Abstract

This case discusses the bribery scandals that were unearthed at Siemens AG (Siemens) in 2006 and 2007. These scandals involved some of the company’s employees bribing foreign officials to gain contracts and creating slush funds for this purpose. In another case, the company was accused of bribing labor representatives on the supervisory board in order to gain their support for its policies. After the German authorities conducted raids on Siemens’ offices in Germany, investigations were initiated on Siemens in several other countries like the US, Greece, Italy and Switzerland for possible misconduct. As a fallout of this scandal, the CEO of the company and the chairman of the supervisory board had to resign, even though they were not directly implicated, as the scandals had occurred during their tenure. With bribery scandals surfacing in Siemens and many other German companies like Volkswagen, questions were also raised about the effectiveness of the Co-determination law in Germany, which advocated a system where in a supervisory board governed the management board and at least half the supervisory board seats had to be filled by labor representatives. Critics contented that in such a system, the management always needed the labor representatives’ support for company policies, which could lead to a suspicious alliance between them. The case also highlights the opinions of several analysts on the issues related to bribing by the German companies and Siemens in particular and the challenges the new CEO is likely to face at Siemens.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the impact of the bribery scandals unearthed at Siemens AG on the company and the economic climate in Germany.: Analyze the steps taken by Siemens AG to prevent such incidents in future.: Discuss the role of the co-determination law in the brib

Keywords

Siemens AG, Bribery Scandal, Government Contracts, IG Metall, Germany, Heinrich von Pierer, supervisory board, Management Board, Klaus Kleinfeld, Co-determination law , Mitbestimmung, Enel SpA, embezzlement fraud, Tax evasion, Slush funds, Corporate Governance, Business Ethics, Anti-public-corruption compliance