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Siemens Case Study

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Siemens AG is a German multinational engineering and electronics conglomerate company headquartered in Berlinand Munich. It is Europe's largest engineering company and maker of medical diagnostics equipment and its medical health-care division, which generates about 12 percent of the company's total sales, is its second-most profitable unit behind the industrial automation division. Siemens' principal activities are in the fields of industry, energy, transportation and healthcare. It is organized into four main divisions: Industry, Energy, Healthcare, and Infrastructure & Cities. Siemens and its subsidiaries employ around 360,000 people across nearly 190 countries and reported global revenue of approximately €78.3 billion in 2012. The company has been the subject of a number of controversies in its history. There were a series of scandals that involved some of the company's employees bribing foreign officials to gain contracts and creating slush funds for this purpose. In 2008, it was revealed that Siemens had bribed the two main political parties of Greece for approximately 10 years to be the sole provider of mechanical and electrical equipment of the Greek state. After the exposure the German authorities moved to arrest the representatives of Siemens in Greece, who had managed to escape from the Greek authorities. The German judicial system didn't allow the Greek authorities to cross-question the representatives. As a result, there wasn't any solid evidence against the corrupt politicians, who weren't arrested and continue to be active in the Greek political system. Meanwhile, the Greek state cancelled the planned business deals. Since all spares were provided by Siemens, the equipment, like traffic lights eventually broke down, and projects like the metro expansion were abandoned. In another case, the company was accused of bribing labor representatives on the supervisory board in order to gain their support for its policies. After the German authorities conducted raids on Siemens'offices in Germany, investigations were initiated on Siemens in several other countries like the US, Greece, Italy and Switzerland for possible misconduct. | | As a fallout of this scandal, the CEO of the company, Klaus Kleinfeld, and the chairman of the supervisory board, Heinrich von Pierer, had to resign even though they were not directly implicated. With bribery scandals surfacing in Siemens and many other German companies like Volkswagen, questions were also raised about the effectiveness of the Co-determination law in Germany, which advocated a system in which a supervisory board governed the management board and at least half the supervisory board seats had to be filled by labor representatives.

In such a system, critics contented that the management always needed the labor representatives' support to be in job and gain support for company policies, which led to a suspicious alliance between them. The case also highlights the opinions of several analysts on the issues related to bribing by the German companies and Siemens in particular and the challenges the new CEO is likely to face at Siemens. The ethical standard which was violated by Siemens AG is integrity. Giving bribes and gifts fall into this ethical standard. These bribes would prejudice the interest of the other party. Hence, this will discredit company’s professionalism. In relation to the bribery case, Greece reached an out-of-court settlement with Siemens AG. Siemens will write off EUR80 million in unpaid arrears owed by the Greek government and pay EUR90 million in cash to the government for various purposes. They spent EUR100 million in new investments in Greece in 2012. They are also considering EUR60 million for future investments. Bribery is one of the serious cases a business can encounter. Not only that it questions the professional performance of the individual but also this action will reflect on the company’s image and reputation. Since morality cannot be legislated, an out of court settlement is enough to appease both parties. Their decision is already just since the government can get a fair consideration out from the cash settlement made between the parties involved.

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