Ex-Siemens Board Member Admits Paying Off Union Boss

Founded more than 160 years ago, Germany’s Siemens is one of Europe’s oldest and most respected corporations.  But the engineering-industrial conglomerate, with dual headquarters in Berlin and Munich, lately has had more than its share of unwanted publicity.  Last October a court in Munich ruled that the company, with almost a half-million employees worldwide, had bribed foreign officials to win contracts.  It ordered Siemens to pay a fine of 201 million euros (almost US$300 million).  The scandal led to the resignation of CEO Klaus Kleinfeld and Chairman Heinrich von Pierer, and since then has widened to a probe of some 300 individuals.  Now another bribery case involving a ranking company official has taken center stage.  And this one has the imprint of labor corruption.


A former Siemens board member, Johannes Feldmayer, admitted in a Nuremberg courtroom on September 24 that he made large payments over several years to the head of a small trade union that supported management’s goals.  The union, known as AUB, unlike its far larger rival, IG Metall, appeared to support Siemens’ goals for worker flexibility.  Prosecutors have alleged that Feldmayer during the course of 2001-06 paid about 35 million euros (US$51 million) to the longtime president of AUB, Wilhelm Schelsky, who also is on trial.  Schelsky in turn used much of the money, disguised as consultant’s fees, to buy automobiles and antiques for personal use.


Originally, Feldmayer denied wrongdoing.  His lawyer has stated that payments dated back to the Eighties, well before the 2001 contract signed by Feldmayer and Schelsky.  But that façade increasingly was difficult to maintain in light of subsequent admissions by Schelsky.  In May 2007, he was quoted as saying:  “I was supposed to build up an umbrella organization with the money.  And that is what I did…I was secretly employed as a lobbyist for Siemens.  There was a clear order from the top of the company.”  The German government took action in the wake of a civil suit filed in February 2007 by IG Metall, angered that Siemens was trying to break its bargaining power by siding with a more employer-friendly union.


The scandal has cost Feldmayer his job.  He temporarily stepped down, and Siemens decided not to renew his contract past 2007.  But a larger issue remains.  In Germany, labor long has had a far more active say in corporate governance than here in the U.S.  And that gives management in that country more opportunities to bribe union officials as a means of keeping costs down.  Union Corruption Update earlier this year provided coverage of a German labor scandal involving Volkswagen and its own Works Council.  Because labor and management have an inherently adversarial relationship, putting them on the same team would seem an invitation to trouble in any country.  (dw-world.de, 2/24/07; Financial Times, 5/31/07; Agence France Presse, 9/24/08).