Siemens' Von Pierer Falls on His Sword

The German conglomerate's chairman resigns in the wake of corruption scandals. A system of slush funds was allegedly set up under his watch as CEO

There has speculation for weeks that Heinrich von Pierer, the chairman of the supervisory board at scandal-prone Siemens, was about to resign. Finally, giving into pressure from within the company, von Pierer reluctantly threw in the towel on Thursday evening.

For weeks Heinrich von Pierer, chairman of the board at Siemens, had been ruling out stepping down over the seemingly never-ending series of corruption scandals that have been engulfing the company. But late on Thursday he finally bowed to the growing pressure from within the company itself. It marks the sorry end of an illustrious career during which von Pierer not only rose to the top of the German industrial giant but also acted as an advisor to successive German chancellors.

Even as he was announcing his resignation, von Pierer insisted that he had done nothing wrong and had no knowledge of any illegal activities at the firm. "Despite its outstanding business performance, Siemens had run into a difficult situation due to the in part apparent and in part alleged misconduct of a number of managers and employees," he said in a statement released late Thursday. "The sole reason for my decision today is to serve the best interests of Siemens."

He said that his duty to the company and its employees took priority over his personal interests. "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," he said in the statement.

Siemens, which makes everything from hearing aids to trains, is one of Europe's biggest engineering companies and a pillar of the German business establishment. But it has been hit by a series of corruption scandals in recent months revolving around accusations that some employees used company money to pay bribes to help secure deals abroad.

A PLAGUE OF SCANDALSSix current or former Siemens employees are suspected of committing breach of trust against Siemens by setting up secret funds outside of Germany to pay up to €420 million in bribes to secure telecoms contract. In a separate case, two former Siemens managers have already gone on trial for bribing employees of the Italian utility Enel to secure a wind turbine deal. The company was also slammed with a fine of over €400 million by the European Commission in January for being involved in a price-fixing cartel. And another senior Siemens manager, Johannes Feldmayer, was arrested in March for illegal payments of millions of euros to the small AUB trade union, which backed management decisions.

Von Pierer has been feeling the heat over the scandals for weeks. Even if he had no direct knowledge of the corruption, the fact that the system of secret funds was set up under his watch as CEO of the company, from 1992 until 2005, has called into question his management style. But despite the blows to the company's reputation, von Pierer continued to cling on.

POWER STRUGGLE ON THE BOARDFinally, according to media reports in Germany, a power struggle came to a head within Siemens over the past few days. Industry insiders told the German newspaper Süddeutsche Zeitung that crisis talks were held on Thursday evening between the Siemens management and influential members of the supervisory board including top-ranking trade union leaders and business leaders. Josef Ackerman, the chairman of Deutsche Bank, Berthold Huber, the deputy head of IG Metall union and the former member of the board at HypoVereinsbank Albrecht Schmidt were some of those in attendance. After a long meeting, the group came to the conclusion that von Pierer had to step aside.

Siemens has already announced that his temporary successor until next year's annual general meeting will be Gerhard Cromme, the current chairman of steelmaker ThyssenKrupp. Cromme will be passed the reins at the supervisory board meeting next Wednesday.

The deputy chair, Josef Ackermann, announced late Thursday night that the supervisory board regarded von Pierer's decision "with great regret and respect." Von Pierer, he said, "had served Siemens for decades with all his might and in the threatening period of deregulation and globalization he had turned Siemens into a leading global company."

Siemens CEO Klaus Kleinfeld, who had been von Pierer's protegé, said: "The entire company, the managing board team and I personally owe him our deepest and most sincere thanks." Kleinfeld has not been implicated in the alleged corruption and has hired external consultants and anti-corruption experts to help manage the fall-out and enforce anti-corruption standards at the company.

SYMPATHY AND RELIEFFollowing his resignation von Pierer sent an email to Siemens employees. "The precarious situation in which our company has found itself, despite excellent business development, has also greatly affected me," he wrote. He said that he was also affected by "the general rush to judgement in the media that often had no consideration for the facts."

The head of IG Metall in Bavaria, Werner Neugebauer greeted the resignation decision as "over due." He told the Hessiche Rundfunk radio station: "It is not just a question of personal responsibility but also moral responsibility." Referring to von Pierer's insistence that he knew nothing about the corruption in the company, Neugebauer said. "Those who don't know Siemens well might believe it -- I don't believe it."

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