Case 37: Siemens (Germany, 2006)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

For over 160 years, Siemens has stood for technological excellence, innovation, quality and reliability. The Munich-based engineering giant has also been acclaimed for its publicly stated emphasis on good governance, strong corporate responsibility and ethical behaviour. But the highly visible veneer of effective governance and a strong ethical corporate culture appears to have masked the reality. In late 2006, the company was rocked by the most spectacular corruption scandal in the history of German business. Experts called the corruption at Siemens “systematic and widespread”, “egregious and brazen” as well as “massive, wilful and carefully orchestrated”. Siemens ended up paying USD 1.6 billion, the largest fine for bribery in modern corporate history. “The Siemens case is so shocking because Siemens is such a major player in Germany and has been for more than a century,” said Bruce Kogut, professor of strategy at INSEAD. “You think of the great German companies, and Siemens is one of them. To find out that they knew about secret accounts that were used for paying bribes is stunning. This is a critical event.”

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