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Siemens bribery case study
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- 2. Siemens AG isa German multinational conglomerate company headquartered in Founders: Werner von Siemens & Johann George Halske (1847) Organized into 19 Divisions & five main Sectors: Siemens and its subsidiaries employ approximately 4,00,000 people across Listing: Frankfurt Stock Exchange (Primary) Munich, Germany. It is the largest Europe-based electronics and electrical engineering company. Industry, Energy, Healthcare, Infrastructure & Cities, & Siemens Financial Services. nearly 190 countries and reported global revenue of approx € 73.5 billion for the year of 2011 of which more than half were found corrupt. New York stock Exchange (Secondary) SIEMENS
- 3. THE GUILTY PARTY HEINRICHVON PIERER Manager of Siemens KLAUS KEINFIELD CEO of Siemens REINHARD SEIKACZEK Manager of Siemens BUNDESPOLIZEI German Police
- 4. IMPORTANT STATEMENTS BY THE STAKEHOLDERS"Based on our investigation so far, we have reason to suspect that Siemens ran black accounts ... that allowed it to open new markets through secret payments to potential and existing business partners".-Horst Vigener "Many people within Siemens knew about the method of payment. Getting a contract isn't easy.“ -Jeanette Balmer "What hopefully will come out of the Siemens affair is that senior business leaders, when they see what happened to Siemens in terms of fines and the lost reputation of individuals like von Pierer or Kleinfeld, is that they will say 'OK, we need to start taking this seriously'".-Jermyn Brooks AROUND 40 WHISTLEBLOWERS GAVE INCRIMINATING EVIDENCE
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- 6. BRIBES $5 BILLION IN BRIBESTO WIN A MOBILE PHONE CONTRACT IN BANGLADESH $40 MILLION IN BRIBE TO SENIOR OFFICIALS IN NIGERIA FOR GOVERNMENT CONTRACTS $12.7 BILLION IN BRIBES TO WIN A $1 BILLION CONTRACT TO PRODUCE NATIONAL IDENTITY CARDS $20 MILLION TO SENIOR GOVERNMENT OFFICIALS TO BUILD UNAUTHORIZED POWER PLANTS $16 MILLION $14 MILLION IN VENEZUELA FOR URBAN RAIL LINES IN CHINA FOR MEDICAL EQUIPMENT
- 7. RISK MANAGEMENT CONCEPTS INVOLVED LEGALRISK- "Everybody does it‟ OR "It's simply part of the culture in some countries‟ : It was COUNTRY RISK – possibility that a foreign country may be unable or unwilling to fulfill its ............................. obligations towards a foreign lender, investor or exporter POLITICAL RISK – Siemens withdrawing from any of the 190 countries where the risk of being GOVERNANCE RISK - Employees detained by prosecutors said bribery was a normal business COMPLIANCE RISK - Siemens compliance at 0% in 2007 legal before 2000 asked for bribes is too great practice known about by senior management.
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- 10. SWOT ANALYSIS S W OT WeaknessesWeaknessesWeaknesses Corruption at Siemens was apparently deeply embedded in its business culture ThreatsThreatsThreats Siemens believed that if they do not participate in bribery activities they would lose jobs, profits, and reputation of being a leading German electronics firm OpportunitiesOpportunitiesOpportunities Siemens gained a large lump profit and longevity of its business by conducting bribes. Bribery was not illegal in Germany StrengthsStrengthsStrengths Executives were educated about how to remain profitable and distort competition
- 11. Learnings from thecase A strong ethical culture is critical for effective corporate governance 1 Senior executives need to know what is going on throughout the organization 2 Strong internal control is more important in a widely dispersed and decentralized company 3 A focus on “making the numbers” will never be successful in the long run 4
- 12. WHAT DID SIEMENSGAIN BY INTRODUCING CONTROLS TO MINIMIZE THE LIKELIHOOD OF CORRUPTION? WHAT DOES THE CASE SUGGEST IS THE VALUE OF ETHICAL BEHAVIOR?
- 13. MY OPINION ONTHE DECISION TAKEN BY SIEMENS
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