intellectual vanities… about close to everything

what I read, and what I don’t – Friday 18 May 2007: The Putsch in the Siemens Madhouse

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On Wednesday 25 April 2007, I read that President and Chief Executive Officer of Siemens AG, Dr. Klaus Kleinfeld, informed the Supervisory Board at its meeting today that he is no longer available for a renewed contract effective October 1, 2007. He based his decision on the current discussions about postponing his contract extension once again. “In times like these, the company needs clarity about its leadership. I have therefore decided not to make myself available for an extension of my contract,” said Kleinfeld.


On Tuesday 26 April 2007, I read that since Monday it had been clear that Kleinfeld was fighting to hold on to his position. But in the end the lack of support on the company’s supervisory board prompted him to jump before he was pushed. I also read that even though the decision had already been made to offer CEO Klaus Kleinfeld’s contract, the board hesitated and even started looking for his replacement behind the chief executive’s back.

At the same date I read that the move against Kleinfeld was led by Josef Ackermann, the head of Deutsche Bank, who sits on Siemens supervisory board, and Gerhard Cromme, the board’s temporary chairman, who was appointed following von Pierer’s resignation last week. Berthold Huber, the deputy head of the main trade union at the company, IG Metall, had also pushed for a new face at the top of the company. Once these three powerful figures began to move against him, Kleinfeld had little chance of surviving.

What I don’t read is, what made the supervisory board so furious that they were willing to plunge Siemens into such a severe leadership crisis and to place the value of Siemens shares at risk? The dry ad-hoc announcements emanating from the company (“Kleinfeld informed the supervisory board at its meeting today that he is no longer available for a renewed contract”) have done little to answer these questions.

Seemingly there are several possible scenarios:

Scenario 1: Kleinfeld is complicit. The supervisory board has proof that, despite all the assertions to the contrary and investigations, the outgoing CEO is in some way involved in the corruption scandal. But if that’s true, then the supervisory board would likely have had to provide at least some concrete facts by now. Probability: 10 percent.

Scenario 2: Ackermann is scared of the Americans. The Securities and Exchange Commission in the US is pushing for new management because of the corruption scandal. Siemens’ shares are listed on the New York Stock Exchange, and Siemens fears a lengthy legal battle with the American securities regulators as well as hefty fines. Both the SEC and the US Justice Department are already investigating Siemens for possible criminal violations. In order to accommodate the SEC, both von Pierer and Kleinfeld had to go. Probability: 30 percent.

Scenario 3: Von Pierer is taking Kleinfeld down with him. The former chairman of the supervisory board, Heinrich von Pierer, who has been replaced by Gerhard Cromme, only agreed to resign on Friday if his successor and protégé was also forced out. The reason: he may have felt that Kleinfeld had left him alone to weather the media storm over the bribery scandal. Kleinfeld sought present himself as a clean pair of hands, thus indirectly making von Pierer look guilty. Probability: Rather unbelievable.

Nevertheless, statements attributed to Ackermann seem to strengthen the viability of the last scenario. He reportedly made it known that a supervisory board could not tolerate this kind of behavior from a CEO. According to Siemens insiders, von Pierer was already looking for a successor three weeks ago. They say it was already clear to him that he wouldn’t be chairman for much longer, and that if he had to give way then Kleinfeld should also go.

What I don’t read either is, that this feud amidst management has left Germany’s most famous industry giant without a leader capable of acting or the ability at the moment to present any successor. That, of course, has made the company shares vulnerable. Indeed, hedge funds managers must be rubbing their hands with glee. It is no longer unthinkable that this pearl of German industry could soon become a target for financial raiders, who could use the leadership chaos and plummeting share value to take over the company and to break it up to make profits, endangering thousands of workplaces.


Siemens AG (Berlin and Munich) is a global powerhouse in electrical engineering and electronics. The company has around 475,000 employees (incl. discontinued operations) working to develop and manufacture products, design and install complex systems and projects, and tailor a wide range of services for individual requirements. Siemens provides innovative technologies and comprehensive know-how to benefit customers in over 190 countries. Founded more than 155 years ago, the company focuses on the areas of Information and Communications, Automation and Control, Power, Transportation, Medical, and Lighting. In fiscal 2006 (ended September 30), Siemens had sales of €87.3 billion and net income of €3.033 billion, according to U.S. GAAP. Further information is available on the Internet at:


Written by huehueteotl

May 18, 2007 at 2:18 pm

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