Siemens Saddled with Scandals (A): Doubts over German Board Structure


Code : GOV0029

Year :

Industry : Engineering, Electrical and Electronics

Region : US Germany

Teaching Note: Available

Structured Assignment : Available

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Abstract: In January 2005, Klaus Kleinfeld (Kleinfeld) succeeded Heinrich von Pierer (von Pierer) as the 11th CEO of Siemens. Under the tenure of Kleinfeld, Siemens was doing well. Sales rose by 16% from € 75.45 billion in 2005 to € 87.33 in 2006, profits by 35% to € 5.3 billion and the operating profit margin increased by 49% for the first quarter in 2007. At the same time, Siemens has racked up an impressive collection of corruption scandals. Prosecutors and security watchdogs in Europe and the US have been investigating current and former Siemens employees, including some senior executives, on various allegations of corruption and unfair play. Kleinfeld and von Pierer were suspected as the mess happened right under their nose. But they – as well as the board members – vindicated themselves of any wrongdoing. Yet Kleinfeld’s tenure was not extended beyond its expiry in September 2007.

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Pedagogical Objectives:

  • To discuss the reasons for corruption and allegations at major German corporations
  • To understand the German dual board structure (co-determination) – its advantages and disadvantages
  • To debate on the views and counter-views of shareholders on the extension of the Kleinfeld’s contract
  • To debate whether German system of co-determination is responsible for the scandals or it is a matter of ethical failure or is it the board.

    Keywords : Scandals in Germany, Co-determination, Corporate Governance Case Study, Scandals at Siemens, Splitting the Roles of chairman and CEO, Insider or an Outsider, Corporate Governance

    Contents :
    » German Companies: The Board Structure
    » Siemens Board: The Dilemmas

    Case Introduction >>

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