Chapter 14 Video: Global Ethics and Siemens (6.30 mins)

Summary

The video explores the challenges of global business ethics, focusing on Siemens' involvement in a large-scale bribery scandal. It highlights how ethics govern corporate behavior, with bribery being a common but unethical practice used to secure contracts. Siemens faced significant fines after it was discovered that executives had used bribes to secure global projects. Despite the scandal, Siemens has since implemented sweeping reforms, including leadership changes and stricter compliance measures. The case serves as a reminder of the high stakes for companies engaging in unethical practices and the global efforts to combat corruption.

Takeaways

• 😀 Ethics in global business governs the behavior of people, firms, and governments regarding right and wrong.
• 😀 Bribery and corruption are common ethical missteps in global corporations, with over one trillion dollars paid annually in bribes worldwide.
• 😀 Siemens, a major global player in electronics and engineering, faced a major bribery scandal in the 2000s.
• 😀 Siemens executives used bribes and kickbacks to secure large government contracts in countries like Argentina, Venezuela, and Bangladesh.
• 😀 Unlike smaller bribery scandals, Siemens' case involved a long-term pattern of systemic bribery involving hidden accounts and off-the-books transactions.
• 😀 Countries with less transparent regimes are more prone to bribery, with smaller 'grease payments' often used to expedite business decisions.
• 😀 Transparency International tracks corruption levels worldwide, with countries like New Zealand and Denmark ranking low in corruption, and many African and former Soviet states ranking high.
• 😀 International conventions, like the OECD's Anti-Bribery Convention, aim to curb corruption, but enforcement remains a challenge.
• 😀 The U.S. Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. companies to bribe foreign officials, but foreign firms may still face fewer restrictions.
• 😀 Siemens has made significant internal changes to improve ethics, including creating a high-level compliance position and holding former executives accountable.
• 😀 Despite admitting to legal violations, Siemens avoided a guilty plea, enabling it to maintain its reputation and continue bidding on major public contracts.

Q & A

What is the primary issue discussed in the Siemens case?

The Siemens case primarily revolves around bribery and corruption, where the company used bribes to secure government contracts across several countries, leading to legal consequences and a significant hit to its reputation.

How much did Siemens agree to pay in fines to settle bribery charges?

Siemens agreed to pay more than 1.34 billion euros in fines to American and European authorities to settle charges related to its bribery practices.

Why did Siemens executives use bribery to secure contracts?

Siemens executives resorted to bribery to expedite decisions and secure lucrative public works contracts, as it was often perceived as a necessary tool to compete in certain global markets where corruption was more prevalent.

What were some of the major projects involved in Siemens' bribery scandal?

Siemens used bribes to secure projects such as a national identity card project in Argentina, mass transit work in Venezuela, and a nationwide cell phone network in Bangladesh.

How did Siemens manage the bribery operations internally?

The bribery operations were orchestrated by mid-level executives and employees, involving hidden bank accounts, shadowy consultants, and an annual slush fund of around 40 to 50 million dollars used to bribe foreign officials.

What are some of the global initiatives against bribery and corruption?

Global initiatives like the OECD’s anti-bribery convention, the United Nations' declaration against corruption, and the U.S. Foreign Corrupt Practices Act (FCPA) are designed to combat bribery and corruption in international business.

How does bribery affect global businesses and markets?

Bribery distorts competition, undermines transparency, and perpetuates inequality. It also creates an unfair advantage for corrupt businesses, making it difficult for companies that operate ethically to compete.

What changes has Siemens made to address its ethical issues?

Siemens has created a new high-level compliance position to enforce anti-corruption rules, improved internal controls, and made public examples of former executives to show that unethical practices will not be tolerated.

How did Siemens avoid a full conviction despite admitting to violating the law?

Siemens avoided a full conviction by admitting to legal violations but splitting legal hairs, allowing it to avoid a guilty plea or conviction for bribery while maintaining its eligibility for critical public contracts.

What broader message does Siemens’ case send to global companies?

The Siemens case sends a message to global companies that engaging in bribery can lead to severe financial and reputational consequences, and that long-term unethical practices will eventually catch up with even the largest and most respected firms.