Ethics

Siemens case study

The Siemens bribery scandal brought to light a strategic dilemma facing multi-national firms attempting to gain a competitive edge by operating abroad; specifically, how can they balance adherence to their own ethical and legal standards with the customs required to do business efficiently, or perhaps at all, in foreign markets?   

Germany’s Co-Determination law has since drawn intense criticism as hampering competitiveness and creating untenable situations for management, rife with conflict-of-interest issues, not only because of Siemens, but also because of the number of other German-based companies accused of bribing labor union representatives.

The forced resignation of CEO, Klaus Kleinfeld, despite the resulting success during his tenure, illustrates the predicament international managers face with regard to conflicting operational methods, and leads us to larger questions about accountability within an organization.   

  As the case study author states, the Siemens scandal is representative of what many firms believe is the inevitable “ethical cost of intense competition in global markets”, particularly emerging markets, where payments for contracts are described as common place and perhaps even required.   

Perhaps the most glaringly problematic observation remains that the Siemens AG top management claims that they failed to notice rampant, and arguably conspicuous embezzlement leading to lucrative foreign contracts.   

Are there flaws in the German System of Corporate Governance?

The 2007 scandal resulting in charges against Siemens’ Chief of Information Technology, Johannes Feldmayer, and Chief of Finance, Karl-Hermann Baumann, was rooted in illegal payments designed to work around German corporate governance laws.   In this instance, IG Metall complained that Siemens was illegally funding smaller, rival union, AUB, in an attempt to grow and cultivate it as an ally against IG Metall in the..

* 1. Case Analysis by...