For the first time in its 160-year-old history German engineering giant Siemens has appointed an outsider as CEO. The new man at the top, Peter Löscher, has been a successful manager in the US pharmaceuticals industry but is largely unknown in Germany.
Making the announcement on Sunday, Siemens chairman Gerhard Cromme said Löscher was "an exceptional individual for the office of president and CEO of Siemens AG," adding that he "has what it takes to steer Siemens through its difficulties and into a better future." Löscher said his appointment was "a great honor and an extraordinary challenge."
Siemens, which has been rocked by bribery and corruption scandals for over six months, is finally filling a power vacuum left after both the chairman of the board, Heinrich von Pierer, and CEO Klaus Kleinfeld resigned within a week of each other in April -- although neither man had been directly implicated in the corruption affair. Since then Cromme has been searching for a safe pair of hands to help Siemens navigate the ongoing investigations in Germany and the US.
An Outsider With no Baggage?
A number of names had been floated in connection with the Siemens job, including Lars Josefsson, boss at the Vatenfall energy firm, Fred Kindels, head of the Swiss engineering firm ABB, and the Cromme's preferred candidate, Wolfgang Reitzle, from Linde.
But the name Peter Löscher hadnt been mentioned at all. This may prove an advantage -- as an unknown entity, he doesnt come with much baggage. The Austrian native has been president of Global Human Health at Merck, the US pharmaceuticals company, since April 2006. He trained in Vienna, Hong Kong and at the Harvard Business School, and his previous stints have included senior management positions at Hoechst, Aventis, and General Electric.
Siemens, which makes everything from hearing aids to trains, is one of Europe's biggest engineering companies, and a pillar of the German business establishment. But it has been hit by a number of corruption scandals in recent months revolving around accusations that some employees used company money for bribes to help secure deals abroad.
A Series of Scandals
Current and former Siemens employees are suspected of committing breach of trust against Siemens by setting up secret funds outside Germany to pay up to €420 million in bribes to secure telecoms contracts. In a separate case, two former Siemens managers have been convicted of bribing employees of the Italian utility Enel to close a wind turbine deal. The German news magazine Focus reported Sunday that Siemens may need to review as much as €3 billion of its transactions in connection with the bribery investigation.
When Löscher takes over on July 1, he will be expected to tackle the scandal head-on. Since he doesn't belong to any old boys' network, he will in theory be free to make sweeping changes, even to the Siemens board.
The American Securities and Exchange Commission (SEC) is now investigating the company. Löscher already has experience with the US legal system, which may come in handy -- at Merck he had to deal with the withdrawal of a painkiller, Vioxx, from the market, and the ensuing legal fallout. Kleinfeld's departure was in part due to pressure from the SEC, over concerns that he could still be implicated in the corruption affair.
Unlike Kleinfeld, Löscher has indicated that he will pursue good relations with the trade unions. Berthold Huber, deputy chairman of Germany's IG Metall union, and a member of Siemens' supervisory board, said that Löscher had promised talks with the employee representatives and had said that he wants to "secure" jobs at Siemens.
Still, Löscher will face an uphill battle as an outsider, according to Jürgen Kurz, who heads the DSW shareholders group. "The company has been very self-contained," he told the German daily Tagesspiegel. "Löscher will need to build a power base for himself and then ensure his acceptance."