Paying €420 million in bribes means never having to say you’re sorry – at least if you are the CEO of Siemens. You have to ask: what does it take to get fired from the executive suite from a German corporation these days? The German culture of executive entitlement was on display yesterday in Munich a the Siemens annual shareholders meeting. Yes, the natives were restless: 10,000 shareholders showed up and threatened to vote against the Executive Board, but in the end, the executives went home considerably richer and with their jobs secure:
The scale of shareholder distrust in the management was laid bare when the meeting gave only 72% support to executive board members and about 65% to supervisory board directors – including some of Germany’s business luminaries – far short of the 90% Siemens executives had hoped for.
But moves to refuse to approve the two boards’ actions in the past year evaporated after Heinrich von Pierer, chairman, said he had withdrawn from the audit committee investigating the bribery scandal to avoid any conflict of interest over events that took place when he was chief executive. Visibly contrite, he expressed "deep distress" that efforts he had instigated to ensure full compliance with corporate governance codes had failed.
The Siemens scandal reveals the weaknesses in the German corporate governance structure. Once the exsitence of the slush fund was discovered, Siemens did not bring in an outside party to investigate. Rather, the former CEO and current chairman of the supervisory board – Heinrich von Pierer – led the inquiry, even though the secret accounts date back to the period when he was running the company. But the €420 million in bribes is only the "tip of the iceberg". There is also the collapse of BenQ – the spin-off successor to Siemens’ cell phone division, putting thousands of former Siemens employees out of work. Yesterday the European Commission hit Siemens with a €396 million fine for price fixing. On top of all of this, Siemens’ executives rewarded themselves for their gross mismanagment with a 30% salary increase.
It is popular to bash the Sarbanes-Oxley rules in the US as cumbersome and unfair, but they would have prevented a scandal of this magnitude here. Is there any doubt that if Siemens were a US corporation CEO Klaus Kleinfeld would have been charged with a crime and would face jail-time? American insitutional investors hold 15% of Siemens capital, maybe it;s time for them to demand accountability in the executive suite?
