Siemens Case

Klaus Kleinfeld (Kleinfeld), CEO of Siemens announced the company's spectacular financial results for 2006 on April 25th 2007. Operating profit for January to March 2007 had increased by 49%, to $2.7 billion, turning Siemens into one of the crown jewels of Germany. But as days passed, there were growing doubts whether he would continue as the CEO. Europe's scandal-stricken engineering firm, Siemens, had been under scrutiny for creating slush funds to bribe potential overseas customers. It came to light in November 2006, when 200 police officers searched offices and homes of Siemens employees. Two of the top Siemens employees were convicted by the Darmstadt State Court on charges of bribery. Though Kleinfeld and Heinrich von Pierer, former chairman of the supervisory board were neither found to be directly involved in the scandal were supposedly aware about slush money payments or secret accounts, but they were suspected on the lines that it took place under their reigns.

The business world was aghast with sudden turn of events at Siemens. Who should take the responsibility: the management board, the dual governance structure in Germany and the rest of Europe, or the supervisory board?

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]2. 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, slow moving European companies operate at a disadvantage and, German governance structure