Case One: The Bribery Scandal at Siemens AG
Organization and Industry Overview:
The case, “The Bribery Scandal at Siemens AG,” underscores how employee involvement with unethical behavior can cause irrevocable damage to a company’s reputation and ultimately their profitability and success. Werner von Siemens and Johann Georg Halske founded Siemens AG in 1847 in Munich, Germany as a manufacturer of telegraphic systems. Over the next 150+ years, the company grew rapidly expanding operations in information and communication, automation and control, power, transportation, medical, and lighting while expanding their global network in over 190 countries. When Siemens made their listing on the New York Stock Exchange in 2001, they were considered an efficient and profitable company. However, the business world was rocked in the fall of 2006 when approximately 30 Siemen’s offices and private homes were raided on grounds of suspicion of bribery, embezzlement of company funds, and tax evasion. This raid would eventually uncover one of the world’s largest corporate bribery scandals.
The key issues surrounding this case focus on the failure of employees to adhere to a set of ethical standards in personal communications and cross-cultural business relationships. The three major issues, outlined below, are inextricably linked to ethical leadership, and preventative measures for each issue could have potentially saved the company from allegations and saved millions of dollars. The key issues are: • A failure to be culturally sensitive and aware of global business practices created a fertile environment for exploitation and manipulation of other companies. • The short-term focus on making the deal through contract negotiations and special bribes led to poor decision-making by company managers. • A lack of accountability, compliance, and transparency by management allowed Sieman’s employees to engage in fraudulent behavior.
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