Shareholder Protest
December 28, 2006
Siemens AG employees who hold stock in the German engineering giant announced that they will withhold approval of management at an upcoming stockholders' meeting in January.
Coming amid an ongoing corruption scandal, the association of employee shareholders gave several reasons for the move, including executives' failure to apply internal rules that might have prevented the alleged corruption. They also complained about pay hikes of 30 percent for some executives during a time of job and wage cuts.
"A short-term shareholders policy, ... unreasonable raises for the board of directors and the corruption allegations have led to unacceptable loss of trust in the company," shareholders wrote in a Dec. 13 letter.
The shareholder approval of management is only a formality but offers disgruntled investors a chance to show displeasure by withholding their votes.
Case growing in strength
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 firm.
Six current or former Siemens employees, including the ex-head of its telecommunications equipment unit, Thomas Ganswindt, were detained in November after Munich prosecutors ordered raids on company offices across Germany.
Although Munich prosecutors conditionally freed the men, they said earlier this month that the case was growing in strength.
The weight of evidence against them had grown thanks to the "comprehensive testimony" obtained during their detention, said prosecutor Christian Schmidt-Sommerfeld at a press conference.
He added that the investigation was proceeding, and the suspects as well as Siemens were cooperating in the ongoing probe.
Bribery investigation widens
As prosecutors in Germany, Italy, Austria, Switzerland and Greece investigate the company on corruption charges, new allegations are cropping up.
The weekly Stern magazine reported this month that prosecutors in Wuppertal, a city in western Germany, 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.