International Business

Individual Case

Trim 4
Submitted to: Dr. Akshay Joshi

Submitted by –
Utkarsh Kumbhare (80011920004)
 Bribery & corruption in Siemens

1. What does the case suggest is the value of ethical behaviour? What did Siemens
gain by introducing controls to minimize the likelihood of corruption?
Ans:
When a business reaches such worldwide success and has such a great reputation as Siemens,
ethical events become increasingly relevant in a number of ways. The company's reputation
may be jeopardized if it is ever implicated in any unethical behavior or incidents. Customers'
opinions of a good-reputation firm must be preserved; otherwise, if they are involved in any
wrongdoings, people's attitudes of them may alter negatively. Following the Siemens
corruption incident, it was proposed that the business should have established an ethnically
based work culture, in which ethical behavior and conduct are valued as highly as increased
production and number of sales. Unethical behavior can hurt both society and rivals, since
genuine benefits may be withheld if one firm tries to deceive them by paying individuals in
other nations to acquire contracts.
According to the case, while engaging in immoral business practices may be appealing in the
short term, it is ultimately poor business in the long run. Siemens has a history of bribery and
corruption all around the world. While this boosted their earnings, it also cost them a terrible
image, millions in penalties, and even prison time for some of their workers. Unethical
behavior draws a company's focus away from legitimate attempts to keep its operations
running smoothly. Siemens profited from the learning curve as well, as they were able to add
more controls and improve their code of business behavior to ensure that things were done
appropriately. They were also able to evaluate and seek to remedy faults in their business
practices. Their improved restrictions allowed them to regain market share while also
contributing to economic development without engaging in any unlawful actions. Siemens
has to put in a lot of effort to get back on track after such a setback. Siemens now has more
control over its overseas operations, as well as a business ethics code, as a result of their hard
work.

2. Most countries lack adequate laws or enforcement to deal with bribery and other
forms of corruption. Why is this? How do countries benefit from a strong rule of
law that minimizes corruption?
Ans:
Many developing nations lack the legal and infrastructural frameworks required to tackle
corruption. This is most often owing to an inefficient or even corrupt administration.
Companies that engage in immoral behavior may be lured to nations whose governments are
weak or submissive and may be purchased or controlled. While a corporation may offer jobs
for these developing countries, if there is a lack of competition, bribery, or other types of
corruption, the company, not the employees, generally reaps the advantages. If there is no
adequate legal structure in place to prohibit unethical business behavior, citizens may find
themselves trapped with them.
Corruption is the abuse of power to achieve illegitimate personal gain-
 Bribery and corruption are the most egregious types of unethical conduct.
 Transparency and corruption (high transparency = low corruption) and corruption and
economic growth (widespread corruption = sluggish economic development) have a
negative connection.
 Corruption's repercussions pervade worldwide business and poverty.
 Despite the fact that they would benefit the most from economic growth, the nations
with the greatest levels of corruption are the least desirable to MNEs.
 Emerging economies and growing markets are characterised by weak anti-corruption
regulations and a lack of enforcement. MNEs are attracted to nations with a strong
rule of law, which eliminates corruption and unethical behaviour by guaranteeing a
fair playing field for all rivals.
 The preservation of intellectual property (IP) rights is another key concern for MNEs.
In mature economies with a solid rule of law, IP protection will be greater than in
emerging or developing countries. As a result, foreign direct investment, economic
progress, and a strong rule of law are all intertwined.

3. Do you think Siemens was penalized enough for its corruption? Why or why not?
What can governments or other organizations do to discourage firms and others
from engaging in corrupt behaviour?
Ans:
Siemens was not properly punished for its wrongdoing, according to economic
development specialists, environmentalists, and human rights advocates. Businesses
should avoid doing business with repressive regimes, according to activists, to avoid
ethical difficulties. As a result, if a multinational business (MNE) such as Siemens
participates in unethical practises, their idealistic perspectives would favour heavy
sanctions. Activists also say that before collaborating with another firm, management
should
 study its workplace and operating procedures,
 hold it accountable for its activities,
 hold it to proper ethical standards.
While such thoroughness is costly and time-consuming, it would corroborate an activist's
argument that Siemens escaped with a clean bill of health.
A proponent of business, on the other hand, might argue that ethics is situational rather
than universal. Siemens must engage in bribery if it is an acceptable and expected type of
business activity in order to remain competitive. This is the same person who claims that
multinational corporations (MNEs) should not avoid repressive regimes because foreign
direct investment (FDI) promotes economic growth, raises living standards, and improves
people's lives.
Governments and organisations must implement more stringent anti-corruption laws, with
harsher consequences for those who break it. The Foreign Corrupt Practices Act, the US
Securities and Exchange Commission, the World Bank, and German court
investigations/findings/fines, along with the resignations of two top Siemens executives,
would make any firm hesitate participating in similar bribes.

4. Some argue that because ethical standards are lax in many countries, Siemens
and other firms must pay bribes to obtain new business. Do you agree with this
view? Stated differently, when doing business around the world, is it generally
better to emphasize normativism or relativism? Justify your answer.
Ans:
No, we do not agree with this point of view. Due to a lack of ethical norms, businesses
should not be obliged to participate in bribery, corruption, or other unethical commercial
practises. Bribery may appear to be more advantageous in the short term because it allows
other firms to threaten or be discovered by authorities, but it is hazardous in the long run
because it allows other companies to threaten or be discovered by authorities. If this
occurs, the firm will be in a very tough position since they will be required to pay a
significant fine, and their reputation would surely suffer as a consequence, leading to the
termination of numerous commercial relationships. A real-life example is Siemens, which
was threatened with paying $910 million by a Saudi consulting firm and was compelled
to pay $100 million, resulting in the loss of numerous clients and the postponement of
commercial contracts. As a consequence, it will be safer and better for the firm to avoid
any unethical commercial actions in order to have a stable and lengthy lifetime. We
choose normativism over relativism because it is more consistent and universal. When
working with nations that have different business regulations than your own, this might
assist avoid misunderstandings.
But in the actual world, a company's corporate principles should be combined with local
ethical standards to produce a more balanced approach. This plan will help the company
secure commercial transactions and avoid unfavourable news and activities that might
damage the company's reputation.