Siemens Targets Former Execs for Failing to Stop Bribery Scandal
Aug 4th, 2008 • Posted in: NewsCurrent board claims former executives’ negligence hurt the firm’s reputation and produced a mammoth bill for compliance costs
MUNICH
Siemens, the giant German engineering firm, last week said it will seek to recover damages from two former CEOs and other former members top management executives for ethics breaches that damaged the firm’s reputation and bottom line.
Berlin-based news service Deutsche Welle reports that Siemens will pursue 11 former officials for “breaches of their organizational and supervisory duties in view of the accusations of illegal business practices and extensive bribery.”
In the crosshairs are two former chief executives, Heinrich von Pierer and Klaus Kleinfeld, whom Siemens claims failed to halt the bribery scandal that has plagued the company since 2006.
Both men repeatedly have denied any wrongdoing but remain subject to criminal investigations, reports Deutsche Welle.
Bloomberg reports that Siemens’ suit is unprecedented in German business. “It’s the first time that the supervisory board of a company decided to sue practically the whole old management board,” Manuel Theisen, a business professor at Munich University, told Bloomberg. “That’s a paradigm change.”
In an analysis, TIME magazine reporter William Boston writes that the development is viewed widely as a sign that “the atmosphere in the clubhouse commonly known as Germany Inc. just got a lot less chummy…. In Germany’s two-tiered management system, shareholders elect the supervisory board. It has the job of appointing and supervising the executive board, which runs the company’s day-to-day business. Typically, though, a retiring CEO is appointed to chair the supervisory board, which often is a paper tiger with little incentive to scrutinize executives. Siemens’ decision to seek financial damages from former executives is a warning to the rest of German industry that such practices are under threat.”
Siemens first will offer the former executives a chance to defend themselves and make restitution before formally pressing lawsuits.
Forbes reports that compliance costs for the company are in the neighborhood of $650 million in the current financial year.
Sources: TIME, July 31 — Bloomberg, July 31 — Forbes, July 29 — Deutsche Welle, July 29.
For more information, see: Related Newsline story, June 16 — Related Newsline story, May 12 — Related Newsline story, May 5 — Related Newsline story, Jan. 28 — Related Newsline story, Nov. 13, 2007.
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