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Disclosure Responses to a Corruption Scandal: The Case of Siemens AG

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Abstract

In the current study, we examine the changes in disclosure practices on compliance and the fight against corruption at Siemens AG, a large German multinational corporation, over the period 2000–2011 during which a major corruption scandal was revealed. More specifically, we conduct a content analysis of the company’s annual reports and sustainability reports during that period to investigate the changes of Siemens’ corruption and compliance disclosure using both quantitative and qualitative methods. Through the lens of legitimacy theory, stakeholder analysis, and organizational façades, we find evidence that Siemens changed its compliance and corruption disclosure practices to repair its legitimacy in the wake of the 2006 corruption scandal. We analyze these strategies more closely by using the rational, progressive, and reputation façades framework (Abrahamson and Baumard in The Oxford Handbook of Organizational Decision Making, pp 437–452, 2008). Our primary findings suggest that the annual reports show peaks of disclosure amounts on corruption and compliance disclosures earlier than sustainability reports, which can be partly explained by analyzing the disclosures made about—and to—the different stakeholder groups. We find that the annual report focuses more on internal stakeholders such as employees, while the sustainability report focuses more on external stakeholders such as suppliers. We also find that the company uses the façades differently depending on which report is being analyzed.

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Notes

  1. The United Nations Global Compact and the Global Reporting Initiative are known to be two of the most important CSR global movements.

  2. Social or CSR reporting is often used as a “corporate veil” to project a positive image of the company and protect its “inner workings” from “external view” (Hopwood 2009, p. 437) and information therein has in many cases been found biased and reflecting management’s interests rather than what really occurred (Boiral 2013). However, one should highlight the importance of such reporting in relation to practice, as best explained through the concepts of decoupling and greenwashing (Graafland and Smid, forthcoming). Whereas the former concept has to do with the “combination of promising policy statements and poor implementation of programs and impact”, the latter is defined as “the intersection of positive communication about performance (e.g., through reporting) and poor performance” (p. 6). According to these authors, higher quality CSR reporting reduces a company’s policy-practice decoupling by way of the inducement to strengthening the quality of its CSR programs.

  3. The study by Cho et al. (2015) puts a higher emphasis on the theoretical (as opposed to empirical) contribution—namely organized hypocrisy and organizational façades, that provides a more nuanced framework to explain and understand sustainability/social reporting practices.

  4. The US FCPA dates from 1977 and is probably the most widely enforced law pertaining to the fight against corruption. It regulates corruption by (1) prohibiting bribery of foreign officials and (2) requiring companies registered with the SEC to keep accurate books and records (Reilly 2015).

  5. While the number of words or the number or percentages of pages (Gray et al. 1995) are also both widely used in corporate social disclosure research, Hackston and Milne (1996) suggest that sentence counts are preferable because they convey a better meaning and may generate fewer errors (Milne and Adler 1999).

  6. When referring to employees, the paper is referencing non-management employees only. Siemens distinguishes employees from management, and the paper maintains the same distinction.

  7. The UNGC refers to business partners, including agents, consultants or other intermediaries, joint venture and consortia partners, suppliers and customers. However, a close reading of UNGC (2009) provides evidence that suppliers are viewed as the most fundamental of these partners.

  8. Results of Deegan and Rankin (1996) indicate a significant increase in positive disclosure after the successful prosecution of 20 companies by the New South Wales and Victorian Environmental Protection Industries. Deegan et al. (2000) show a higher increase in disclosure in the year following specific environmental incidents concerning a small sample of Australian firms.

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Acknowledgements

We wish to thank Lisa Baudot, Den Patten and the participants of the 2013 Alternative Accounts Conference, the 36th European Accounting Association Conference, and the 2013 French Congress on Social and Environmental Accounting Research (2nd CSEAR France) for their helpful comments and suggestions provided on earlier versions of this paper. Charles Cho also acknowledges the financial support provided by the Global Research Network program through the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2016S1A2A2912421).

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Authors and Affiliations

  1. Faculty of Economics, University of Porto, Rua Roberto Frias, 4200 – 464, Porto, Portugal

    Renata Blanc & Manuel Castelo Branco

  2. Schulich School of Business, York University, 4700 Keele Street, Toronto, ON, M3J 1P3, Canada

    Charles H. Cho

  3. ESSEC Business School, 3 Avenue Bernard Hirsch, CS 50105 CERGY, 95021, Cergy Pontoise Cedex, France

    Joanne Sopt

  4. Temple University, Alter Hall, 1801 Liacouras Walk, Philadelphia, PA, 19122, USA

    Joanne Sopt

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  1. Renata Blanc
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  2. Charles H. Cho
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  4. Manuel Castelo Branco
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Correspondence to Charles H. Cho.

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Blanc, R., Cho, C.H., Sopt, J. et al. Disclosure Responses to a Corruption Scandal: The Case of Siemens AG. J Bus Ethics 156, 545–561 (2019). https://doi.org/10.1007/s10551-017-3602-7

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