Abstract

This case discusses the bribery scandals that were unearthed at Siemens AG (Siemens) in 2006 and 2007. There were a series of scandals that involved some of the company’s employees bribing foreign officials to gain contracts and creating slush funds for this purpose. In another case, the company was accused of bribing labor representatives on the suprvisory board in order to gain their support for its policies. After the German authorities conducted raids on Siemens’ offices in Germany, investigations were initiated on Siemens in several other countries like the US, Greece, Italy and Switzerland for possible misconduct. As a fallout of this scandal, the CEO of the company, Klaus Kleinfeld, and the chairman of the supervisory board, Heinrich von Pierer, had to resign even though they were not directly implicated. With bribery scandals surfacing in Siemens and many other German companies like Volkswagen, questions were also raised about the effectiveness of the Co-determination law in Germany, which advocated a system in which a supervisory board governed the management board and at least half the supervisory board seats had to be filled by labor representatives. In such a system, critics contented that the management always needed the labor representatives’ support to be in job and gain support for company policies, which led to a suspicious alliance between them. The case also highlights the opinions of several analysts on the issues related to bribing by the German companies and Siemens in particular and the challenges the new CEO is likely to face at Siemens.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the impact of the bribery scandals unearthed at Siemens AG on the company and the economic climate in Germany: Analyze the steps taken by Siemens AG to prevent such incidents in future: Discuss the role of the co-determination law in the briber

Keywords

Siemens AG, Bribery Scandal, Government Contracts, IG Metall, Germany, Heinrich von Pierer, supervisory board, Management Board, Klaus Kleinfeld, Co-determination law , Mitbestimmung, Enel SpA, embezzlement fraud, Tax evasion, Slush funds, Corporate Governance, Business Ethics, Anti-public-corruption compliance