Siemens Scandal
January 24, 2008
Some 10,000 investors came to Munich on Thursday for a general assembly of Siemens shareholders, accusing the bosses of failing to address the spiraling corruption scandal.
"The reputation built by Siemens for 160 years has been reduced to ashes," said Daniela Bergdolt, from the DSW group of small investors.
"It is not satisfactory that the affair has not been wrapped up after more than a year," complained Hans Hirt, who represented the British pension fund Hermes.
In the latest twist to the "affair," investigators have established that payments worth around 140 million euros ($206 million) have been found in the firm's flagship medical equipment division, reported the daily Süddeutsche Zeitung Thursday. Siemens' most profitable division, its turnover averages some 10 billion euros a year.
Until now, Siemens has said such payments totalled around 1.3 billion euros.
The Löscher effect
Exempted from the shareholders' criticisms was Siemens boss Peter Löscher, appointed six months ago following the disclosure of a well-stocked slush fund at the group.
Shareholders' hopes are resting on the shoulders of Löscher, the first Siemens boss to be hired from outside the group.
He has already renovated the management team and begun to simplify the company's tentacular structure, reining in directors of Siemens units abroad who have been dubbed "the princes."
"What counts for me is clean business everywhere and always, and highest performance meeting the highest ethical standards," he has said.
He has also revealed that the group had been hit with compliance costs to date of around 1.1 billion euros, plus around 520 million in tax liabilities and sanctions "whose scope cannot be estimated."
"Intangible damage is much harder to measure -- the loss of reputation and trust in the general public," he said.
Shareholder concerns
Others on the executive floor were given a rocky ride by investors, including those supposed to be controlling the group such as supervisory board Gerhard Cromme and his right-hand man, Deutsche Bank chairman Josef Ackermann.
According to AFP, the association of small shareholders DSW intends to vote against a renewal of their mandates, which nonetheless seem assured.
Among the top figures absent were former Siemens boss Klaus Kleinfeld and former supervisory board president Heinrich von Pierer, the emblematic head of the group from 1992 to 2005, who both left Siemens last year.
One telling sign of the times was a decision by Siemens to forego the traditional vote of confidence by which shareholders typically approve the management team's performance over the past year.
But the supervisory board, including Cromme and his right-hand man Josef Ackermann, the chairman of Deutsche Bank, were to face such a vote.
Still in business
It has been over a year since the first revelations emerged about shady dealings at Siemens, often in the form of money alleged to have been paid under the table to obtain foreign contracts.
At last count, the biggest private German employer had acknowledged 1.3 billion euros in questionable funds.
According to press reports, internal allegations are still abounding, including the suggestion that corruption was present up to the higher spheres of the group.
The German group is listed on Wall Street and fears being slapped with a fine of four billion euros (5.8 billion dollars) in the US, according to the German business magazine WirtschaftsWoche.
But for the time being, the company's businesses -- medical equipment, manufacturing, trains and electric power stations -- remain healthy. The company posted a huge increase in first quarter profit from 788 million euros to 6.5 billion owing to the sale of the auto equipment parts company VDO.
Operating profit for the first three months of its 2007-2008 fiscal year, which began on October 1, increased by 16 percent to 1.7 billion euros, on sales which grew by 10 percent to 18.4 billion euros.