How Do You Change a Corrupt Culture?

As most compliance practitioners know Siemens AG paid not only the largest Foreign Corrupt Practices Act (FCPA) fine in the history of the world at $800MM but also paid the same amount to the German government, this makes for a total fine of $1.6bn back in 2008 when that was real money.

In addition to these fines and penalties the New York Times (NYT), in an article entitled “The Mounting Costs of Internal Investigations”, stated that Siemens “reported incurring costs of more than $1 billion for a global inquiry into payment of bribes to foreign officials to win business.” In other words, it cost Siemens an uber amount money to clean up this huge mess.

Nevertheless clean it up they did and the company has come back even stronger and more profitable. A recent article in the November issue of the Harvard Business Review (HBR), entitled “The CEO of Siemens On Using a Scandal To Drive Change” explains how he did so. In late 2007, Peter Löscher was hired as the first outsider to become the company’s Chief Executive Officer (CEO) since its founding in 1847. Löscher’s attitude when he was hired can be summed up with the following quote from the article “never miss the opportunities that come from a good crisis – and we certainly didn’t miss ours.” More importantly, Löscher’s recognized that as strong as a strategy might be, the key is in how you execute that strategy. In other words, it does not matter how strong your compliance program is, if you do not follow it, you will most probably fail in this area.

The First 100 Days

Löscher had two immediate goals to achieve in his first 100 days as Siemens’ CEO. The first was to get to know the company. The second was to work quickly to change how it was organized. To accomplish his first goal Löscher literally went on a round the world tour of the company’s facilities, including meetings with customers, local governmental officials and Siemens employees ...

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