Siemen’s; one of Germanys leading companies in engineering ran into difficulties with multiple forms of bribery and business misconduct. The main causes of fraud arise due to the disconnect and the inconsistency between the laws and codes of conducts as well as the decline in moral behavior exemplified in the business industry. It relates to the non-uniformity theory. What the theory describes is how due to the gap between multiple different offices of law there is the ability for misconduct to grow and discrepancies to occur. The broad provisions set in a country for a business transaction is what allows corruption in this setting. Before Siemens was faced with being raided in Germany by the government officials they were faced with charges of corruption in multiple countries. Siemens was charged with manipulation of accounting records and adopting methods of keeping payments intentionally from general financial statements. Siemen’s was additionally charged for having weakly executed audits. The multiple different investigations private and public also confirmed that certain payments were also not recorded with the intention to keep them nondisclosed. This identifies how corruption and the ability to carry it out lies within the management system and the overall infrastructure of the company.
The scope in which actions of corruption and immoral ethics are caused due to inconsistency between the law and the written codes of conduct. In this situation both the business and the government officials are those who exploit the system of management and the provisions in the country. Not only do these actions damage the business but have rippling effects on the country and its entities as well. If companies are caught in these fraudulent acts it suffers a major financial loss such as Siemens did, due to the large fines and loss of profit when contracts are terminated such as the case in Italy with the loss of over 38 million in profit. Not only does a company miss out on financial benefit however they have large scale reputational damage. The main difference between the two is that financial damage can be recovered and time can make up for the loss however with reputational damage it stains the image of the company now and for its existence. A company that has a tarnished reputation has much more difficulty in the industry due to the lack of business opportunities in the market because of the fact many companies could be hesitant to collaborate based on previous knowledge. In turn damage is not limited to financial but is however also implemented in social image and reputation.
Siemens main problem was corruption, this in turn is more than likely to deeply damage its reputation. It will damage its image in a market and non-market environment. In order to regain and uplift its image it must first take initiative to save what remains of their image and run a much more open and effectively ran corporation. It should apply a much larger and effective system to eliminate any trace of corruption and suspicious behavior that could be involved. Siemen’s should develop an anti-corruption process training programs to prevent employees from giving or even receiving briberies of any kind i.e. monetary or influential; as well as teaching employees at any level on how to handle a situation when it presents itself. The management needs to be completely redeveloped and need to be restructured in order to meet the moral qualifications and standards of the code of ethics in business. Transparency will be key to rebuilding in this situation. Having accountability in the company and its accounting systems will be key to redeveloping the image of the corporation.
The Italian government eventually was responsible for sending two of the Siemens employees behind the bars against corruption charges in italy. Some of the accusations against the employees were charged for bribing 6 million to the management of Enel, an Italian based company. The justifications of the Siemens employee’s actions were that if they did not make that type of incentive payment they would be unable to achieve market entry and securement of the project. Had they been rejected from the project it would have denied Siemens initial market penetration, however the issue is very sensitive based on morality. Although it is against the ethical system of business if a utilitarian perspective would have been approached we would have favored Siemens. The fact that it was their initial market entry turning down the project would have led to a loss of business for both companies and would have equally rippled into consequences such as the loss of employment for workers. In the second perspective it can be interpreted that it was in a greater benefit to bride the managers of Enel in order to produce a greater good. However, if it is seen from the traditional perspective it is seen as immoral and a conflict of interest as well as illegal.
There is a thin line between bribery, when looking at corruption we define it as the abuse of entrusted power for private or personal gain. When defining bribery, it is defined as an offer or receipt any present to do something which is morally incorrect. The policies to stop corruption and bribery must be equally adopted by the business organizations and government to eliminate the gap. There must be an anti-corruption program within organizations and their entities to regulate business activities. There should be a joint effort from peers of the company and its stakeholders to eliminate corruption and bribery in any form and manner. The management system has to bring accountability and transparency in the company. It must ensure that the accounting records are represented in their fullness and a high level of accuracy to eliminate any manipulation. The management should take all efforts for not keeping accounting records off the books. It must ensure to have a very transparent and strong audit of the company. It should include certain programs to prevent employees from corrupt practices in the future. They should be taught the importance of business ethics and moral standards through regular programs in the company.
The management systems that need to be implemented to Siemens include them having a better understanding of the regulatory enforcement environment. They need to facilitate management to understand, commit to, and support anti-fraud and anti-corruption initiatives. Another action that Siemens could highly benefit from and progress include prioritizing the key risks to the company’s business, their brand and their reputation. Maintaining compliance in light of the scope and complexity of global business growth will be extremely essential in the reconstruction of the company, by seeking and obtaining expert advice when responding to compliance issues or threats they will also benefit a lot and identify key problems and potential discrepancies early on. The overall objective of a company incorporating action like this would be to provide practical suggestions to enable corporations to implement these practices. These suggestions would also provide guidelines and encourage corporations and their law firms they partner with to develop effective compliance programs that will avoid as well as remedy their previous wrong doings especially while dealing with fraud and corruption.