The Bribery Scandal at Siemens AG

Case Code: BECG106
Case Length: 18 Pages
Period: 2006-2009
Pub Date: 2010
Teaching Note: Available

Price: Rs.300
Organization: Siemens AG
Industry: Diversified
Countries: Germany
Themes: Business Ethics Corporate Governance,

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

A Series of Scandals Rocks Siemens

Slush funds to win contracts abroad On November 15, 2006, around 30 offices and private homes related to Siemens and its employees were raided by some 200 police officers, tax inspectors and prosecutors in Munich, and other cities of Germany, to probe suspicions of bribery, embezzlement of company funds and tax evasion...

Repercussions of the Scandals

The series of bribery allegations came in the aftermath of Siemens' sale of its loss-making mobile handset unit in 2005, to a Taiwanese company, BenQ. Here too, Siemens did not cover itself in glory as it was seen as having got rid of the unit because it could not easily lay off its employees...

Initiatives at Siemens

After the bribery scandals were unearthed at Siemens, the company started many initiatives to strengthen its corporate governance and compliance controls. A law firm Debevoise & Plimpton LLP (Debevoise & Plimpton) was appointed to conduct an independent and comprehensive investigation into the company's compliance and control system with the help of the independent auditor for Siemens, KPMG...

Questions Relating to Ethics in Corporate Germany

Around the same time as the Siemens cases came out, unethical practices surfaced in other German companies including Volkswagen AG (Volkswagen), Deutsche Telekom AG, Deutsche Bahn AG and Deutsche Post AG. At Volkswagen, a senior executive was fined €576,000 and received a suspended prison sentence in January 2007 for bribing labor representatives with money, foreign trips and prostitutes.

Since several of the corruption scandals involved the bribing of labor representatives on the boards of German companies, some analysts felt that the Co-determination law or Mitbestimmung in Germany was flawed...

Outlook

Analysts opined that on account of increasing competition, companies were resorting to illegal payments to win international contracts especially in some emerging economies where the practice was common. Siemens along with many other companies was found guilty of paying bribes to secure contracts abroad...

Exhibits

Exhibit I: A Note on the Co-Determination Law or Mitbestimmung
Exhibit II(a): Major Business Activities of Siemens (before 2008)
Exhibit II (b): Major Business Activities of Siemens (As of 2009)
Exhibit III: Income Statement of Siemens: 2004-2008
Exhibit IV: Stock Price Movement of Siemens
Exhibit V: A Note on Siemens' Anti-Public-Corruption Compliance

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