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FT.com / Companies / Europe - The man who engineered the restructuring of Siemens

The man who engineered the restructuring of Siemens
By Richard Milne

Published: April 21 2007 03:00 | Last updated: April 21 2007 03:00

"A pragmatic capitalist and social romantic" - that Financial Times headline from seven years ago was Heinrich von Pierer's favourite description of himself.

His big fear as he prepares to resign on Wednesday as Siemens' chairman is that the reverberations from two scandals will damage that legacy perhaps irreparably.

Mr von Pierer was one of his generation's leading businessmen, helping keep the German industrial conglomerate together in spite of outside pressure, while hobnobbing with the great and good on boards from Deutsche Bank to Volks-wagen. Once a serious contender for German president, he was also a tennis partner of former Chancellor Gerhard Schröder, and an adviser on innovation to Angela Merkel, the current chancellor.

His service to both Social Democrat and Christian Democrat chancellors says much about him - he was interested in being in powerful positions and happy to act pragmatically to get there (he was a Christian Democrat councillor in the 1970s). Similarly, while at VW he complained vociferously about corporate governance in private, yet remained in his post as a non-executive director while others resigned in disgust.

His contrasts continued at Siemens and led to his love of that FT headline. His pragmatic capitalism was underlined by his introducing the words "shareholder value" into the Siemens lexicon. He span off divisions and forced through heavy restructuring. But he also resisted calls to split up the sprawling conglomerate. Proudly German, he disliked attempts to undermine institutions such as the co-determination system under which workers help run companies.

Even today, one of his proudest memories is to recall his naming as an honorary member of the works council at Siemens' Erfurt plant. He delighted in telling visitors about wearing - and being photographed in - a red jacket belonging to the IG Metall union, a fairly hardline outfit in the engineering industry.

He sometimes bemoaned that his successor as chief executive, Klaus Kleinfeld, failed to spend time being a "social romantic". A former colleague of Mr von Pierer's on the management board says: "Say what you like about Pierer, he always acted in the interests ofSiemens."

He had a particular interest in Asia, and Siemens' stellar growth there in recent years is largely because of him. Coming from lunch with him a year ago, a visitor saw him run over and hug some Chinese customers looking roundSiemens' Munich headquarters. "He is Siemens to us," one of the Chinese delegation said, beaming at Mr von Pierer's attentions.

But the list of Mr von Pierer's achievements have been severely tarnished in the eyes of many by the twin scandals engulfing Siemens. Mr von Pierer denies any wrongdoing or knowledge of either scandal. But most of the events in a €426m ($580m) bribery affair and an investigation into whether Siemens financially supported a rival to its main trade union took place during his 13-year term as chief executive, which ended in 2005.

Questions arose not just about the competence of management and the company's controls but also as to Siemens' culture.

Mr von Pierer always denied a personal responsibility, arguing that business could not have a definition of the term like in politics. Instead he justified his resignation by hoping that it would allow the company to sail back to "calmer waters" and said he had always put Siemens and its 475,000 workers above personal considerations. Many praised his decision as selfless.

But there is no doubt that this was a wrenching decision for him to take. Just days ago he was telling friends still that we was "kampfbereit" - ready to fight. But private talks with several prominent directors from the labour side and shareholder bank - including Gerhard Cromme, the chairman of steelmaker ThyssenKrupp and his temporary successor - convinced him to go.

Many people close to Mr Kleinfeld felt frustrated about having his predecessor in the supervisory board watching over him and potentially blocking his ideas. But others are worried that there is no counterweight to Mr Kleinfeld now. "With von Pierer gone, who will check him? German companies are just not made for one person to have so much power," a former management board member at Siemens said.

Mr von Pierer said he would continue with his other mandates including being the innovation adviser to Chancellor Angela Merkel and board seats at Volks-wagen and Deutsche Bank. "I'm coming from a 60-hour week to one of perhaps 30-35 hours. As a pensioner I think that is enough."

Merkel says she wants to keep former Siemens chief as her senior business adviser

By Hugh Williamson

Angela Merkel, the German chancellor, said yesterday that she would retain Heinrich von Pierer as her senior business adviser in spite of his resignation from Siemens' supervisory board, Hugh Williamson reports from Berlin.

Ms Merkel argued that Mr von Pierer "embodied" the positive values associated with the German engineering giant.

Other reactions were more negative, with Berthold Huber, deputy chairman of the IG Metall engineering union, arguing that the resignation was "long overdue". He added: "Now Siemens has a chance for a new beginning."

Josef Ackermann, chief executive of Deutsche Bank and deputy chairman of Siemens' supervisory board, expressed "huge regret" over Mr von Pierer's resignation, saying there remained "absolutely no doubt" about the former chairman's "personal integrity".

Mr von Pierer himself yesterday expressed bitterness over how he felt he had been treated by the media and by prosecutors investigating Siemens' corruption scandals. He used an e-mail to staff to attack the "sweeping judgments" about him that were "often not based on any facts".

Ms Merkel's spokesman said she "respected" Mr von Pierer's decision to step down but hoped that he would continue as chairman of the chancellor's "innovation council" of business leaders.

Copyright The Financial Times Limited 2007