Saturday, December 23, 2006

Germany Considers Tighter CEO Laws

The Siemens bribery scandal has caused the German government to consider forbidding retired CEOs from moving over to head their companies' supervisory boards, according to a report released this week.

In an effort to prevent the abuse of power among top chief executive officers, the German government has proposed putting limits on what they can do after retirement. In Germany, departing CEOs often take over leadership of their companies' supervisory boards.

Germany's Christian Democratic Union (CDU) and its coalition partner, the Social Democrats (SPD) have already reached an agreement on the supervisory board issue, according to the Handelsblatt newspaper.

A management board member should not hold a seat on his company's own supervisory board for five years after his contract as CEO has expired, Michael Fuchs, the economics affairs spokesman for the CDU told Handelsblatt.

Siemens scandal causes changes

For CEOs of German blue-chip companies listed on the elite DAX 30 index, heading up the supervisory board after retirement remains a common practice, despite possible conflicts of interest. Yet the ongoing Siemens scandal has caused the German government to look for ways to tighten up corporate governance laws.

Siemens has become a prime example of the cozy relationship between CEOs and their supervisory boards. Heinrich von Pierer, the former CEO of the German engineering company Siemens, moved directly to the company's supervisory board when he retired as CEO in January, 2005.

Siemens is under investigation for the possible embezzlement of 200 million euros ($260 million) that was allegedly transferred to overseas funds and used as bribe money. So far, von Pierer has not been directly implicated in the bribery scandal, but the investigation could stretch back to when he was CEO.

DW staff / AFP (th)

Deutsche Welle 12/2006

Siemens Corruption Scandal Deepens

Although Munich State prosecutors have freed a group of men accused of running slush funds at the engineering giant Siemens, they announced on Friday that the case was growing in strength.

At a press conference in Munich on Friday, prosecutors said the last of the five men in custody had now been conditionally released.

The weight of evidence against them had grown thanks to the "comprehensive testimony" obtained during their detention, said prosecutor Christian Schmidt-Sommerfeld.

He added that the investigation was proceeding, and the suspects as well as Siemens were cooperating in the ongoing probe.

About a dozen former Siemens executives are expected to face breach of trust charges for the misappropriation of funds involving more than 200 million euros ($264 million).

The cash was allegedly deposited in hidden accounts and used as bribes in return for receiving lucrative contracts for the Munich-based electronics and engineering firm.

Bribery investigation widens

Friday's online edition of the weekly Stern magazine reports that prosecutors in Wuppertal, a city in Germany's west, are also investigating Siemens on suspicion of bribery.

The prosecutors suspect a contract obtained by Siemens to construct a electricity generating plant in Serbia worth nearly 50 million euros was obtained by bribing a European Union project official.

The kickbacks allegedly took the form of money and a "gift" of a luxury car. Both Siemens and the EU official involved have denied the charges. Stern said the plant suppliers, Siemens Power Generation and the engineering firm Lurgi Lentjes, as well as the project official denied the allegations.

Siemens launches own probe

Meanwhile, an American anti-corruption expert hired by Siemens has arrived in Munich to launch an internal investigation.

Michael Hershman, president of a private intelligence and security company, stressed his independence at a press conference held on Wednesday.

"I am not here to represent Siemens," Hershman said. "I am also not here to defend Siemens, or apologize for them. I am completely independent."

Hershman, who was one of the co-founders of the anti-corruption organization Transparency International, said he was sure that "all of the people involved in the scandal will be identified." Siemens had earlier announced it would investigate suspect payments of over 420 million euros.

DW staff (kh)

Deutsche Welle 12/2006