Global Journal of Management and Business Research Volume 12 Issue 13 Version 1.0 Year 2012 Type: Double Blind Peer Reviewed International Research Journal Publisher: Global Journals Inc. (USA) Online ISSN: 2249-4588 & Print ISSN: 0975-5853 A Case Study of Siemens’ Violation of Business Ethics in Argentine Based On Stakeholder Theory By Zhu Wenzhong & Fu Limin Guangdong University of Foreign Studies (GDUFS) Abstract - Hand in hand with prosper of International business brought by globalization, many ethical problems have been surfacing in the past decades: bribery, corruption, human rights issues, etc. Business ethics, as an academic discipline as well as a business practice, is becoming the focal point of waged and animated debate. The increasing attention on it generates many relative theories, among which Freeman’s stakeholder theory stands out. This paper, backed by Freeman’s stakeholder theory, conducts a case study of Simens’ violation of business ethics by analyzing its recent bribery scandal in Argentina. After a detailed analysis of the interests of Siemens’ stakeholders, it draws a conclusion of Siemens’ severe violation of business ethics, and thus suggests some solutions. Keywords : Simens Telecommunication; Business Bribery; Stakeholder Analysis. GJMBR-A Classification : FOR Code: 150303,150301 JEL Code: M21 A CaseStudyofSiemensViolationofBusinessEthicsinArgentineBasedOnStakeholderTheory Strictly as per the compliance and regulations of: © 2012. Zhu Wenzhong & Fu Limin. This is a research/review paper, distributed under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/), permitting all non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited. A Case Study of Siemens’ Violation of Business Ethics in Argentine Based On Stakeholder Theory Zhu Wenzhongα & Fu Liminσ Abstract - Hand in hand with prosper of International business academic fields. Scholars’ study on business ethics also 12 brought by globalization, many ethical problems have been gave birth to a famous theory: stakeholder theory, put 0 2 surfacing in the past decades: bribery, corruption, human forward by R. Edward Freeman, which in turn serves as rights issues, etc. Business ethics, as an academic discipline the theoretical foundation of business ethics study. The Year as well as a business practice, is becoming the focal point of theory attempts to address the "Principle of Who or What waged and animated debate. The increasing attention on it Really Counts” by identifying the stakeholders in generates many relative theories, among which Freeman’s 75 stakeholder theory stands out. This paper, backed by business ethics practices. Freeman’s stakeholder theory, conducts a case study of Based on business ethics and stakeholder Simens’ violation of business ethics by analyzing its recent theory, this paper proposes to conduct a case study by bribery scandal in Argentina. After a detailed analysis of the analyzing Siemens’ latest business ethics violation—the interests of Siemens’ stakeholders, it draws a conclusion of Bribery Scandal in Argentina. Following the analysis, Siemens’ severe violation of business ethics, and thus suggestions pertinent to this issue are also put forward. suggests some solutions. Keywords : Simens Telecommunication; Business II. Literary Review Bribery; Stakeholder Analysis. a) Concept of Stakeholder I. Introduction The term “stakeholder” was first used in a 1963 usiness ethics is a form of applied ethics or internal memorandum at the Stanford Research Institute. professional ethics that examines ethical It was originally detailed by R. Edward Freeeman in the B principles and moral or ethical problems that book Strategic Management: A Stakeholder Approach in arise in a business environment. To put it in a simple 1984. way, business ethics involves the application of What is a stakeholder? standards of moral behavior to business situations. The earliest definition offered by an internal Despite the fact that the concept “business report of Standford Research Institute in 1963, they ethics” was firstly proposed in 1970s and hailed as define it as those groups that directly influence the oxymoron, it witnessed a waged and animated debate organization’s existence. Freeman continues to employ as well as increased public awareness ever since. On this term by further defining it as those groups that are one hand, there is a huge growth of number of so vital to the organization that they dominantly affect businessmen who realize that pure profit-oriented the organization’s survival and success and can also be corporate operation can not stand permanently in a affected by the actions of the business (Freeman, 1984). global market where customers’ ethic awareness is The term “stakeholder” is a variant of the familiar and increasing; on the other hand, more and more traditional idea of stockholders—the investors in or the companies find themselves time and again stuck in owners of business. It has experienced an evolution and ethic dilemmas. For instance, bribery, as one of the progress in its scope and range. notorious business ethical problems, has surfaced as important issues in an increasingly interdependent world In the traditional view, the stockholders or the economy. shareholders are the owners of the firm, therefore, a firm The increasing attention on business ethics not has binding fiduciary duty to give the top priority to only takes place in business practices, but also in stockholders by satisfying their needs in the first place Global Journal of Management and Business Research Volume XII Issue XIII Version I and increasing their output. It is based on the input- output model in which firms have to only address wishes Author α : PhD, Professor of School of English for International Business, research member of Research Center for International Trade and benefits of parties closely pertinent to its operation: and Economics, Guangdong University of Foreign Studies (GDUFS), investors, employees, suppliers, and customers No.2, North Baiyun Avenue, Guangzhou 510420, China. (Donaldson and Preston, 1995). E-mail : [email protected] However, along with the growth of corporation, Author σ : Student of School of English for International Business, the scope and range of stakeholder also expand, which Guangdong University of Foreign Studies (GDUFS), No.2, North Baiyun Avenue, Guangzhou 510420, China. © 2012 Global Journals Inc. (US) A Case Study of Siemens’ Violation of Business Ethics in Argentine Based On Stakeholder Theory is typically presented in Freeman’s stakeholder theory. management of an enterprise carries out to balance the stake requirements of stakeholders. Compared to the b) Freeman’s Stakeholder Theory traditional shareholders supremacists, this theory holds As in Freeman’s Strategic Management: A that the development of any enterprise is closely related Stakeholder Approach, the stakeholder theory is a to the investment and participation of each stakeholder theory of organizational management and business and the pursuit of an enterprise is the entire stake of all ethics that addresses morals and values in managing an stakeholders instead of some major stakes. organization. It identifies and models the groups which Stakeholders not only include the shareholders, are stakeholders of a corporation, and both describes creditors, employees, consumers, suppliers etc. of the and recommends methods by which management can enterprise, but also pressure groups such as give due regard to the interests of those groups. In government, local residents, local communities, medias, short, it attempts to address the "Principle of Who or environmentalists etc. even the natural environment, 2 What Really Counts. 1 future generations etc. who may be directly or indirectly 20 In Freeman’s stakeholder theory, stakeholder affected by the operation of the enterprise. These are not only those people who have direct stakes in the stakeholders are closely related to the development of firm but also those who are equivalently influential as ear Y the enterprise, they share the operation risk of the well, especially in affecting reputation and public image, enterprise, some pay a cost for the operation of the 76 but their stake is more representational of public than enterprise, some supervise and constrain the enterprise, direct. Stakeholder theory argues that every legimate and the decisions of the enterprise must take their person or group participating in the activities of a firm do stakes into consideration and accept their constraints. In so to obtain benefits and that the priority of the interests this sense an enterprise is the institutional arrangement of all legitimate stakeholders is not self-evident. From of intelligence and management professionalization this perspective, the groups of stakeholders expand to investment, the development of an enterprise relies on government and social institutions etc. the quality of responses to the requirements of each In his book Strategic Management: A stakeholder instead of only shareholders. This corporate Stakeholder Approach, Freeman outlines groups of management idea explains the corporate performance stakeholder in both internal and external environment. appraisal and the core of management, which lies Internal stakeholders are as follows: employees, foundation for the later theory of performance appraisal managers, and owners. External stakeholders are: