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On
April 25, 2007, Klaus Kleinfeld (Kleinfeld), CEO, Siemens AG
(Siemens), announced that he would step down from his post. The
announcement came in the wake of a number of scandals that
rocked Siemens over a short span of time.
Mixed reactions greeted Kleinfeld's exit. Some analysts felt
that Kleinfeld should not have been replaced since he had been
instrumental in turning Siemens around and bringing it back into
profit.
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Kleinfeld had often been dubbed as the Jack Welch of
Germany, and his exit raised questions about the role of supervisory
boards in the management of German companies.
Founded in 1897, Siemens was the largest engineering conglomerate in
Europe and offered an array of products ranging from electronics,
engineering equipment, telecommunications services, industrial
automation, and power generation, to transportation.
Kleinfeld's decision to quit did not come as a surprise as the Siemens'
board had been calling for his resignation for failing to trace the
embezzlement of large company funds and payments made over several
years. Since 2006, a series of bribery scandals at Siemens played a
major role in tarnishing the image of the company.
In May 2007, a German court convicted two former managers of Siemens for
diverting the company's money to bribe employees of Enel SpA (Enel),
Italy's largest energy company. In late 2006, another scandal had
surfaced in the telecommunications division of Siemens involving slush
funds1 created to bribe foreign
officials to secure contracts abroad.
In still another case, Siemens was accused by IG Metall, a dominant
labor union in Germany, of having tried to bribe a small union called
AUB to gain support for its policies. In October 2007, Siemens was
indicted for paying more than US$ 29.13 million in bribes to officials
of Nigeria, Russia, and Libya.2
According to a Beijing-based information consultancy, foreign companies
such as Siemens, Carrefour SA, and IBM Corp. accounted for 64 percent of
the 500,000 corruption cases investigated in China in the last ten
years.3
Though the bribery scandals came to light during Kleinfeld's time, most
of the payments were made when Henrich von Pierer (von Pierer) was the
CEO of the company. Kleinfeld took over as the CEO of Siemens in 2005
from von Pierer, who held the job from 1992 till 2005.
During Kleinfeld's tenure, in addition to a major restructuring program,
there was a crackdown on the employees engaging in illegal conduct. In
2006, the company hired outside legal experts and auditing firms to
revamp its internal accounting and control systems.
Kleinfeld hoped that the investigations would lead to a total exposure
of the wrong practices prevailing in the company and that proper
measures would be taken to eliminate them.
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1] A slush fund is an auxiliary monetary account
or a reserve fund. The term is commonly used in the context of corrupt dealings
(such as bribery or graft) by governments, large corporations, or other bodies
and individuals.
2] David Crawford, "Inside Bribery Probe of Siemens,"
www.online.wsj.com, December 28, 2007.
3] "Chinese Media Questions Nonfeasance over
those Involved in Lucent," www.english.peopledaily.com.cn, December 27, 2007. |
