The Bribery Scandal At Siemens AG
The Bribery Scandal At Siemens AG
Siemens, originated by Werner von Siemens and Johann Georg Halske in 1847, now is one of the top companies which major business area is electrical engineering, and has millions of employees and operations in around 190 countries in the whole world. However, in 2007, two former managers of Siemens AG were proved to be guilty by a German court.
The court accused them for giving money from company to employees of Enel Spa and asking for contracts in return. Besides that, earlier in 2006, Siemens was convicted for bribing AUB which is a small union in order to receive the support from its policies. Numbers of the bribery scandals appeared in such a short pried of time, which led to a huge damage to the reputation of Siemens. Till December of 2008, Siemens AG has already agreed to pay more than €1 billion fine.
Despite the fact that bribery is illegal in all countries, bribery starts to become a universal and morally acceptable phenomenon in recent years, and sometimes it is regarded as the only way to solving some problems. For example, companies in Mexico have to pay the postman monthly to prevent their mail missing. Besides that, in some developed countries, bribery cannot be avoided as well.
For instance, several officials of the international Olympic Committee were fired because of accepting bribery for helping Salt Lake City to host the Winter Olympics in 2002. In this report, bribery and the case which is about the bribery scandal at Siemens AG will be discussed. It is certain that bribery is prohibited in law all over the world, whereas whether it is ethical or not depends on individuals.
Although numbers of companies believed that bribery is only part of cost of doing business and it enables businessmen to get their contracts easier, bribery is illegal, unethical and cannot be considered as a cost of doing business. As author mentioned in our book, bribery fails three questions of ethical corporate actions. Firstly, bribery is an illegal act in all countries.
Except for those local laws countries have, international codes of conduct for MNEs require multi-national enterprises that they should never pay bribes to any public authorities. For instance, Siemens in a company in German, so according to the local law of Germany, bribing is illegal.
As a result, Siemens has to be punished. Secondly, bribery benefits the company in a long term. Take the scandals of Siemens happened in 2007 as an example, two managers who used to work in Siemens admitted that they had paid €6 million to Enel which is an energy company in Italy , and they can get a gas turbine contrast valued at €450 million in return. In addition to the direct profit, Kley points out that the contrast also helps Siemens enter the Italian market during the court proceedings.
Thirdly, any act of bribery cannot be told to the public. According to what Noonan said,” in no country do bribe takers speak publicly of their bribes, nor do bribe givers announce the bribes they pay as bribery is shameful.” To conclude, for these three reasons, bribery cannot be regarded as a cost of doing business, and it is illegal and unethical. Companies can win business contrasts without bribing which is conflict with the law by making their products better and providing more benefits to the host countries.
To begin with, companies may invest that money which was used to bribe into investment and research in order to let their own products become more competitive. If a product has a competitive advantage, it is more likely to be chosen over other competitors. Then, contributing to the development of the economy of the host countries also helps multi-national enterprises get their contracts easier. Contributions include assistance in the development of a country in terms of employment, investment and import earnings without bringing negative effects on local companies, such as, making employees who work in local companies unemployed.
With the bribery scandals came out, von Pierer who is the former supervisory board and Kleinfeld who was the CEO of Siemens had to quit their jobs. Critics felt that Kleinfeld should not be fired since he had carried two successful reforms which help turning Siemens into profitable. In spite of the fact that Kleinfeld did a good job during his two year tenure, he still has to be replaced in my opinion. First of all, Kleinfeld was widely accused and had a bad reputation.
For one aspect, due to Kleinfeld’s failure of tracing the huge amounts of company asset and payment, the public start to complain and criticize Kleinfeld instead of showing their trust they used to have. For another aspect, a two-tier system of management is applied in every company in Germany. In this system, the relationship between labor representatives and management is also taken into consideration to evaluate the performance of a manager. However, what Kleinfeld had done during his venture was not acceptable by those conservative and old employees.
For example, as Jack Ewing shows in “Siemens’ Culture Clash”, Kleinfeld sold mobile phone production which is unprofitable to BenQ and he invested $8.6 billion to growing areas such as nuclear power and medical diagnostics in 2006. Although these actions help the stock price of Siemens increase by 26% during the time he was the CEO, Kleinfeld’s radical decisions result in his not being supported. To concluded, a good CEO should not only help a company benefited but also maintain a good relationship with the staff.
In addition, Siemens needs a completely new beginning. According to the chairman said,” the leadership change had been made to give the company a clean break from the past.” Besides that, Loescher who is newly appointed has global background, well-known international reputation and upright characteristic. Apparently, the public are more likely to believe that Loescher can get through recent tough difficulties and take Siemens into a better future.
In conclusion, Kleinfeld should be replaced by Loescher as Loescher has a better reputation, while the departure may also bring several negative impacts. Loescher needs to let himself be accepted by everyone in Siemens and adapt himself to the current situation of Siemens as soon as possible (Morgan Stanley analyst Ben Uglow). In fact, other German companies, included Volkswagen AG, Deutsche Telekom AG, were also reported to have unethical practice.
However, it is obvious that Siemens is not just unfortunate to get caught. Bribe is not only Siemens’ fault but also because of the corrupt practices the Co-determination law or Mitbestimmung in German have. The Co-determination law is easily to cause argument between management and the labor representatives, and it also causes suspicion and exclusion between them. Just as the German government reported, laws should be modified to forbid regarding bribery charges as a cost of doing business.
Besides that, Siemens which has numbers of offices all around the world can have a huge impact on local economies. In other words, large companies like Siemens have to take a moral stand since their acts are more likely to be viewed by the public. Instead of accepting bribery, Siemens should refuse to go along with bribery and other unethical acts. In order to prevent enterprises as Siemens bribing in the future, numbers of plans have to been carried out. Firstly, companies ought to have their own division whose function is to supervise all the staffs in the companies.
If any bribery is found, companies need to have their own regulation to solve these problems. Secondly, local laws in Germany seem to be out of date. The government needs to lay more emphasis on revising the local laws. Thirdly, countries should corporate with each other. Globalization start to be a new trend in this century and countries need to have a same standard to stop companies bribing. To sum up, this essay analyzes the case which is about the bribery scandal at Siemens AG. From this case, it is shown that bribery is not only illegal but also unethical.
International codes of conduct for Multi-national enterprises have clearly ruled that bribery is a kind of illegal acts. Even if many countries ban briberies, there are still many companies regard the money which is used to bribe as a cost of doing business. Bribery may destroy the reputation of a company, and it may also cause distrust and unfairness among the staff in a company.
In order to have a better future, the former CEO of Siemens Kleinfeld has to be replaced since the new CEO Loescher has a better background and reputation. How to maintain a good relationship with staffs, help Siemens become profitable and be more accepted by the public are the major difficulties Loescher has. Even though bribery exists in many companies, especially in multi-national enterprises, and the attitude companies shown on bribery start to change. Increasing numbers of companies start to notice that bribery cannot be accepted, and it must be thoroughly forbidden in the future.