Summary
Background
Siemens, a Germany company with long history, is one of the world’s most important companies and Europe’s largest technology conglomerates, with 430,000 employees, $77 billion in revenue and industrial manufacturing. However in 2006, Siemens was caught in a corruption scandal for bribing employees of other companies for contracts.Scandal
Some of the
executive board members have been charged in this scandal. Kutschenreuter is
the most senior Siemens executive found guilty of corruption so far. He was
placed on probation for two years and fined 160,000 euro after admitting that
he had covered up slush funds and bribes paid by his employees. The other
concerned person, Hans-Werner Hartmann, who was in charge of accounting at the
company’s telecommunications arm, was placed on probation for 18 months and
fined 40,000 euro. The funds were used to bribe government officials and
business contacts to win lucrative contracts in Russia and Nigeria. The
managers admitted the bribery but defended themselves on the basis that it was
not for personal gain and could be considered standard business practice in
some countries where they did business. Results
As a result, Siemens was fined 30 million euro, which was approximately 7% of the total 420 million euro in bribes Siemens paid out. Combined, Siemens lost a total of 450 million euro in 2006 and lost most of the market shares in global business. In addition, the most important loss for Siemens is its good name and it will take a long time to regain the trust of customers and business partners. According to this scandal, German companies’ boards were also wondered if the German Co-determination law or Mitbestimmug* was flawed.
To sum up, the best solution would be to set up some kind of
international governing body and require that all business operate within those
basic international standards so that all parties involved know what is allowed
and expected and what is not thereby taking the unknowns out of the equation
and equalizing the playing field for all concerned.
* Mitbestimmug is a practice whereby the employees have a role in management of a company.
Solution
International Governing Body
After the bribery
scandals were unearthed at Siemens, the company started many initiatives to
strengthen its corporate governance and compliance controls. Siemens has laid
down business conduct guidelines for its employees in dealing with government
officials in a document on “Anti-public corruption compliance.” However, the
most important solution which should be taken is to set
up some kind of international
governing body and require that all business operate within the basic
international standard. We think that the international governing body will be created by WTO (World Trade Organization) which already has enough authorities and influences among the world. And the officers of WTO will take charge of this body. In order to reduce the different cultural differences between different countries. The members
of this body should come from different countries and will be paid by
WTO. The regional restrictions or laws will be made.Benefits of the Governing Body
As a result all parties involved know what is allowed
and expected and what is not thereby taking the unknowns out of the
equation
and equalizing the playing field for all concerned. Gradually increasing
along
with the amount of multinational companies, companies were resorting to
illegal payments to win international contracts especially in some
emerging economies where the practice was common.
Future of the Governing Body
Additionally, the problems
resulted by the difference between laws with global operation from governments
to governments will be decreased. In all, in order to solve the business
bribery problems among the word, it is urgent to focus on establishing
the international governing body now.
Outlook of Siemens
That the
company officials at Siemens had resorted to bribing was not in question, but
the remaining questions were even more worrying—how much
knowledge did company official have about the fraud. As Manuel Theisen, a
professor of business and tax law at Ludwig-Maximilians-Universitat in Munich said, “this
individual case is of significance because it shows clearly that a system of
bribery was installed. The rest is now just a question of numbers and
dimension. That unearthing the system of bribery is certainly an important
milestone.” There was also mounting pressure on Siemens to explain how all
these cases of bribery—both within Germany and externally
went unchecked by the top management for so many years.
We think they will face
a lot of barriers such as how to rebuild the name of Siemens. Because in the business
world the most important thing is the reputation of the company, now Siemens is
involved in this bribery scandal, as a result, some of its partners will not believe
it any more. In addition, Siemens should start to make others trust it again,
reverse the brand image and cannier on business laws. It should rebuild the
company members’ organization such as making the employees involved in the company’s
decision making process.
On the other
hand, Siemens was influenced by the bribery scandal a lot; they are a
multifaceted company it has great infrastructure and resources, and they are
the only company which has covered ten fields, such as automation, healthcare
and mobility. Thus Siemens can make up its loss by advanced technology. If they
have the most advanced technology in the world, there is no need for them to
bribe other companies for contracts. Siemens has an advantage in energy attenuate
source, so their company can focus on alternate energy especially in solar area
and expects to make ground in that direction. Although it is difficult for
Siemens to save its situation, Siemens has the potential to make a strong
comeback and with its dedicated team, they can fully developed technology,
advanced design.
To sum up, if
Siemens can make the bribery disappear from it and approve its technology,
Siemens will have chance to be strong again.
