Siemens is a German conglomerate that has been in business since 1847 with its three divisions of

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Siemens is a German conglomerate that has been in business since 1847 with its three divisions of Energy, Health Care, and Industry. Siemens has 428,200 employees and operates in 190 countries, producing wind turbines and high-speed trains and providing engineering services on all types of construction projects. Siemens's net income for 2008 was \(\$ 8.9\) billion on net revenue of \(\$ 116.5\) billion. However, a large portion of Siemens's revenues came from projects with governments and their agencies. As a result of a multi-country investigation, authorities uncovered a four-year pattern of bribery by Siemens that is shown in the chart below. Both the SEC and the Justice Department were investigating Siemens. The two agencies concluded that Siemens had paid more than 4,283 bribes totaling \(\$ 1.4\) billion to government officials to secure contracts. The SEC concluded that the bribes resulted in the company obtaining \(\$ 1.1\) billion in profits. Siemens did follow what is known as "the four-eyes principle" of internal control for the FCPA, which is that all payments required two signatures. However, the company had made so many exceptions to the four-eyes principle that, operationally, it was not in effect. The SEC complaint notes how many red flags the board ignored in the years during which the bribery was occurring. Since 1999, when Germany signed on to the antibribery provisions of the OECD, Siemens's executives were concerned about all the companies involved in bribery around the world. Siemen's CEO at the time of the OECD adoption also voiced concern to the board about the number of Siemens executives who were under investigation by the German government for bribery activities. He asked the board to take protective measures because its members could be held responsible for inaction. Despite his plea, the bribes continued with support from some board members.

In 2001, general counsel for the board notified the members that in order for the company to meet U.S. standards for its new New York Stock Exchange (NYSE) listing, it needed to end its practices of having off-the-books accounts for the payment of the bribes. The company took no steps to investigate or end its practices. The SEC noted there was a stunning lack of internal controls as well as a tone at the top that did not take the FCPA seriously.

The U.S. Justice Department and Siemens AG reached an agreement to settle the company's ongoing violations of the FCPA. Siemens agreed to pay \(\$ 800\) million to the United States, a fine twenty times higher than the largest fine ever collected under the FCPA. Siemens is also settling charges with ten other countries and will be paying fines that total \(\$ 5.8\) billion. The SEC complaint states that the bribes involved employees at all levels of the company and revealed a culture that had long been at odds with the FCPA. \({ }^{67}\).....................

Discussion Questions
1. Add together all the fines and compare with the profits made from the bribes to determine whether Siemens made a good business decision with its approach to winning contracts.
2. Peter Loscher, the new CEO hired to take over following the settlement of the FCPA charges, indicates that the company was a great innovator, but no longer had marketing skills because it had relied on the facile approach of bribery for so long. \({ }^{68}\) Thinking about his statement, offer a risk associated with using bribes as a business model.
3. Reinhard Siekaczek, the former Siemens employee, largely responsible for Siemens accounting system that hid bribes for five years, and who has been charged with breach of trust under German law, has made the following statements about his activities, the bribes, and the consequences:
"People will only say about Siemens that they were unlucky and that they broke the 11 th Commandment. The 11 th Commandment is: 'Don't get caught.'"69 "It was about keeping the business unit alive and not jeopardizing thousands of jobs overnight."
"I was not the man responsible for the bribery. I organized the cash."
"I would have never thought I'd go to jail for my company. Sure, we joked about it, but we thought if our actions ever came to light, we'd get together and there would be enough people to play a game of cards."
Can you describe what type of moral development is involved here? What did he miss in his evaluation of his conduct and the risks? What lines did Siemens cross in getting to this level of bribery payments?

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