Siemens Bribery Scandal

Ethics

Effects of the Scandal

Case Summary

Why the scandal happened

The logistics

Righteous Moralism: the belief that a multinational's home country standards or ethics are the appropriate ones for companies to follow in foreign countries

• Shut out competitors

• Local residents in poor countries paid too much for government services

• Foster a culture of corruption in countries

• Is the ease with which big companies can negotiate foreign corruption settlements without suffering suspension from government business ethical?

• Is it unethical for Siemens to recruit people with such strong influence in government business? Or is it a “smart business” practice?

• Is “capturing more influence in Washington” an ethical strategy?

• Why is it important for managers to understand ethics in international business?

Bangladesh: $5 million to son of prime minister, mobile phone contract

Nigeria: $12.7 million to various officials, telecommunications contracts

Argentina: $40 million (at least) to win a $1 billion for national identity cards

Israel: $20 million to build power plants

China: $14 million to supply medical equipment

• Hard to trace bank accounts in Switzerland
• This money used to hire outside “consultant” (2,700 worldwide) to win contract
• A formal process for monitoring payments to “make sure” no illegal payments were being made
• Individuals responsible for managing bribery funds signed compliance forms stating they had not engaged in any such activity

• Corruption deeply embedded in the business culture
•  Before1999 bribery could be deducted as a business expense under the German tax code
• “useful money” would be used to win
• “It was about keeping the business alive and not jeopardizing thousands of jobs overnight"

• Siemens agreed to pay $1.6 billion for US and German legal suits

• Siemens used bribes to win business around world

• Largest fines ever levied against a company for bribes

• Since 1999, paid some $1.4 billion in bribes

(cc) image by nuonsolarteam on Flickr

Siemens

UPDATE: Siemens Biggest Federal Contracts

Siemens gains favor in U.S.

• $466 million order last fall from Amtrak for 70 electric locomotives

• A renewed $ 267 million contract to supply the Defense department with radiology equipment

• Add green technology to government buildings

• 600 positions filled

• August, President Obama at a Washington Navy Yard speech mentioned Siemens when applauding countries that had hired returning war veterans

• Camille Johnston, Michelle Obama’s former communications director in White House and a longtime Democratic operative was recruited last year as Siemens' U.S. corporate affairs chief

UPDATE: Siemens today

Smart Recruiting

UPDATE: Siemens today

UPDATE: Siemens unaffected by scandal

• “Its made capturing more business and influence in Washington a central part of its U.S strategy”
• Double its annual federal business to $2 billion by 2015
• Top Rival GE

• December 13, 2011, the Justice Department brought charges against six former Siemens executives
• Uriel Sharef (former board member) and two middlemen for conspiring to pay more than $100 million in bribes over several years in order to secure a $1 billion contract in Argentina
• The Securities and Exchange Commission brought a separate civil lawsuit against seven former executives
• Avoided toughest penalty: Debarment from U.S. government contracts

• “ The company’s inroads in the U.S. so far suggest that Siemens' entanglement in a foreign bribery case has caused only minimal, if any damage to Siemens' U.S business, and its relationships in Washington”

• Fiscal 2011, U.S. sales rose 12 % (fueled by federal contracts) , compared to total groups revenue of 7%

• Judy Marks, a former top Lockheed Martin Corp. veteran who has a “lengthy track record” with big government customers, now head of Siemens federal Business unit

• “sets Siemens up with a big- name defense contractor to bolster the company’s bidding power”

• New York headquarters to raise its D.C. profile
• Special federal business unit ran by a cadre of veteran Washington operators

Works Cited

Amtrak. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?um=1&hl=en&sa=N&biw=1280&bih=656&tbm=isch&tbnid=lq3d5tbgwK5cBM:&imgrefurl=http://netrightdaily.com/2011/01/dont-subsidize-amtrak-just-let-the-free-market-work/&docid=a9tkVLpbbLPYZM&imgurl=http://netrightdaily.com/wp-content/uploads/2011/01/amtrak.gif&w=400&h=268&ei=OmcvT9OFCqnA0AGs3YG7Cg&zoom=1&iact=rc&dur=523&sig=104123070902558009390&page=1&tbnh=131&tbnw=191&start=0&ndsp=15&ved=1t:429,r:0,s:0&tx=50&ty=97>.

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Dollar Sign. Digital image. So- Cal Library Connection. Web. 5 Feb. 2012. <http://www.google.com/imgres?q=money+signs+clip+art+without+boxed+outline&um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=kNorINouJjpG7M:&imgrefurl=http://so-calconnection.blogspot.com/2011_04_01_archive.html&docid=fbm2DheSYOm9zM&imgurl=http://3.bp.blogspot.com/-JxBOr_N7Kho/TZukdiKfToI/AAAAAAAAACM/g4TmGjR2CSI/s1600/dollar-sign.jpg&w=520&h=731&ei=_TYvT-TxEaX10gGfjInqCg&zoom=1&iact=hc&vpx=178&vpy=100&dur=163&hovh=266&hovw=189&tx=81&ty=171&sig=104123070902558009390&page=1&tbnh=148&tbnw=105&start=0&ndsp=20&ved=1t:429,r:0,s:0>.

Ethics Scale. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=-DCKYlGKbudMPM:&imgrefurl=http://gottesman.pressible.org/snbattiste/whats-your-ethical-weight&docid=ZrutPx0jf7WoEM&imgurl=http://files.pressible.org/267/files/2011/07/EthicsScale.jpg&w=334&h=324&ei=ZmovT4CGB6PV0QHjwoD6Cg&zoom=1&iact=hc&vpx=694&vpy=310&dur=184&hovh=221&hovw=228&tx=138&ty=146&sig=104123070902558009390&page=1&tbnh=130&tbnw=134&start=0&ndsp=18&ved=1t:429,r:9,s:0>.

Fuhrmans, Vanessa. "Shrugging Off Bribery Case, Siemens Gains Favor in U.S." Wall Street Journal: B.1. ProQuest Central; The Wall Street Journal. Dec 15 2011. Web. 4 Feb. 2012 .

Government Official. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?q=government+official+clip+art&um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=dj7QEszgluL9LM:&imgrefurl=http://www.school-clipart.com/_pages/0512-0909-0114-2303.html&docid=_mkgYfi3_U3a8M&itg=1&imgurl=http://www.school-clipart.com/_small/0512-0909-0114-2303.jpg&w=350&h=235&ei=XVEvT7jPDKrL0QGUjsHdCg&zoom=1&iact=rc&dur=296&sig=104123070902558009390&page=7&tbnh=144&tbnw=194&start=141&ndsp=24&ved=1t:429,r:16,s:141&tx=74&ty=109>.

International Businessman. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?q=international+business+man&um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=VOdjiv_RBw_OsM:&imgrefurl=http://www.123rf.com/photo_5589454_an-international-business-man-wearing-ties-of-country-flags-with-card.html&docid=zyI_bXaiJMijJM&imgurl=http://us.123rf.com/400wm/400/400/nruboc/nruboc0909/nruboc090900081/5589454-an-international-business-man-wearing-ties-of-country-flags-with-card.jpg&w=280&h=400&ei=90wvT-2uConr0gHYwZ3kCg&zoom=1&iact=hc&vpx=371&vpy=277&dur=174&hovh=268&hovw=188&tx=96&ty=151&sig=104123070902558009390&page=2&tbnh=138&tbnw=97&start=21&ndsp=25&ved=1t:429,r:7,s:21>.

Lockheed Jets. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=kKdCrkvNHSyF6M:&imgrefurl=http://www.sflorg.com/aviation/av020807_01.html&docid=xjqGCEisnhiXhM&imgurl=http://www.sflorg.com/aviation/images/imav020807_01_02.jpg&w=4267&h=2845&ei=ZmkvT_ykDsX10gG30t2WCw&zoom=1>.

Sales Growth. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?um=1&hl=en&sa=N&biw=1280&bih=656&tbm=isch&tbnid=nY6bHcRJuyV4_M:&imgrefurl=http://www.softsalescure.com/&docid=N6urpCVg4mBaDM&imgurl=http://0801.nccdn.net/1_5/0ce/190/1c0/12683278842074003.jpg&w=371&h=323&ei=2nUvT_bLAqXb0QHMnN3qCg&zoom=1>.

Siemens Building. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?q=Siemens+building&um=1&hl=en&biw=1280&bih=656&tbm=isch&tbnid=s1Azm8sqQ6EJQM:&imgrefurl=http://www.expo2010china.hu/index.phtml%3Fmodule%3Dhir%26ID%3D1250&docid=vyYfYQinivEjEM&imgurl=http://www.expo2010china.hu/hirkepek/Siemens_building_expo2010.jpg&w=320&h=225&ei=MUwvT6SwDojo0gH-xZHxCg&zoom=1&iact=hc&vpx=804&vpy=157&dur=29497&hovh=180&hovw=256&tx=144&ty=195&sig=104123070902558009390&page=1&tbnh=141&tbnw=193&start=0&ndsp=15&ved=1t:429,r:3,s:0>.

Siemens Logo. Digital image. U-day Blogspot. Web. 5 Feb. 2012. <http://www.google.com/imgres?q=siemens+electronics&um=1&hl=en&sa=N&biw=1280&bih=699&tbm=isch&tbnid=39Vw0SoQifgN7M:&imgrefurl=http://udayarumilli.blogspot.com/2012/01/openings-for-freshers-2011-passout-in.html&docid=_xbTtPY2QoGZFM&imgurl=http://4.bp.blogspot.com/-ViMBnS79h3k/TxVaTk_TDlI/AAAAAAAAHnY/6g1HWez3VOs/s1600/Siemens_logo.jpg&w=1280&h=720&ei=kEsvT9qNNajq0gHDubStDA&zoom=1&iact=rc&dur=446&sig=104123070902558009390&page=1&tbnh=116&tbnw=207&start=0&ndsp=15&ved=1t:429,r:2,s:0&tx=65&ty=107>.

Swiss Bank. Digital image. Web. 5 Feb. 2012. <http://www.google.com/imgres?um=1&hl=en&sa=N&biw=1280&bih=656&tbm=isch&tbnid=1OczfKuXF5palM:&imgrefurl=http://depositphotos.com/3962927/stock-photo-Money-in-swiss-bank.html&docid=ewn7oCT9nNI5hM&imgurl=http://static5.depositphotos.com/1002049/396/i/450/dep_3962927-Money-in-swiss-bank.jpg&w=450&h=450&ei=Am8vT-bRNqP10gH8xpTzCg&zoom=1&iact=hc&vpx=698&vpy=301&dur=129&hovh=225&hovw=225&tx=132&ty=245&sig=104123070902558009390&page=1&tbnh=135&tbnw=131&start=0&ndsp=18&ved=1t:429,r:15,s:0>.