Thomas J. BoucherDeMontrez JohnsonYao YaoKristen Rogers

THE BRIBERY SCANDAL AT SIEMENS AG

Background

Siemens was initially started as Telegraphen-Bauanstalt von Siemens & Halske in 1847 by Werner von Siemens (Werner) and a mechanical engineer, Johann Georg Halske.

Background

In 1853, the company won its first international contract to build a telegraph net work that stretched around 10,000 kilomerers and provide maintenace services for it, in Russia.

In 1855, Werner set up subsidiaries in Russia and Britain to serve the growing opportunities for the company outside Germany and entrusted their responsibility to his brothers.

By 1914, Siemens & Halske was one of the largest companies of Germany with a workforce if 82,000 employees. However, World War had a devastating impact Ⅰon the company’s business. It lost most of its foreign businesses.

In 1966, Siemens & Halske, Siemens-Schuckertwerke Ag and Siemens-Reiniger-Werke AG merged to form Siemens AG.

Background

In 2001, Siemens obatined a listing on the New York Stock Exchange.

In 1969, the entire company’s business was reorganized into 6 operating groups.

In 1990, the largest European company in the computer industry, Siemens-Nixdorf Informationssystem AG (SNI), was created.

During the fiscal year 2008, the revenues of the company stood at €77.34 billion.

EXHIBIT (B) Income Statement of Siemens:2004-08Ⅲ(All figures in billions of Euro except per share amounts)

September2008

September2007

September2006

September2005

September 2004

Revenue 77.33 78.89 87.33 75.44 75.17

Cost of Goods Sold 56.28 74.86 63.82 53.5 53.52

Gross Profit 21.04 4.04 23.51 21.94 21.64

Gross Profit Margin(%) 27.2 5.1 26.9 29.1 28.8

SG & A Expense 15.34 -4.63 17.28 15.42 15.44

Depreciation & Amortization 3.21 3.75 3.01 3.42 3.34

Operating Income 2.49 4.91 3.22 3.09 2.86

Operating Margin(%) 3.2 6.2 3.7 4.1 3.8

Nonoperating Income 0.96 -1.67 1.19 1.12 1.37

Nonoperating Margin(%) 0.83 - 0.04 0.03 -

Income Before Taxes 2.87 3.25 4.37 4.18 4.23

Income Taxes 1.02 0.96 1.08 0.97 0.66

Net Income After Taxes 1.86 2.29 3.29 10.52 9.08

Continue Operation 1.86 2.06 3.09 3.20 3.57

Discontinue Operation 4.03 0.35 -0.05 -0.81 -

Total Operations 5.89 2.42 3.03 2.24 3.4

Total Net Income 5.89 2.42 3.03 2.24 3.4

Net Profit Margin(%) 7.6 3.1 3.5 3 4.5

Diluted EPS from Total Net Income(€) - 2.68 3.26 2.42 -

Dividends per Share 1.27 1.03 1.02 1.06 0.88

Source:www.hoovers.com

Issues

Slush funds to win contracts abroad

On November 15, 2006, around 30 office and private homes related to Siemens and its employees were raided by some 200 police officers, tax inspectors and proOn November 15, 2006, around 30 office and private homes related to Siemens and its employees were raided by some 200 police officers, tax inspectors and prosecutors in Munich, and other cities of Germany, to probe suspicions of bribery. As the probe continued, the scandal deepened and te estimate of the total cash used in suspect payments increased to €200 million from €10-30 million, and finally the figure touched €420 million.secutors in Munich, and other cities of Germany, to probe suspicions of bribery. As the probe continued, the scandal deepened and te estimate of the total cash used in suspect payments increased to €200 million from €10-30 million, and finally the figure touched €420 million.

IssuesSiemens charged for bribing employee representatives

On February 14, 2007, authorities in Nuremberg, Germany, raided several Siemens offices following allegations that the company was involved in bribing employee represnetatives to secure their support for its polices.

Former Siemens managers convicted of bribing foreign officials

On May14, 2007, a German court convicted two former managers of Siemens, Andreas Kley and Horst Vigener, for embezzling the company funds to bribe employees of an Italian energy company, Enel.

IssuesProbes in other countries

Siemens was also being probed in several other countries like Italy, Switzerland, Greece and the US for possible misconduct.

Knowledgehttp://www.youtube.com/watch?v=PFM7P

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UpdatesExhibit V

IntroductionExhibit I: MitbestimmungSlush Funds To Win Contracts AbroadSiemens Charged For Bribing Employee

RepresentativesFormer Siemens Managers Convicted Of

Bribing Foreign OfficialsProbes In Other Countries

SWOT Analysis Strengths: Siemens AG (Siemens) is a

leading electronics and electrical engineering company, operating in the industry, energy and healthcare sectors. Siemens has strong presence in the renewable energy sector.

Weaknesses: Siemens phones were once in the global top five, but problems with quality in high-end handsets and with stiff price competition in the mass market depressed its position.

SWOTOportunities: Merger with BenQ. "BenQ

and Siemens complement one another ideally."

Threats: Bad publicity on a international level due to scandals within the company.

PerspectivesKleinfield’s aggressive style of

management was disliked by older conservatives in the company.

The first time in Siemens that a CEO was being appointed from outside the company.

Gerhard Cromme said:“His upright character, his global

background, his outstanding international reputation and his wide-ranging experience in business development and strategy, the financial markets and technology-related issues were the key factor in our decision.”

Perspectives“I am convinced that Mr. Loescher has

what it takes to steer Siemens through its current difficulties and into a better future.