Executive Summary
Siemens has implemented anti-corruption measures, detailed standards and ethics, and stringent corporate norms. Prior to the bribery scandal, Siemens had a superb reputation. Bribes have long been accepted as a business norm at Siemens. When calculating the project’s cost, Siemens workers used a famous tax phrase that literally means “acceptable costs” or “confidentially recognized payments.” The policies that allowed corruption to grow may be to blame for Siemens’ high levels of wrongdoing. Furthermore, it is a factor that contributes to negative company culture. Its management hoped that the strategy would help them keep the firm solvent. Executives and groups must comprehend the difference among control reports from external and internal auditors and tangible conformity outcomes from the methods and equipment put in place in order to achieve compliance. With additional inspections in effect and significant re-training, new techniques make it easier to report high-risk activities and potential intrusions.
Introduction
Siemens has established organizational anti-corruption policies, elaborate standards and ethics, and stringent business rules. For years, the corporation appeared to operate in accordance with the highest ethical and legal norms. Siemens had a stellar reputation previous to the bribery crisis. It was well-known for its worldly goods and dependable services in communications, electricity, transportation, and hospital instruments. It was typical to see news about its operations in remote places, the development of new high-quality items, and the winning of competitive bids. In the wake of the recent corruption scandal, German industrial firm Siemens missed some of its own red signals for international bribery (Mercy and Anuradha, 2007). According to former corporate insiders and internal company evaluations, the concerns addressed the corporation’s use of third-party vendors, who have frequently functioned as conduits for paying foreign politicians. According to evidence from government records in China, difficulties with resellers persisted throughout the epidemic, resulting in the sale of hospital devices to Chinese government institutions at exorbitant costs.
Problem Statement
Bribes have become the recognized business standard at Siemens over many decades. They were routed through obscure intermediaries, disguised bank accounts, and fake advisers. Siemens personnel utilized a popular tax word literally meaning as reasonable expenses or privately perceived as payments when determining the cost of the project. The fact that the legislation in Germany was constructed in such a manner that bribery might be reported for as tax-deductible costs did not help matters (Mercy and Anuradha, 2007). Siemens published a new company circular mandating functional groups and regional firms to incorporate a new anti-corruption provision in all agreements with agencies, advisers, dealers, or other third parties.
Discussion
Bribery is an issue for Siemens that may be attributed to a variety of causes, ranging from German legislation to the company’s bad corporate culture. The former is due to a statute that does not prohibit paying bribes to foreign entities. Siemens used this approach so widely that when the ban was repealed, the culture was already firmly established in its infrastructure. It maintained this technique and readily admitted that the funds were utilized to keep its operations running in various nations.
The high levels of corruption at Siemens may be traced back to the rules that allowed the practice to flourish. Furthermore, it is a component that contributes to poor corporate culture. Its executives believed that the technique would help keep the company afloat. Any manager who would have taken a different stance against the corporate culture would have faced stiff opposition from other managers. Corruption at Siemens has an influence on competitiveness since it hinders rivals from participating in the same business or country (Mercy and Anuradha, 2007). The consequence of a nation accepting the money in return is that it endangers local jobs and forces residents to pay exorbitant prices for commodities.
Recommendations
The Siemens incident is a symbol of history, and many hope that it be understood and used to establish easy compliance processes in the future. Without effective countermeasures, the fear is that corruption will spread like a virus, with corporations emulating one another. Another conclusion is that the United States is the only entire justice system that takes corruption seriously. Only the US Department of Justice has been able to penalize businesses adequately. However, the United States should not be alone in penalizing corporate wrongdoing. All governments must do more than merely declare that corruption is wrong; they must also demonstrate that it will be prosecuted.
Siemens did not wait for the inquiry to be finished before beginning the remedial procedure, which resulted in two critical results. First, management disclosed findings from the repair process with authorities, exhibiting a degree of cooperation that prosecutors praised in the settlement deal; second, the corporation quickly proceeded to improve its housekeeping. In addition to repairing and implementing operational controls, the corporation improved its worldwide compliance and internal audit activities, concentrating on issues such as possible corruption in reporting relationships, ability, approvals procedures, and remuneration. Disciplinary procedures were evaluated to see if they were working effectively in responding to new claims, including the use of relevant skills in identifying the appropriate degree of an internal inquiry, which is neither over-reacting nor inadequately.
Managers and committees must understand the distinction between reports from external and internal accountants on control and actual conformance results of the systems and methods put in place to achieve conformity. New methods facilitate reporting elevated transactions and suspected breaches with new checks in place and intense re-training. Nevertheless, the decision is used to avoid fully automated and disproportionate prudence in situations where concerns are brought up for evaluation irrespective of risk, which, in the extreme, can cause supervisors to go haywire in seeking someone to sign off on exchanges instead of doing their due diligence and maintaining culpability. Middle top management’s fear of negative evaluation and attractive compensation administration is also taken into account.
Conclusion
The reality that German regulations were written in such a way that bribes might be recorded as income charges did not help matters. Siemens issued a new company circular requiring all agreements with organic compounds and regional enterprises to include a new anti-corruption language. Siemens did not wait for the investigation to be completed before initiating the corrective action, which resulted in two important outcomes. Disciplinary processes were assessed to see if they were successful in response to changing accusations, including the application of applicable skills in determining the right degree of an inside inquiry that is neither overreacting nor insufficient. The Siemens tragedy is a sign of the past, and many hope that it will be recognized and used in the coming to build simple compliance methods. Without adequate defenses, corruption is expected to spread like a disease, with firms imitating one another. Taking the payment in exchange puts local employment in jeopardy and compels citizens to pay high prices for goods.
Reference List
Mercy M., Anuradha D. 2007. ‘Siemens Saddled with Scandals (A): Doubts over German Board Structure’. IBS Case Development Center. pp. 1-6.