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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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Introduction: Kleinfeld, 49, became the president and CEO of Siemens on January 27th 2005. He became the 11th head in the 160- year history of the company, having a tradition of promoting company veterans for the top executive positions. Kleinfeld had built his reputation on turning around Siemens’ US operations as a president and CEO, which had interests ranging from water technologies to medical equipment, and employed 104,100. He has turned a loss of €800 million into a profit of €600million within two years [2000–2002] . Kleinfeld succeeded von Pierer, who has been running the Munich-based company since 1992. Transforming Siemens was not easy in a world, where heavily taxed, slowmoving European companies operate at a disadvantage and, German governance structure and labour relations are shoddy. But Kleinfeld inherited a company thatmade substantial progress under von Pierer. Siemens’ sales had nearly doubled under von Pierer, to $98 billion, and profit had tripled, to $4.5 billion – a sumanalysts expected would increase by at least another 10%in 2005.

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Siemens is one of Germany’s best-known brands and an industrial powerhouse, similar to what GE is in US; Kleinfeld is often compared to Jack Welch (Welch), GE’s former CEO. Welch’s most significant achievement has been the revival of theGE’s US operations, which was losing to Japanese competition.AsWelch reshapedGE – with a focus on profit margins by cutting costs, layoffs and selling non-profitable business units – Kleinfeld restructured Siemens, setting quantifiable measures, raising the group’s main operating units to the set profitability targets, slashing thousands of jobs and either selling, dissolving or liquidating unprofitable units...

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