Read the case study carefully and answer all the questions given below.

The Siemens scandals

The German engineering company Siemens was founded in 1847. By 2008 it had about 430,000 employees in 190 countries worldwide with revenues of $116 billion and profits of around $9 billion. Siemens manufactures a range of products from power stations to dishwashers, from mobile telephones to medical equipment, and from security systems to high-speed trains. Much of its business in areas like power generation, communication, medical equipment, trains, and transport infrastructure is with governments, government agencies, and government-controlled companies. From 2007 it faced a number of legal and regulatory actions in respect of bribes paid as part of its international sales. In order to secure contracts, Siemens made payments to politicians, government officials, or the friends and families of ruling dictators in Argentina, Bangladesh, China, Greece, Iraq, Israel, Italy, Nigeria, Russia, Venezuela, Vietnam, and other countries. The largest of these payments was in excess of $50 million, and a US investigation identified a total of over 4,000 payments amounting to about $1.4 billion in the early 2000s. Other estimates put the total for the 1990s and 2000s at about $2.3 billion. This practice was long-standing and deeply engrained in the Siemens culture. Paying sweeteners or commissions has always been how you do business in these industries and with these customers, much as it is in the defense industry. Up until the late 1990s, it was not even clearly illegal under German law, and so-called useful expenses were even tax-deductible. But for the period covered by the US investigations it clearly was illegal, both under German and under US law, to which Siemens, listed on the New York Stock Exchange, is subject. Siemens was also far from being the only company to be guilty of this kind of offense. In the defense sector, BAe (British Aerospace Systems) has had difficulty defending its payments to the Saudi royal family. In the oil sector, the French companies Elf and Total have a long history of bribing not only African dictators but, through them, French politicians as well. Large bribes to secure transport and infrastructure projects have been made by French and Italian as well as German companies. The Siemens case nevertheless came as a shock, because Germany, unlike France or Italy, had a good reputation for ethical standards. Despite the fact that bribery was so well established and deeply rooted in the company culture, the Siemens board denied all knowledge of it. The company is very decentralized and compartmentalized, with local managers around the world having a lot of autonomy. They know the cultures in which they work, it is argued, and are best positioned to make decisions relating to them. Eventually, two Siemens CEOs and various other top executives lost their jobs, and the company had to pay fines in various countries of several billion dollars. But many in the company still maintain that the practices are necessary if the company is to do business, especially against newly emerging Chinese competitors, who have none of the Wests scruples in this respect. (END OF CASE)

Questions for discussion:

1. What Professional ethical dilemma is related in this case? Explain. (2.5 marks)