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Copy of Siemens Bribery Scandal

MGMT 3P98
by

Maria Allueva Oncins

on 16 February 2013

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Transcript of Copy of Siemens Bribery Scandal

Company Founding The company began operating in October of 1847 under the name "Telegraph Construction Company of Siemens & Halske." Siemens is a German multinational conglomerate company headquartered in Munich Germany. It is the largest Europe-based electronics and electrical engineering company. Siemens is organized into four main sectors. Industry Energy Health Care Corruption was deeply embedded in the business culture at Siemens. Siemens Bribery Scandal Before 1999, bribery of foreign officials was not illegal in Germany and bribes could be deducted as a business expense under the German tax code. When the German law changed in 1999, Siemens carried on as before, but put in place elaborate mechanisms to hide what it was doing. This practice left behind angry competitors who were shut out of contracts.

By engaging in bribery, Siemens helped to foster a culture of corruption in those countries where it made illegal payouts.

Senior Executives even made some of the individuals responsible for managing the bribery funds sign compliance forms stating that they had not engaged in any such activity. Since 1999, the company had paid approximately $1.4 billion in bribes. Bangladesh - $5 million to the son of the prime minister to win a mobile phone contract.

Nigeria - $12.7 million to various officials to win government telecommunications contracts.

China - $14 million to government officials to win a contract to supply medical equipment.

Israel - $20 million to senior government officials in order to win a contract to build power plants

Argentina - $40 million to win a $1 billion contract to produce national identity cards Investigators in several countries began to examine suspicious transactions.

In late 2006, the German police acted, raiding the company, seizing data, and arresting several executives. Siemens had to pay $1.6 billion in fines.

And another $1 billion to improve its internal compliance process.

Several executives went to jail. At the end of the day.. What explains the high level of corruption at Siemens? How did managers engaged in corruption rationalize it? Question 1 Before 1999, bribery in Germany was not illegal.
Bribes could be deducted as a business expense.
Most executives knew this culture and this way of doing business.
Hired nearly 3000 "consultants" worldwide to deliver bribes. Rationalization
Executives to referred bribes as "useful money".
They engaged in corrupt behaviour to keep the business alive and not jeopardize thousands of jobs overnight. Question 2 What do you think would have happened to a manager at Siemens if he or she had taken a stand against corrupt practices? Could have been bribed to stay quiet and to carry on with their job. Manager could be seen as an employee that does not wish to "keep the business alive"

Forced to sign a compliance form to not speak about the culture at Siemens. Question 3 How does the kind of corruption Siemens engaged in distort competition? The company who offers the highest bribes will get the contract, not the best company. Siemens had an invalid market leadership. When Siemens' corruption was made public, competitors would have prospered Questions 4 What is the impact of corrupt behavior by Siemens on the countries where it does business? Anger competitors as they were shut out of contracts due to bribes Left behind angry residents in poor countries as those residents had to pay too much for government services as the deals between Siemens and the particular country were rigged. Siemens helped to spread the culture of corruption in those countries where it acted improperly. Question 5 If you were a manager at Siemens, and you became aware of these activities, what would you have done? Try to figure out the extent of corruption and bribery in the organization and figure out who is involved. Try to speak to other managers who are involved Try to convince those involved to hire an external HR firm to help guide and fix the culture. Fix the problem, before it all falls to pieces. Infrastructure & Cities
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