Siemens bows to pressure for transparency

Siemens, Europe’s biggest engineering group, on Monday bowed to its critics and appointed an external law firm, auditor and anti-corruption expert in an attempt to contain the fall-out from an ever-growing bribery scandal.

The investigation by prosecutors into an alleged illegal transfer of at least €200m ($265m) of Siemens funds, possibly to pay for bribes abroad, has shaken the German group and led to some calls for its chairman to resign.

It also led Transparency International, the anti-corruption watchdog, to indicate it would terminate Siemens’ membership.

On Monday, however, Siemens named Michael Hershman, co-founder of TI, as its compliance adviser for both the supervisory and managing boards.

It also appointed the New York law firm Debevoise & Plimpton to conduct an independent review of its compliance system and find an external auditor. Siemens will also find an external legal expert to head its compliance office from January.

Several supervisory board members had called for external help and criticised Siemens’ auditor, KPMG, which will support the law firm in its investigation.

The scandal has seen a dozen people, including current and former Siemens’ employees, under investigation over funds allegedly transferred from its telecommunications business to bank accounts in Liechtenstein, Switzerland and Austria, among others.

The chief executive of Siemens for most of the period was Heinrich von Pierer, now chairman, and calls for his resignation are now being voiced.

Some corporate governance experts and shareholders are concerned his status as former chief executive and current chairman hinders a frank discussion of matters in the supervisory board.

The office of Klaus Kleinfeld, current chief executive, was raided by prosecutors but Siemens officials underline he and the company are both being treated as witnesses, not suspects.

Mr Kleinfeld said on Monday: “Siemens tolerates absolutely no illegal or irregular conduct by employees – and I really mean zero tolerance.”

The bribery scandal is just one in a series of mishaps to befall the industrial conglomerate recently.

Mr Kleinfeld has been under fire for his handling of the sale of Siemens’ mobile handsets division, which later went bankrupt, and his acceptance and subsequent rejection for a year of a 30 per cent pay rise.

In all three cases, critics both outside and inside the company have complained about its seemingly clumsy and defensive way of handling matters.

Some shareholders are worried that all the problems are distracting Siemens’ management from the task of turning around its most troublesome divisions.

Others have raised questions about the complexity of the company if such a large amount of money could be fraudulently diverted without setting off alarm bells.

Siemens and KPMG were unavailable for comment.

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