Siemens is a major engineering company. In the financial year 2007 it had 475000 employees in 190 countries. Due to this wider coverage it partners with several companies. Its competitive advantage is therefore derived from the presence of subsidiaries and business partners in various countries like in the USA and in Saudi Arabia. To secure contracts, Siemens is a differentiator. Top employees had to pay a ‘fee’ to get foreign contracts through their subsidiaries and partners. Between 2006 and 2007 it had a several bribery scandals trying to secure international contracts like in Italy.
Siemens management skills vs. corruption
The management of the Siemens Corporation was in question as a number of bribery allegations came up. The supervisory board hesitated to accept ChairmanPierer’scontract, who then resigned admitting that Siemens had got into a difficult state. This was because of the partial apparent and partial suspected misconduct of many of the managers and employees.He believed voting a new chairman would clear up the company in corruption cases. Although he was not directly implicated, the company’s employees were involved in bribing officials abroad to secure contracts.
Type and Cause of the Corruption at Siemens
Many corruption scandals surfaced in Siemens involved high-ranking officials who made major decisions such as allocation of funds and subsidiaries. Such decisions could not be made without involvement of the executives and therefore the type of corruption at Siemens is grand corruption. The grand corruption occurs in an attempt to secure major foreign transactions which are competitive. As in the case for two Siemens employees in German who paid a fee to get power contracts with an Italian firm.
Political risk analysis
After sequential bribery scandals, CEO Kleinfeld came up with a ‘zero tolerance’ policy for corruption. With help of an investigator the audit committee developed a fulfillment system. For instance consulting firms were required to provide an explanation for the purpose of the funds, as well as obtain signatures of superior executives and the chief conformity officer.
As an employee of Siemens working in a corrupt country, I would first bring to the attention of the clients the changes implemented pertaining corruption. This way it would be easy to take up the changes in such a corrupt environment.
Costs of corruption
Siemens paid much cash to a law firm to investigate bribery allegations. A labor scandal in 2007 made the executives to decline planned 30 percent increases.
High-ranking officials had to resign including the chairman Pierer and the CEO Kleinfeld and hence management turnover. Siemens also had to pay fines to the EU and affected countries.
Clarity & Language/Other Cases & Concepts
Corruption in international business takes place in secret and develops up to a level that it can no longer be invisible. Money laundry was revealed to have been in progress in Siemens since 1999 and was only discovered in 2007 by German authorities.
Corruption originates from economic and political interdependence. Siemens Company applied bribes to get international contracts. As a result, countries interacted politically to come up with corruption laws.
Corruption depends on actors who include those from the private sector and the public in making of important decisions. In Siemens corruption occurred with the executives negotiating major transactions internationally.
Corruption in international business has depressing macroeconomic effects to the country. Siemens a top company in German lost much funds in cases as fines and in hiring of investigation teams. Corruption caused high management turnover consequently making it to drop from number one to ten in Germany. This cost German in terms of income revenue.
