Siemens Ethical Problem

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ETHICS:

THE BRIBERY SCANDAL IN SIEMENS (2006)

In November 2006, Siemens company the Germany’s industrial giant had been involved in the largest bribery scandal that Germany had never experienced before. Managers used to secure abroad contracts by paying bribes to their clients. Is this an unethical behaviour or just a way to make profits for their company as they pretend that they didn’t make any personal gain? Is this behaviour could be considered as a sort of lobbying? What are the lessons Siemens had learned from this scandal and how did they save their reputation? First, corruption in Siemens company was a well-organized practice. Mister Reinhard Herbert Siekaczek, who was a top trade manager in Siemens testified at the Public Prosecutor’s Office of Munich and at the Crime Prosecution Service. He explained by giving some proofs of how the corruption was organized in Siemens. He told that the prior CEO of Siemens Hella Mr Mauridis received “secret payments” that were used to pay the bribes when it was needed. They used “post-it” in order to erase any proof on these bribes. They also used specific codes: “Placid” designed Greece. Besides, Mr Siekaczek claimed that between 2002 and 2006 budget for annual bribery represented almost $ 50 million. There was a slush fund used by top managers when they needed to corrupt government officials worldwide. Hence, bribery at Siemens had become a part of their business model and a normal practice to “win” some contracts. Prior 1999, bribes were deductible as business expenses under the German tax code but in February 1999, Germany signed a new law: The International Convention that forbad bribery of foreign officials. But we clearly see that even after 1999, corruption abroad had continued, they just tried to hide it and to better disguise the payments to foreign officials. Bribes were considered as a “useful money” so managers took some precautions by using specific codes and destroying any proof but they didn’t obey the law. Bribery was deeply institutionalized as Siemens used to hire an outside local consultant to help them to “win” contracts and obviously this consultant was receiving some kickbacks. Moreover, globalization facilitated all these well-organized practices, as it was a complete decentralized business. The issue here is that if we compare Siemens behaviour in Germany and abroad, we notice that they really differ one from another. Thus, is the role of a multinational company abroad only to make profits?

The Siemens scandal has a worldwide dimension as it involved 160 countries all over the world. Moreover, the bribes were paid especially abroad in order to win contracts based on fake agreements in countries such as Greece, Kuwait and Nigeria. In Argentina, Siemens paid $40 million in bribes to win a $1 billion contract to produce national identity cards. In Israel, the company provided $20 million to senior government officials to build power plants. In Venezuela, it was $16 million for urban rail lines. In China, the company paid $14 million for medical equipment. The biggest bribes was given in Greece and it represented € 10 million. Managers claimed that in these countries they had no choice to act differently because that was how they could sign contracts with their clients. In my opinion this is not a fair practice toward Siemens’ competitors as it’s an illegal competitive advantage especially since February 1999 when Germany signed the international convention banning bribery of foreign officials. So, even if during the trial, managers claimed that it was only about business and that the practice was common, I think that because of this, Siemens’s competitors suffered from this situation. In fact, contracts that were signed with Siemens thanks to corruption penalized other competitors as they didn’t benefit from these contracts. Even if it was a current behaviour in some developing countries, such a huge company should not encourage it. On the...
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