Abstract:
This paper will focuses on the implications of bribery to a business entity, in this case Siemens, and the role of institutions that are used to oversee and regulate ethical business practice. The available ways and means of regulating corruption and bribery in organizations are going to be discussed together with how those found guilty of such offences should be punished. The report will further explore the role of the employees in regulating illicit business practices, and how these efforts are related to the firm’s culture and tradition.
It is shocking how organizations such as Siemens, which is a world leading technological brand has been named as a prime example of the monetary and implications of bribery. It is important to highlight the leading reasons for companies to offer bribes, which includes defining the ethics that such organizations believe in. Once the core issues that lead to bribes are determined, the company should find effective and efficient ways of addressing them.
Introduction:
The costs of corruption and bribery are vast. Siemens, a German technological giant, is a prime example of the monetary and implications of bribery. The company paid a hefty fine amounting to $ 1.6 billion to American and European authorities to clear charges that the firm had frequently utilized bribes to secure huge public contracts around the world (United States, 2011). This monetary fine is massive for any firm, irrespective of its financial standing. According to the United States Foreign Corrupt Practices Act (FPCA), bribing foreign officials to rule in favor or drum up a business contract is unethical and entirely outlawed.
This paper will focus on the costs and benefits of bribery to a business entity, and the role of ethical business practice oversight bodies in regulating the vice. The author will highlight other means of regulating corruption and bribery in organizations, and how the culprits should be punished. The report will further explore the role of the employees in regulating illicit business practices, and how these efforts are related to the firm’s culture and tradition.
Merits and demerits of bribery:
Bribery is among the prevalent corrupt business practices that define payments made for the purposes of gaining advantage or avoiding an advantage with no regard to the implications of the practice on other related parties. In the bribery case study involving Siemens, the company offered money to foreign officials to ensure the firm secured contracts across the globe, and hence raise its capital gains at the expense of other companies that were more deserving (Olatunde, 2011).
For instance, through bribery the company secured numerous tenders and contracts in the following projects: power generation contracts in Italy; telecommunications infrastructure in Nigeria; a food and aid supplies project to Iraq under Sadaam Hussein; huge mass transit projects in Venezuela; a mobile network installation project in Bangladesh, and national identity cards project in Argentina.
Besides these projects, the company was involved in other multiple bribery cases, dating back form the 1970s to 2008. It is evident that throughout these projects, the company managed to secure contracts that provided the company with vast financial returns and relevant global business connections that guaranteed future contract awards and it in this vein that the company earned its repute as a global technological giant. One prime fact is that the illicit practices had thrived to its competitiveness, and it was thus inevitable to detach from such a practice, until the company was exposed during the Washington litigation.
Despite the financial gains, the company committed grave financial crimes as stipulated by the FCPA. Under the Proceeds of Crime Act all the parties involved in the bribery demonstrated inappropriate conduct such as breach of duty and professional ethics. Having ratified the United Nations Convention Against Corruption (UNCAC), the firm ought to have set pace in endorsing transparency, financial integrity and sound corporate governance. As the litigation unfolded, the company’s dark side was exposed, and as a result, the firm lost its credibility in the global financial market.
In this event, the company had largely infringed on civil and political rights, for example in Argentina, the mandate to issue citizens with identity cards is entitled to the indigenous companies to promote their growth and development. On the basis that about $ 400 million was meant to go back to the Argentine national economy, this money was lost to an external party rather than provide essential public services. Besides distorting Siemen’s international competitive conditions, this case elicited serious moral and political concerns, where the inappropriate allocation of contracts served to corrode good governance practices across the Argentine government and Siemens Company equally.
Addressing bribery:
According to the Justice Department guidelines, the firm was lauded over its endeavors to check the corrupt bribery practices through an internal oversight faculty. Through an internal financial corruption regulation protocol established by Siemens, the company had identified these wrongdoings and prevented future occurrences through intensive financial auditing and analysis. This set up hints that the organization had previously showed reluctance in fully implementing its oversight upon the contracting and tendering process (Eric & Carter, 2008).
Barely did the firm’s administration emphasize and espouse honesty and transparency as its core values among its employees. It is clear that the top-tiered executive must have aspired to operate in an environment free from any future fraudulent implications; however, this was not proactively enforced, until the malpractices multiplied. Therefore, the organization lacked a definite framework that would have nurtured a culture of integrity and strong works ethics among its employees. The entire blame lies on the firm’s management and administration, because they failed to instill and implement a culture of good corporate governance, financial reporting, and auditing practices from the onset.
Punishing bribery:
According to the FPCA bribery is a serious crime that must be exposed and curbed from any hint of thriving. The $ 1.6 billion fine was substantial; however, the company must also meet and offer compensational packages to other parties that might have suffered damages from the bribery practices. This move would set precedence against other corporate entities that perpetuate corrupt deals with no regard to other individual, such as citizens, organizations, authorities, or other companies.
Punishing the offenders in accordance to the prevailing law then serves as an appropriate deterrence strategy. Such punitive measures may include: hefty fines or extended jail terms to the errant employees and managers, prosecuting and issuing sanctions to the errant company, and drawing compensation packages to the offended parties, as the judicial or arbitration bodies may deem fit. Exposing and appropriately punishing unethical business practices in a country further proves as the only way that a government can pledge loyalty to stakeholders and prospective investors, both in the country and overseas.
References:
Bruce, W. (2013). Siemens and the battle against bribery and corruption. The Guardian. Retrieved from http://www.theguardian.com/sustainable-business/siemens-solmssen-bribery-corruption.
Eric, L. & Carter, D. (2008). Siemens to Pay $1.34 Billion in Fines. The New York Times. Retrieved from http://www.nytimes.com/2008/12/16/business/worldbusiness/16siemens.html?_r=0
Olatunde, J. O. (January 01, 2011). Corruption as an obstacle to development in developing countries: a review of literature. Journal of Money Laundering Control, 14, 4, 387-422.
United States, (2011). Bribery, Corruption, and the Foreign Corrupt Practices Act. (January 01, 2011). 1-21.
