Bribery is considered to be the breaking of law in all countries around the world; they may be developed or under developed. Bribery can be succinctly defined as the condition on which an individual or any business entity can dictate their amount of money they require from the interested party. In multinational organizations, the concept of bribery is taken as a common attitude and they justify it on several grounds. They take the cost of bribery as a normal business cost. This case deals with the Siemens organization accusing them for bribery practices taking place within their organization by the top management level and other employees of the organization.
Question 1: Is bribing unethical and illegal or just a cost of doing business as assumed by some companies? Discuss this in the light of bribery scandals at Siemens.
Bribery is definitely an unethical and illegal practice. Bribery cannot be considered as a cost of business just to get contracts for the company or securing their financial position in any international state or country.
The reasons given by the employees when they were accused with the bribery scandal was mainly focusing on one aspect. They said they did it for the benefit of the company, so that the organization could get good business and be stable in all their different business units.
Referring to the case, it is mentioned that in May 2007 two former managers of AG Siemens were convicted by the German court for bribing the employees of Enel SpA which is an Italian energy company.
The employees said in their defense that the bribery was asked to them by the employees of Enel if they wanted the contract for their company, Siemens. The employees of Siemens also defended their case by saying that the practice of bribery was common to get the contracts for the company on an international level.
In late 2006, Siemens had faced another scandal of bribery in the telecommunication department which was bribing foreign officials for securing of contracts. Accusations were also made by IG Metall Company to Siemens for bribing their unions. Many other countries like US, Italy, Greece and Switzerland has accused Siemens for having misconduct while doing their foreign business.
Siemens had practiced bribery so that they could win the contracts in the international market and become a strong player in their respective field. This is an unethical practice but it has been observed that for multinational organizations, the concept of bribery is considered a norm.
Siemens has also been charged for bribing the employee representatives of different organizations so that they can get their work done easily. The former Siemen managers were also convicted of bribing the foreign officials for getting the business contracts for their organization. The main worrying aspect is that the practicing of bribery may be spread along many levels of management and to get to the root cause may be extremely difficult.
Bribery is extremely unethical and it should not be considered as a cost for businesses even if they are multinationals because then there would not be fair dealing which is again not right or ethical.
What options do companies have to win business contracts without bribing, especially in foreign countries?
According to analysts, the bribery conducts which Siemens had applied was due to the intense global competition which was being faced by them. Major companies are suspected to resort to this practice of giving underhand payments for getting contracts for their company. In developing countries, giving money for securing contracts was considered a norm and they would place this money under the head of business cost.
Unethical business practices were surfacing Germany at the time when the Siemens case came in the limelight. According to different analysts the Co-determination laws of Germany were flawed, because many companies were being discovered that they were involved in bribing practices.
The law had the compulsion of including the labor representatives in the board of committee. The presence of the employees of the organization caused discomfort for the board for discussing any important issues for the company. The non-labor members of the board started to take the important decisions before the meeting took place, this could be one of the major problems why bribery was being implemented more.
Secondly, Non-German directors were not allowed to be part of the supervisory board, this was a major drawback in the law as it was resisting the new ideas from coming in from the foreign market. Organizations like Siemens and Volkswagen had their large businesses coming from the foreign market, outside Germany.
If the directors of foreign multinationals are not given a place in the supervisory board, they may not know what business practices are being followed in the country and this in return may force them to indulge into the practices of bribery. Conflicts of interest may tend to arise in this situation following with lack of trust while conducting the business.
Companies can eliminate the practice of bribery if they allow the directors of all organizations with whom they conduct their business to have a place in the supervisory board. Being at the top level by the directorâ€™s leads to a good chance of getting to know the strengths and weaknesses of the organization and this would allow them to make the right decisions for the organization.
Question 2: Was the board right in not extending Kleinfeld’s term even though he had performed well as CEO and was not implicated in the scandals directly?
The board should have extended the term for Kleinfeld. The performance of Kleinfeld should have been kept in view while taking the decision for his position in the organization. During his stay in the company, he had restructured Siemens in just a time span of two years. In the world of such cut throat competition, Kleinfeld made the employees capable enough to make decisions faster and accurately according to the situation.
The businesses that were not profitable of Siemens were sold off to other organizations by Kleinfeld. Merger was made with Nokia so that they would become the biggest network firm possible. Kleinfeld had systematized the operating procedures of Siemens organization to a very large extent.
Kleinfeld was not involved in the scandals of bribery directly and so this leverage should have been provided to him that he should not be terminated from the organization. His performance should have had a larger impact on the decision made by the supervisory board.
As mentioned in the case, it seems the bribery case was a means to terminate Kleinfeld from the organization as he was not accepted by the old generation workers due to the way he applied his working style and the leadership style in the organization.
What is the likely impact of his departure on the company?
The likely departure for Kleinfeld for leaving Siemens was that he was a very aggressive CEO. He believed on working at fast pace and making decisions on an immediate basis. This leadership style was resisted by many of the old conservative workers of the organization who did not easily accept this style. They didnâ€™t want to work under such leadership.
Kleinfeld had caused a reasonable growth momentum for the Siemens organization. The new CEO will have to face a lot of major challenges with the former one having to leave the organization. Kleinfeld was aware of how the work should be taking place and what decisions should be taken for the organization.
The new CEO will have to work on gaining back the reputation for the organization and it will have to gain the trust of the labor management representatives. This will take quite some time.
Also, Kleinfeld had good decision making skills and that too on an immediate basis. He didnâ€™t believe in delaying the decisions, with his departure the organizations may face some problems in their decision making procedures.
Was Siemens really at fault or was it just unfortunate to have got caught since many other companies bribed for contracts the way it did?
Analysts have analyzed that many companies had been practicing bribing in their operating procedures. They were forced to do this because of the international competition that was being faced by them on a very high scale.
If they were not able to get the contracts in the international market, they would not be able to maintain a stable position, this competitive force were mostly driving the companies to go for bribery in that business era.
Bribery as mentioned before, is an extremely unethical business practice and no organization should opt for this stage even if there is no other option left, because if once the organization gets into bribery, it earns itself a bad corporate image and to get over with this image becomes extremely difficult for the operating procedures for the company in the long term.
Few companies tend to realize this fact that when they go for bribery, they immensely damage the reputation of the company. There is considerable legal and financial danger associated with bribery, and once proved guilty of bribery, organizations may be entangled with the legal proceedings for a very long time. This may affect the business processes or even halt them for some time until the case gets resolved.
The demands for bribes may tend to increase with time and the organizations may realize that in the long term it will end up paying the bribing money from its hard earned profits. The OECD has implied its Anti-Bribery convention policy and it should be applied in all organizations for the prevention of such bribery schemes that take place in the organizations with the top management being aware of it.
The case highlights the problems which Siemens organization had to face while they were found guilty of bribery. The German Co-determination law needs to be revised so that it does not instigate the organizations to go for the practice of bribery. Siemens will have to face major challenges as its old director has left and new director will have to re-build the strong corporate image for the Siemens organization.
The top management needs to implement all possible ways and methods to eliminate the practices of bribery from their organization. A major check and balance measures should be applied so that the scandals of bribery can be investigated till the roots and further the charges of bribery should not be present in the organization. As the former manager states, to have a zero tolerance level implemented if the employees are found in illegal practices or misconduct in the organization.
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