Siemens daimler case
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Siemens paid $2.6 billion in fines and settlements for widespread bribery investigations. It was found to have paid bribes totaling over $100 million to win contracts in countries like Bangladesh, Nigeria, Argentina, Israel, Venezuela, China, and Iraq. Similarly, Daimler paid $185 million to settle lawsuits in the US after it was discovered to have paid $4.4 million in bribes to secure business in countries like Turkey, North Korea, Latvia, Bulgaria, Romania, and Russia. Both companies disguised these bribe payments through using offshore accounts and outside consultants, rather than comply with anti-bribery laws passed in 1999.
Siemens daimler case
- 1. Siemens-Daimler Bribery Cases presented by Sohini Banerjee 11BM60025 Partha Pratim 11BM60041 Arun Kabra 11BM60046 Abhishek Awasthi 11BM60071 Leelaram Tenneti 11BM60124
- 2. Siemens paid $2.6 billion for investigations and fine for bribery. It paid $5 million in bribes to win a mobile phone contract in Bangladesh, $12.7 million in payments to senior officials in Nigeria for government contracts, in Argentina, a different Siemens subsidiary paid at least $40 million in bribes to win a $1 billion contract to produce national identity cards, In Israel, the company provided $20 million to senior government officials to build power plants, In Venezuela, it was $16 million for urban rail lines. In China, $14 million for medical equipment, And in Iraq, $1.7 million to Saddam Hussein and his cronies. The method of bribery was hiring an outside consultant who would facilitate this. Rather than comply with the law after 2000, Siemens managers created a “paper program,” Overview
- 3. The German automaker Daimler produces busses in Turkey, and sells in countries around the world, including North Korea, Latvia, Bulgaria, Romania and Russia. The company apparently paid €3.3 million ($4.4 million) in bribes to secure business in these countries. Daimler set to pay $185 million to settle a lawsuit in the United States. Industrial group MAN and industrial services provider Ferrostaal also made these so called „useful payments‟. Questions to be thought of are whether abandoning bribery would mean that sales decrease at Siemens, MAN and Daimler and how to do business where there are countries in which it has been virtually impossible to conduct business, or at least win major contracts, without paying kickbacks to key decision-makers. Overview
- 5. In 1999, a pact was signed by most of the world‟s industrial nations in order to do away with acts of foreign bribery and Germany also joined this international convention. But, instead of complying with the law, the managers in Siemens tried to ascertain how efficiently they can disguise this practice of bribery from the law enforcement officials and the common public. In Siemens, the amount of money paid as bribes to foreign officials worldwide was huge. Mr. Siekaczek himself oversaw an annual bribery budget of $40 million to $50 million from 2002 to 2006 as well as the transfer of around $65 million through hard- to-trace offshore bank accounts. In case of Daimler, although a new legal framework was introduced after 1999 by the internal audit head, the executives refused to follow the same on the grounds that the company would lose sales in some of the countries. Moreover, the internal audit head in Daimler encountered strong opposition from the executives when he wanted to audit all the internal third party accounts as well as when he wanted to close all these accounts later on. Lastly, the then CEO of Daimler, Mr. Jurgen Schrempp, was also responsible to some extent for this debacle. Even after the laws were changed in Germany, he did not pay any attention to the problem of corruption within the company and was busy with the merger between Daimler and Chrysler. Problems Identified
- 6. LEGAL RISK- „Everybody does it‟ OR „It‟s simply part of the culture in some countries‟ : It was legal before 2000 COUNTRY RISK – possibility that a foreign country may be unable or unwilling to fulfill its obligations towards a foreign lender, investor or exporter POLITICAL RISK – Siemens withdrawing from any of the 190 countries where the risk of being asked for bribes is too great GOVERNANCE RISK - Employees detained by prosecutors said bribery was a normal business practice known about by senior management. COMPLIANCE RISK - Siemens compliance at 0% in 2007 Risk Management Concepts Involved
- 7. • A strong ethical culture is critical for effective corporate governance • Senior executives need to know what is going on throughout the organization • Strong internal control is more important in a widely dispersed and decentralized company. • A focus on “making the numbers” will never be successful in the long run • Effective organizational governance and policy making should be done considering the political situation and the business model to be designed the ethical way. Learning from the cases
- 8. Thank you!