors

The arguments for and against provide details about the cultural climate and key individuals that could be held responsible for the state of the conditions at Siemens. Prior to a recent reorganization, “Siemens operated through a complex array of business groups and regional companies” (Scarboro, Muoio, Price, Hansberry, & Dodge, 2008, p. 4). Prior to 1999, German Law did not prohibit foreign bribery and allowed tax deductions as allowances for the cost of doing business (Scarboro, Muoio, Price, Hansberry, & Dodge, 2008, p. 5). Prior to being listed on the NYSE, foreign bribery was categorized as a normal business activity. Special accounting practices were added to accomplish bribery payments such as cash and off-books accounts. As stated, this activity prior to 1999 was normal business activity. Senior managers were well aware and actively participated. The cultural climate encouraged these transactions to increase the chances of winning important bids. With the listing on the NYSE on March 12th 2001, managers and directors had very little control over changing this cultural climate that had become so ingrained in the normal business practices. Siemens could not honor the strict regulations that were mandated by the U.S. regulatory and anti-bribery requirements. Even when notified about off-book accounts, the board of directors (the Vorstand) failed to address violations and frequently presented road blocks to ridding the company of bribery (Scarboro, Muoio, Price, Hansberry, & Dodge, 2008, p. 7). The culture of the company and its managers are at fault for the illicit activities of the 2000’s. The practice of conducting business through strategically executed bribes was too ingrained into the company. The action was taught from one generation of managers to the next and without the proper internal controls it became an accepted practice. As a managing partner in the firm, I would have done the following to eliminate practices that violated regulatory and ethical guidelines: •Increased the authority of the accounting team to be able to thoroughly examine each transaction for legitimacy. •Create an internal audit division that would reiterate and enforce any regulatory rules that needed to be followed. •Establish management training classes to reteach good business ethics. •Strictly enforce policy with a zero tolerance clause to all employees. Without...
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