Siemens bribery case

Siemens Bribery Scandal

By: Courtney Miano, Nancy Gonzalez, Mohamed Jawhar,
Vernita Leslie, and Ferba Hines

Siemen’s is classified as a large German electronics firm. In December of 2008, Siemens had to settle lawsuits and pay fines due to the fact that they were caught using bribes to win business all over the world. The fines totaled a net amount of 1.6 billion. Between 1999 and 2006 when the company was raided, Siemens reportedly paid around 1.4 billion dollars in bribes. Before 1999, bribery of foreign officials was not illegal in Germany, and bribes could be deducted as a business expense under the German tax code. When the law changed, Siemens carried on as before, but put in elaborate mechanisms to hide what is was doing. Bribes were considered a cost of doing business. Their scheme fell apart when investigators in several countries began to examine suspicious transactions. Not only did Siemens have to pay fines, but it had to spend another billion dollar to improve its internal compliance process while several executives went to jail.
What explains the high level of corruption at Siemen’s? How did managers engaged in corruption rationalize it? Before 1999, it was a common business practice to offer bribes to win over contracts. It was considered a cost of doing business and was also deducted under business expenses under the German Tax Code. After 1999, it became illegal to offer these types of bribes to win over businesses so any type of bribery became illegal. Siemens found a way around this by creating hard to trace bank accounts in Switzerland to hide what they were doing. The company even went so far as to hire “consultants”. They would hire the consultants with this money, and in turn, the consultants would deliver the cash to the ultimate recipient. Unethical behavior in senior management was the result of poor operational decisions which perpetuated a dysfunctional culture at Siemens. Bribery became common practice and the managers labeled these unlawful practices as useful money as a way to further the business by making more money. Siemens created the illusion that they were keeping the business alive by considering it to be used for the expense of operating the business. But the reality was, they were doing unlawful acts.
What do you think would have happened to a manager at Siemens if he or she had taken a stand against corrupt practices? Given the fact that management at the highest levels participated in this crime, it is our opinion that the employees followed in suit or feared losing their jobs. Siemens seemed to brainwash their employees by making them believe that it is a cost of doing business and important to keep the business alive by offering these bribes. It is our belief that getting rid of employee’s who did not agree with this way of thinking was a cost of doing business as well. It also would seem fair to assume that payoffs were given to those who left the company to keep their silence. If an employee went as far as to try to take a stand against the corrupt practices, they were in fear of losing their job and possible safety for themselves and their families. They also could be blacklisted from many other firms that do business with this large company.
How does this kind of corruption Siemens engaged in distort completion? Siemen’s monopolized the system which caused competitors to be shut out of contracts. They encouraged unfair bidding practices. Siemens caused the growth of smaller enterprises to be stagnate. Siemens had an unfair advantage over their competitors. It is a large corporation that can afford to use financial leverage to their advantage through bribery. Smaller companies who do not have the money or ethical behavior to do this are now shut out of the bidding wars, even if they do have better products and services. Also, consumers are faced with paying higher prices and left with less options to choose from. This goes to show that if Siemens has the largest bank account, it will outbid all of its competitors regardless of what how good their product is.
What is the impact of corrupt behavior by Siemens on the countries where it does business? With Siemens use of corruption and bribery in foreign countries to win business, this ultimately limited the playing field and impacted the way business was done. The playing field was always to their advantage. This eliminates healthy completion from other firms who cannot or will not partake in such bribery. The ultimate effect lies on the local residents in poor countries where they are faced with paying higher prices for services because of rigged deals. As a result, they are faced with financial difficulties. Siemens also created a negative tone of doing business in other countries. Siemens corrupted officials by doing bribes which could lead to people not trusting the political system. Also, because of Siemen’s ability to “pay out”, many local residents were shut out of contracts and the residents of these poor countries suffered.
If you were a manager at Siemens, and you became aware of these activities, what would you have done? The bottom line is that it is unethical to work for this type of corporation. A wise man once said, “He who passively accepts evil is as much involved in it as he who helps to perpetuate it. He who accepts evil without protesting against it is really cooperating with it”. Martin Luther King Jr. There are different steps that could be taken. First of all, you could just quit. After realizing that you don’t want to be a part of this type of unethical behavior, the easiest solution would be to leave the company. Another route is to find out how many people are involved in this behavior. See if you can find enough people within the company to take a stand against this behavior and try to change the way that things are done. The problem with this scenario, is now you may become fearful of losing your job, becoming blacklisted from other companies, or even fear for your safety for taking a stand. The easiest method is just to find a way to disassociate yourself with the company. Look for a new job and do research to make sure they are not involved with these same unethical practices, or any for that matter.