For updates visit

Siemens Chairman Quits, as $ 500 mn bribing scandal rages

Saturday, April 21, 2007

The corruption scandals at Siemens, the German industrial giant, claimed one of the nation's most prominent industrialists late Thursday, as the company said its chairman, Heinrich von Pierer, would resign next week. In a statement, Mr. von Pierer said that he was leaving out of a duty to Siemens and its more than 400,000 employees, not because of any involvement in the accusations of bribery that have roiled the company.

Mr. von Pierer's departure is not a total surprise. He had been under mounting pressure to leave, even from other members of the company's supervisory board. But his resignation is sure to reverberate through German corporate circles, where he has long been a distinguished figure.

Mr. von Pierer's position on the board eroded in recent weeks because he had been chief executive during the period when the company is accused of bribes and other corporate corruption.

Prosecutors in Munich are investigating reports that more than $500 million in bribes were paid to foreign officials over the last seven years by the communications unit of Siemens to win contracts.

Current and former executives are also being investigated in two other bribery cases — one involving an Italian energy company, the other a German labor leader who represented Siemens workers.

The accusations are among the most far-reaching in corporate history in Germany, and they have all but obscured the robust financial performance of the company, which is 160 years old.

In the statement, released around 11 p.m. Thursday after the newspaper Bild reported that his resignation was imminent, Mr. von Pierer, 66, said: "Siemens has run into a difficult situation due to the in part apparent and in part alleged misconduct of a number of managers and employees.

"I assume that electing a new chairman of the supervisory board will also make a contribution toward taking our company out of the headlines and bringing it back into calmer waters."

Given the breadth of the accusations facing Siemens, Mr. von Pierer's departure is unlikely the settle the questions surrounding its senior management.

Last month, prosecutors arrested a top executive, Johannes Feldmayer, on suspicion that he was involved in bribing the head of a group that represents Siemens employees.

It is unclear, analysts who follow the company say, how the shake-up will affect the current chief executive, Klaus Kleinfeld. He has not been implicated in any corruption, and has responded to the accusations by hiring a law firm and anticorruption specialists to advise management.

By leaving, an official with ties to the company said, Mr. von Pierer may give Mr. Kleinfeld a freer hand to clean up Siemens, without fear of crossing his former boss.

On the other hand, Mr. Kleinfeld was a protégé of Mr. von Pierer's, anointed by him as his successor when Mr. Kleinfeld was 46.

In a statement, Mr. Kleinfeld said: "I have always associated the greatest honesty and exemplary behavior with Heinrich von Pierer. That was always the case, and it is particularly so in these difficult times."

A lawyer from northern Bavaria, Mr. von Pierer spent his entire business career at Siemens, becoming chief executive in 1992. Under his leadership, Siemens expanded aggressively around the world in industries like medical devices and power-generating equipment.

When he relinquished the top job to Mr. Kleinfeld in January 2005, Mr. von Pierer was regarded as a sort of dean among German executives. He advised the former chancellor, Gerhard Schröder, on economic policy, and now advises Chancellor Angela Merkel.

As is the custom at many German companies — and a cause of concern for some corporate watchdogs — Mr. von Pierer ascended to the chairmanship of Siemens, presiding over a supervisory board composed equally of shareholder representatives and representatives of employees.

He also sits on the boards of other leading German companies, including Deutsche Bank and Volkswagen.

As accusations about how Siemens conducted business overseas began to seep out last fall, Mr. von Pierer's legacy came under question. To some extent, Siemens is a victim of a changing ethical code in Germany: bribery of foreign officials was tax-deductible in this country until 1999.

While Mr. von Pierer has steadfastly denied any personal involvement in bribery, the fact that so much of it appears to have occurred under his watch has raised questions about his management.

Siemens said Mr. von Pierer would be succeeded temporarily by another board member, Gerhard Cromme, the chairman of Thyssen- Krupp, the German steel maker. A new chairman is expected to be elected in January
Safe Harbor
Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Posted by FR at 12:17 AM  

0 comments:

Post a Comment

IMPORTANT DISCLAIMER

Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.