Siemens Case

Topics: Klaus Kleinfeld, Siemens, Political corruption Pages: 7 (2520 words) Published: November 17, 2013

The Bribery Scandal at Siemens AG
Case Number One

i.Introduction:
Siemens AG is one of the world’s largest conglomerates; it is Europe’s largest electronics and engineering company. With that said the extent of Siemens AG network flows from one end of the world all the way to the other. It has businesses in almost 190 countries and employs over 360,000 people throughout these countries. After going through reconstruction several times over its one hundred and fifty plus year history, Siemens AG had seven different business areas before 2008; those areas included Information and Communication, Automation and Control, Power, Transportation, Medical Solutions, Lighting, and Financing and Real Estate. Several of these business areas have sub-areas as well. Being such a large conglomerate has its perks of course, but it does have its disadvantages as well. Its sheer size leaves Siemens AG vulnerable in the sense that the top management cannot possibly control every part of every business that is spread out all over the world. The different countries that Siemens AG has business dealings in all have different laws and codes about what companies can do and what they cannot. Although most countries have “outlawed” bribery, it still remains prevalent because enforcing it is much more difficult to do in practice than in theory. Some government officials in various countries do not care for the anti-bribery laws and insist on receiving bribes from potential companies that want to win contracts. This completely undermines the laws on the books, but until someone gets caught, the wrongs committed go unpunished. A couple million euros here and a couple million euros there does not seem like much when the contracts that the companies are winning are worth billions of dollars. Siemens AG was not immune to the prevalent bribery problem that faces nearly every multinational company. Until 2006, the general public had no idea about Siemen AG’s involvement in bribery and fraud. The conglomerate was involved in shady deals and all sorts of different bribery schemes that came to light in 2006. The fines that Siemens AG agreed to pay totaled to over one billion euros, which was in addition to the billions of euros that it had to pay in taxes and late interest charges. Siemens AG was involved in several scandals, including: slush funds to win contracts abroad, bribing employee representatives, and bribing foreign officials. The German government lifted the veil of secrecy from Siemens AG, and all of a sudden, the world knew what was happening behind closed doors.

ii.Problem Definition:
Between 1999 and 2006, Siemens AG made illegal payments to different government officials and employee representatives to the tune of around 420 million euros. Not only did this scandal damage Siemens AG’s reputation, but it also affected their financial statements due to the back taxes and fines that it had to pay. Despite the fact that Siemens AG acknowledged the fact that its employees were involved in fraud, it was still the company as a whole that would take the hit. In light of this situation, a former board executive, Thomas Ganswindt, was arrested as well because he was aware of the questionable payments. Payments were found to be made to secure contracts in the fixed line telecommunications business in different countries. Along with the payments to secure contracts, bribes were paid to officials in Italy, Puerto Rico, Greece, the U.S, and various other countries. Moreover, in 2007, German officials raided Siemens AG offices based on allegations that company officers were bribing employee representatives of the AUB labor union in order to win support for their policies. This allegation was brought on by the dominant labor union IG Metall after several members of the union began noticing how Siemens showed favoritism towards AUB and even suspected Siemens AG of financing AUB. Following the labor union bribery scandal,...

References: Deresky, Helen. International Management Managing Across Borders and Cultures. 7th ed. Upper Sadle River: Pearson, 2011. Print.
Schubert, Siri and T. Christian Miller. “At Siemens, Bribery Was Just a Line Item.” The New York Times. New York Times Company, 20 Dec. 2008. Web.
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