Chapter 2: Siemens and Satyam
Fine/Settlement: $1.6 billion in 2008
From 2002 to 2006, Siemens had a “bribery budget” in place. The funds were used to pay officials around the world to secure business contracts and other needs at Siemens. The purpose of the fund was well known throughout certain departments in the company’s German operations.
Siemens was extremely cooperative with investigators, which reduced the fine and granted amnesty to employees who were willing to bring information forward. Siemens was also allowed to plead to “accounting inaccuracies” as opposed to bribery because of its cooperation.
- Tone from the top
- It was clear that Siemens needed to bring in someone from outside of the company to take over. Peter Löscher was the man for the job.
- Code of ethics
- When selecting leaders, choose people who embody the corporate mission and vision. Make sure leaders walk the walk to back up their talk.
As demonstrated by Siemens, bringing in someone from outside of the company can be the fresh start that some organizations need.
Amount Overstated: $1.04 billion
The Satyam accounting fraud scandal shook the company and the rest ofIndia. The false $1.04 billion in cash on the company’s balance sheets equated to 94 per cent of the cash listed on the company’s books. Satyam’s Chairman, Ramalinga Raju stated that no one else on the board was aware of his actions.
When news broke about Satyam, the value of the rupee dropped, as did Indian equity markets.
- Corporate crime hurts everyone
- Corporate crime can impact the reputation of an entire country. After the scandal, it was predicted that Indian rivals would also face greater scrutiny by regulators, investors, and customers.
- The banking and finance sector in theUSis another example. A loss of trust, increased regulation and tighter enforcement have resulted from the actions of a few key players.