Ethical Implications of Bribery Scandals at Siemens

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Siemens, founded in 1847 by Werner von Siemens and Johann Georg Halske, is a well-known company in electrical engineering with a presence in approximately 190 countries and numerous employees. In 2007, two ex-managers of Siemens AG were convicted by a German court.

Siemens faced allegations of providing funds to Enel Spa employees in exchange for contracts, leading to further bribery scandals. In 2006, the company was convicted of bribing AUB for policy support. These incidents damaged Siemens' reputation, resulting in fines exceeding €1 billion by December 2008.

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Despite being illegal globally, bribery has become more common and accepted in recent years as a solution to various challenges. For instance, companies in Mexico must regularly pay postmen to guarantee safe mail delivery. Additionally, bribery is still prevalent even in developed countries.

The international Olympic Committee dismissed multiple officials for accepting bribes to help Salt Lake City secure the 2002 Winter Olympics. This article will delve into the topic of bribery, including the scandal surrounding Siemens AG. Despite being universally condemned, the ethical implications of bribery differ among individuals.

Despite some companies considering bribery a necessary cost for contract securing, it is crucial to acknowledge that bribery is illegal and unethical in business. As mentioned in our book, bribery fails to meet ethical standards and is universally banned.

According to international codes of conduct for multi-national enterprises, it is prohibited to pay bribes to public authorities, regardless of the local laws in their respective countries. For instance, Siemens, a German company, must abide by Germany's anti-bribery legislation.

Siemens should face consequences for its actions, as bribery can offer lasting benefits to a company.

For example, during the 2007 scandals involving Siemens, two ex-managers admitted to giving €6 million to the Italian energy firm Enel in return for a gas turbine contract worth €450 million. In addition to the immediate financial reward, Kley highlights that this deal also helped Siemens break into the Italian market despite legal challenges.

Thirdly, bribery cannot be disclosed to the public. Noonan stated, "in no country do bribe takers speak publicly of their bribes, nor do bribe givers announce the bribes they pay as bribery is shameful." In conclusion, bribery is not considered a cost of doing business due to these three reasons, and it is both illegal and unethical. Companies can secure business deals without resorting to bribery by improving their products and offering more advantages to the host countries, which goes against the law.

Firstly, companies can invest the money that was previously used for bribes into research and development to enhance the competitiveness of their own products. A competitive product is more likely to be selected over others. Additionally, contributing to the economic development of host countries can make it easier for multinational enterprises to secure contracts. This contribution involves aiding in areas such as employment, investment, and import earnings without negatively impacting local companies by causing unemployment among their employees.

Despite the success of two profitable reforms during his tenure as CEO, Kleinfeld was forced to resign along with former supervisory board member von Pierer due to bribery scandals at Siemens. Many critics believed Kleinfeld should not have been fired, however, his widely accused and bad Reputation led to his replacement, in my opinion.

Due to Kleinfeld's failure in tracing company assets and payments, the public has started to criticize him instead of showing the trust they once had. In Germany, a two-tier management system is implemented in every company, where the relationship between labor representatives and management plays a crucial role in evaluating a manager's performance. However, Kleinfeld's actions during his tenure were not acceptable to the conservative and older employees.

The article "Siemens' Culture Clash" by Jack Ewing illustrates how Kleinfeld, as CEO, made strategic decisions like selling unprofitable mobile phone production to BenQ and investing $8.6 billion in growing areas like nuclear power and medical diagnostics in 2006. While these actions boosted Siemens' stock price by 26%, they also led to resistance due to their radical nature. In summary, a successful CEO must not only prioritize the company's success but also foster positive relationships with the staff.

Siemens requires a fresh start, as stated by the chairman, to create a clean break from the past. The newly appointed leader, Loescher, is renowned globally and has a strong reputation. It is believed that he can successfully navigate current challenges and lead Siemens towards a brighter future.

In conclusion, it is suggested that Kleinfeld be replaced by Loescher because of his better reputation, despite possible negative outcomes. It is essential for Loescher to be accepted by all Siemens employees and adapt to the company's current situation promptly, as recommended by Morgan Stanley analyst Ben Uglow. Furthermore, there have been allegations of unethical conduct at other German firms like Volkswagen AG and Deutsche Telekom AG.

Siemens is not the only party to blame for bribery scandals. The Co-determination law in Germany also plays a role, leading to conflicts between management and labor representatives. This law has created an atmosphere of suspicion and exclusion. The German government highlights the need for legal changes to prevent bribery from becoming a common practice in business.

Furthermore, Siemens, a global company with offices around the world, plays a significant role in local economies. It is essential for large corporations like Siemens to uphold ethical standards as they are under close public scrutiny. Rather than participating in bribery, Siemens should strongly condemn such unethical conduct. To avoid future instances of bribery within companies like Siemens, various measures need to be implemented. Initially, organizations should establish a dedicated department tasked with overseeing all employees.

It is important for companies to create their own anti-bribery policies, especially in Germany where the current laws are outdated and in need of revision. International cooperation is crucial in fighting bribery as the world becomes more interconnected, highlighting the necessity for countries to establish a global standard against corporate corruption. The case study on Siemens AG's bribery scandal demonstrates the unlawful and unethical aspects of bribery.

Even though many countries have strict laws prohibiting bribery, as stated in international codes of conduct for multi-national enterprises, some companies continue to see bribes as a required cost for doing business. This attitude can jeopardize their reputation and relationships with employees.

Former CEO of Siemens Kleinfeld was replaced by new CEO Loescher to secure a better future for the company. Challenges for Loescher include building strong relationships with employees, boosting Siemens' profitability, and gaining public approval. While bribery remains common in many organizations, including large corporations, there is a changing attitude towards this unethical behavior. More companies are acknowledging that bribery is unacceptable and must be completely eliminated going forward.