Reference no: EM131380311
Siemens failed to implement adequate internal controls to comply with the company's NYSE listing, including the detection and prevention of violations of the FCPA. As already stated, Siemens made thousands of payments to third parties in ways that obscured the purpose for, and the ultimate recipients of, the payments. Despite a policy that required two signatures on company documents to authorize transactions, a significant number of business consultant agreements were entered into and a significant number of payments were authorized in violation of the policy. Siemens paid approximately $1.4 billion in bribes to foreign government officials. Doing so involved the falsification of Siemens's books and records by employees throughout the company. Specifically, Siemens failed to keep accurate books and records by
(1) establishing and funding secret, off-books accounts;
(2) establishing and using a system of payment intermediaries to obscure the source and destination of funds;
(3) making payments pursuant to business consultant agreements that inaccurately described the services provided;
(4) generating false invoices and other false documents to justify payments;
(5) disbursing millions in cash from cash desks with inaccurate documentation authorizing or supporting the withdrawals;
(6) concealing the identity of persons authorizing illicit payments;
(7) recording illicit ASSF payments as legitimate commissions in Oil for Food transactions;
(8) falsifying UN documents in connection with the Oil for Food program; and
(9) recording bribes as payments for legitimate services.
Siemens failed to establish controls over cash disbursements, allowed manual payments without documentation, and failed to ensure the proper use of intercompany accounts. In addition, the company failed to establish an effective central compliance function. The compliance office lacked independence and was severely understaffed. Siemens's tone at the top was inadequate for a law-abiding entity, and employees engaged in bribery and other misconduct on behalf of the company were not disciplined adequately. Siemens also failed to conduct appropriate antibribery and corruption training.
Questions
1 . Evaluate the ethics of actions taken by Siemens with respect to Josephson's Six Pillars of Character and virtuebased decision making, as discussed.
2. Under the German Criminal Code, much like the U.K. Bribery Act, all bribes are prohibited including facilitating payments. The Foreign Corrupt Practices Act (FCPA) in the U.S. makes a distinction between the two and permits facilitating payments made to induce a government official to carry out her designated responsibilities. From an ethical perspective, which of these two approaches are more consistent with virtue theory?
3. Comment on the following statement from an ethics perspective: Companies that make the mistake of trying to follow the bottom limits of legal behavior without championing ethics should learn from the Siemens case that once a culture of taking short cuts and ignoring values is in place, it is only a matter of time before employees cross the line into illegal conduct.
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