The Bribery Scandal at Siemens Ag
1.
• In your opinion, is “bribing” unethical & illegal or just a cost of doing business? Discuss this in light of Siemens’ bribery scandal.
We believe that bribing is unethical because it takes away the fairness of a business transaction between bidders of a contract. Bribing also has a negative impact on competition because it allows for oligopolies and monopolies to emerge in an industry due to smaller competitors being unable to financially compete with the amount of the bribes. This in turn creates a barrier for entry for prospective companies and promotes the oligopoly or monopoly in place. The lack of competition affects consumer choice by reducing their options which then stifles innovation within the industry as there is no need to generate a competitive advantage to attain customers. The legality of bribing depends on the laws of the home country that the business is based from. For example, Siemens is a German based business and German law states that bribing officials of another country to win business contracts is illegal. So, under German law, Siemens was guilty of bribing an official when it bribed employees of the Italian company Enel to gain a contract as Enel was 68% owned by the Italian government. The counter-argument is that bribing is the cost of doing business. We disagree with this because the economic benefits gained from bribing are not outweighing the cost to a company’s reputation. As we see in this case, Siemens paid a 6 million euro bribe to secure a contract valued at 450 million euros which would seem like a cost of doing business for Andreas Kley and Horst Vigener but the legal and political cost almost triple the value of the contract in euros and a loss of reputation. These executives were fortunate to escape imprisonment for the illegal actions that were committed. A company must avoid bribing government officials to win business contracts however they can ask their own government for some type of aid in
• In your opinion, is “bribing” unethical & illegal or just a cost of doing business? Discuss this in light of Siemens’ bribery scandal.
We believe that bribing is unethical because it takes away the fairness of a business transaction between bidders of a contract. Bribing also has a negative impact on competition because it allows for oligopolies and monopolies to emerge in an industry due to smaller competitors being unable to financially compete with the amount of the bribes. This in turn creates a barrier for entry for prospective companies and promotes the oligopoly or monopoly in place. The lack of competition affects consumer choice by reducing their options which then stifles innovation within the industry as there is no need to generate a competitive advantage to attain customers. The legality of bribing depends on the laws of the home country that the business is based from. For example, Siemens is a German based business and German law states that bribing officials of another country to win business contracts is illegal. So, under German law, Siemens was guilty of bribing an official when it bribed employees of the Italian company Enel to gain a contract as Enel was 68% owned by the Italian government. The counter-argument is that bribing is the cost of doing business. We disagree with this because the economic benefits gained from bribing are not outweighing the cost to a company’s reputation. As we see in this case, Siemens paid a 6 million euro bribe to secure a contract valued at 450 million euros which would seem like a cost of doing business for Andreas Kley and Horst Vigener but the legal and political cost almost triple the value of the contract in euros and a loss of reputation. These executives were fortunate to escape imprisonment for the illegal actions that were committed. A company must avoid bribing government officials to win business contracts however they can ask their own government for some type of aid in
Cited: Helen Deresky, International Management: Managing Across Borders and Cultures, 7th ed. (New Jersey: Prentice Hall, 2011), 61-71. Facts and Details. “Foreign Companies & Foreign Investment in China”. Last modified April, 2012. http://factsanddetails.com/china.php?itemid=349&catid=9&subcatid=62