The Siemens Logo
In 2008, there was a financial scandal in Siemens AG, Germany, which is a multinational company working in diverse fields. The company had been engaging in systematic corruptive mechanisms. The scale of bribery was unprecedented – 4283 payments in 332 projects with the bribes totalling US$ 1.4 billion.
A settlement was reached with the German and US authorities. As a consequence, the company had to pay Euro 2 billion in the form of fines and compliance costs. The US Department of Justice appointed a monitor to watch the compliance progress.
The company went through a great transformation. The entire Board was replaced and compliance measures were introduced in all the departments of the company in every unit in the world. Now Siemens has a best-in-class compliance system and is fighting corruption with collective action.
What is compliance? It means compliance with:
- Anti-corruption legislation
- Anti-trust legislation
- Anti-discrimination legislation
- Environmental laws
- Labour laws
- Human rights legislation
- Privacy law
In addition, compliance also means governance by the internal values of responsibility and commitment to ethical actions and the promotion of an integrity culture.
The company followed three steps:
- Immediate actions: Change of leadership, directives from the top, independent investigation.
- Implementation of new system: Compliance programme, compliance organization, compliance training to all employees, and tools for compliance.
- Becoming a leader in ethical management: Values and integrity in all areas, continuous improvement, collective action, and sustainable development.
In the collective action, Siemens is fighting corruption in cooperation with agencies such as Transparency International, UN Global Compact, and the World Bank, and even with competitors. In every action, a Siemens employee is guided by these questions:
- Is it the right thing for Siemens?
- Is it consistent with the core values of Siemens and mine?
- Is it legal? Is it ethical?
- Is it something I am willing to be held accountable for?
Results of the restructuring have been the following:
- Decision-making became easier for the employees given the well-defined policies that guide them through challenging situations.
- Transparency in dealing with vendors gave the company a competitive edge.
- Customers felt more comfortable dealing with the company.
- The company was ranked No.1 in the Dow Jones Sustainability World Index.
- The business and profits actually improved.
Siemens has fundamentally changed and is now seen as an industry benchmark in ethics, compliance, and sustainability.
Afterword: Ethical and sustainable businesses are rare (Recall Anderson and Interface). Even rarer perhaps are cases of companies arising like a phoenix out of huge scandals and become responsible ones. Siemens is a such a rare example and one hopes that its ethics will remain.
I hope Siemens becomes the common (rather than the exception). I had no idea! I’ll add Siemens to my list for “GOOD Companies”. Gracias
I have been a witness to many unethical practices in all walks of life, especially so in India. It is an exception to be ethical as we believe that being ethical always brings us into crisis. Governance of many countries care, a damn for an upright person and it is often an unwritten rule to grease the palm. Voices of the straight forward, is unheard and life carries on as if it was the norm. This in turn explains the culture of the country, region or the institution. We have examples of Worldcom, Enron, British Petroleum and the like who spoke ethics on paper and carried on opaque transactions, with world becoming aghast when skeletons fell out of the cupboard. When speed is desired, with the of object racing against others, actions become less transparent and speed money gets activated. When once the entity or the individual is in the slush, there is no point of return. To be out of it requires a constant vigil, good governance and a slow sustainable growth that cushions it with controls. Top management’s sincerity and commitment to best practices is a must, even when struck by any crisis. Is this possible? Yes it is, provided we understand that we are not the owners but custodians, who have shouldered responsibilities on behalf of others. It requires fire in the belly to be upright both in action and thought.