Siemens Managers May Have to Put Their Money Where Their Mistakes Were

Posted by: Jack Ewing on April 18

Siemens may sue former members of top management to recover some of the costs of a continuing corruption scandal, Munich’s daily Süddeutsche Zeitung reports. And why not? The norm at a lot of companies has been to reward ex-managers with big severance packages even when they mess up big time. Some subprime-stricken U.S. investment banks spring to mind.

Siemens isn’t confirming the Süddeutsche story. But the company has already filed claims against some former members of the Communications unit, which is at the center of accusations that Siemens employees systematically bribed foreign officials to win business. And Siemens jurists have extensively researched German law on what management liability in such a case might be.

The scandal has been costly for Siemens. The company has already spent hundreds of millions on lawyers, penalties and other costs related to the investigation, which involves German prosecutors as well as U.S. authorities. Why not try to recover some of those costs from members of the management board who were in charge when the corruption took place?

The scale of the corruption suggests that, even if former top execs weren’t aware of illegal practices, they are guilty of bad management. Siemens would set a positive example if it held those former top execs financially responsible for the cost to shareholders.