The Bribery Scandal at Siemens Ag
Md Haque
BUS 685
Case 1 – The Bribery Scandal at Siemens AG
Analysis:
On November 15, 2006, five Siemens employees were taken into custody in connection with suspected bribery, tax evasion and embezzlement of company funds related investigation. Police raided 30 offices and private homes in Germany.
The authorities found €420M of questionable payments made over a seven year period from 1999 to 2006. Siemens documents reflected the questionable payments were made to external consultants. The investigation concluded that the funds were actually paid to foreign officials to gain market advantage in countries like Greece, Italy, Puerto Rico, and United States.
Siemens eventually acknowledged that certain employees were engaged in fraud. In spring 2007, two former Siemens executives were convicted of embezzlement of €6 Million company funds for the purpose of bribing foreign officials to win a natural gas turbine contract. The company was fined €38 Million of the total €420 Million in bribes that Siemens paid out.
The contract that Siemens obtained with the bribes was worth €450 Million. This means that he company’s profit after paying the penalty was €412 Million. The penalty that was assessed against Siemens was immaterial compared to the profit they earned by paying out the bribes.
From the viewpoint of Siemens employees who are willing to break the law in order to gain large profits, it was certainly worth it. They argued that they were working towards benefiting the company and not themselves. However, for Siemens as a company, the bribery was not worth the loss of the company’s money and reputation.
The case study mentioned how the incident may harm Siemens’ reputation. Interestingly, Siemens’ increasing profits did not indicate any decreases due damage of reputation. By 2011, Siemens made more money than they had in the last five years, since 2007. From 1999 to 2006, their combined net income was €26.63B (over seven years), and from 2011 to 2007,
BUS 685
Case 1 – The Bribery Scandal at Siemens AG
Analysis:
On November 15, 2006, five Siemens employees were taken into custody in connection with suspected bribery, tax evasion and embezzlement of company funds related investigation. Police raided 30 offices and private homes in Germany.
The authorities found €420M of questionable payments made over a seven year period from 1999 to 2006. Siemens documents reflected the questionable payments were made to external consultants. The investigation concluded that the funds were actually paid to foreign officials to gain market advantage in countries like Greece, Italy, Puerto Rico, and United States.
Siemens eventually acknowledged that certain employees were engaged in fraud. In spring 2007, two former Siemens executives were convicted of embezzlement of €6 Million company funds for the purpose of bribing foreign officials to win a natural gas turbine contract. The company was fined €38 Million of the total €420 Million in bribes that Siemens paid out.
The contract that Siemens obtained with the bribes was worth €450 Million. This means that he company’s profit after paying the penalty was €412 Million. The penalty that was assessed against Siemens was immaterial compared to the profit they earned by paying out the bribes.
From the viewpoint of Siemens employees who are willing to break the law in order to gain large profits, it was certainly worth it. They argued that they were working towards benefiting the company and not themselves. However, for Siemens as a company, the bribery was not worth the loss of the company’s money and reputation.
The case study mentioned how the incident may harm Siemens’ reputation. Interestingly, Siemens’ increasing profits did not indicate any decreases due damage of reputation. By 2011, Siemens made more money than they had in the last five years, since 2007. From 1999 to 2006, their combined net income was €26.63B (over seven years), and from 2011 to 2007,