The Siemens Scandal to do or not to do?

TBS 981 Managing in Multinational Companies Joel Vikas Dhanesh Colin

The Siemens Scandal

About Siemens
 Set up in 1847 under the name Telegraphen-Bauanstalt von Siemens & Halske, by Werner von Siemens & Johann Georg Halske (Engineer)  1st contract in 1853; 10,000 kms of telegraph network in Russia. Build and provide maintenance services.  Set up subsidiaries outside Germany. Britain and Russia. Handed over to Siemens Brothers.  Patents for Dynamo-electric principle in Germany and Britain. Power engineering led to rapid growth to the increasing dependence of all electrical things at the time. Railways, street lighting, elevators, tramways etc.

The Siemens Scandal

About Siemens
Employs 420,800 people in nearly 190 countries worldwide. It is a Company of turnover of 6520 million Euros. It is also listed in Frankfurt Stock Exchange and New York Stock Exchange since March 12, 2001.

The Siemens Scandal

Employee benefits
Stock options, share profit with employees. Set up pension funds to benefit employees and their families. Concentrate on retaining reliable & qualified employees Fixed working hours per day. Quality over quantity. Training employees on specific jobs & assistance in career progression.

The Siemens Scandal

Timelines

1890-Werner retired; sons succeeded.

1914 Largest German Co., 82,000 employees.

WWII-Closure of plants. War damaged Siemens bldgs and industries

1966 Merger of subsidiaries, forms Siemens AG

1896 Built Eurpoes 1st underground rail line

WWI Lost most foreign assets, patent rights expropriated

1949 Moved HQ to Munich due to Berlins political instability

Jan 2007 Nokia Siemens Networks

The Siemens Scandal

Scandals
Nov 2006 offices and private homes raided May 14, 2007 - a German court convicted two formers managers for diverting the companys money to bribe employees of Enel SpA. An Italian energy company. Acknowledged certain employees involved in fraud from Euro 10-30 M to 200 M and finally to 420 M Damaged reputation and financials
Back taxes since 1999, Euro 168 M Net profit from 3.106 B to 3.033

Former board member,Thomas Granswindt arrested

The Siemens Scandal

Scandals
Payments made to external consultants, were actually bribes to secure contracts Siemens was also accused by IG Metall for bribing officials of AUB to gain support for its policies Italy, Puerto Rico, Greece, US, Nigeria, Russia, Libya and even Dubai and Abu Dhabi.

The Siemens Scandal

Indications
Bank a/cs of Siemens employees seized for fraudulent payments Swiss a/cs of former employees also seized Millions of Euros Slush funds Should have taken proactive measures to reverse/reduce damage to its reputation immediately.

The Siemens Scandal

Arrests & Convictions

2 former managers, Andreas Kley & Horst Vigener for embezzlement and bribing employees at Enel Admitted paying 6 million to managers in Enel to win orders for gas turbines contracts valued 450 million. Not for personal gain, but for companys benefit Received suspended sentences, 9 months to 2 years

The Siemens Scandal

Arrests & Convictions

Wilhelm Schelsky, a member of AUB was arrested in connection with this case. IG Metal accused Siemens for bribing AUB employee representatives.

The Siemens Scandal

CEOs
Exit of Klaus Kleinfeld Mixed reactions Major restructuring in 2 years Stock price rose 26% within that period Equal focus on customers & technology Aggressive business attitude

The Siemens Scandal

CEOs
Peter Loescher New man in incharge Infuse new leadership
Considered as an outsider in German corporate circles Learn the ropes of a huge company tarnished by corruption Gain confidence of labor and management Continue upward trend set by Kleinfeld

The Siemens Scandal

Post bribery
Establishment of Corporate Governance & Compliance controls Debevoise & Plimpton LLC, law firm hired to conduct an independent research and investigation Assisted by auditing firm KPMG

The Siemens Scandal

Other violators
Volkswagen AG Deutsche Telekom Deutsche Bahn AG Deutshce Post AG Slapped with fines and suspended sentences

The Siemens Scandal

Suggestions and Recommendations

Compliance policies should be more stringent across the globe Employees should be aware of corruption and bribery Whistle blowing system Leadership beyond borders

The Siemens Scandal

Suggestions and Recommendations

Compete with service over paying bribes Management should be more aware of their executives actions Transparency between employees, suppliers and even customers Profit should not be the only goal Integrate social objectives and business goals

The Siemens Scandal

Conclusions
Globalization: International markets attractiveness lead them to bribery. Majority of revenue generated in foreign countries. Organization culture and structure: Kleinfelds aggressive business approach drove executives to gain contracts. Top level management not very well aware

The Siemens Scandal

Conclusions
Change: Anti-corruption policies were put in place; Corporate governance; Debevoise & Plimpton LLC, KPMG CSR: Caring Hands; Hurricane Katrina rebuilding houses. Newark building schools. STEM fields. Education more than Greenwashing

The Siemens Scandal

Personal Opinions
Rock and a hard place Unethical and definitely illegal Ethical Relativism, when in Rome. Fails 3 important tests of ethical corporate actions: 1)Is it legal? (2)Does it work in the long run? (3) Can it be talked about? Bribery is endemic in business

The Siemens Scandal

Thank you