Wednesday, November 29, 2006

Draining the Swamp at Siemens

The corruption scandal at Siemens: bribes, slush funds, and…decentralization?

The story from Spiegel:

In order to understand why the Munich-based multinational is so susceptible to corruption cases, it is necessary to go back to the large-scale restructuring that took place in 1989. The 15 divisions which were newly created at that time were given a considerable degree of autonomy, and they were also allowed to carry out financial transactions without supervision by the company's headquarters. The small central management enthroned above them was mainly responsible for company-wide issues, while also checking up on the newly created divisions.

The division heads learned to value this new-found freedom, and apparently dipped generously into funds that Siemens maintained in order to make general payments in foreign countries. At that time, these expenses were disguised as consultant fees or commissions, and they were even tax deductible.

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