It Takes a Crisis

Battered by its infamous bribes-for-contracts scandal, Siemens turns to an IT solution to make sure it doesn't happen again.

“Our new procedures go all the way down to the 434,000th employee,” says Joseph Kaeser, the notably unembattled CFO of German industrial giant Siemens AG. New procedures certainly seemed called for in the wake of the company’s infamous bribes-for-contracts scandal, which came to light in 2006 and has led to the departure of roughly 500 employees and pending legal actions around the globe, including a potential fine by the Securities and Exchange Commission that could be announced sometime this quarter.

Even as the company hired its first-ever non-German CEO, Kaeser remained as CFO, untainted by the scandal and given major responsibility for making sure it never happens again. Toward that end, he has championed a new purchase-to-payment system that creates a central database for the thousands of Siemens accounts that were not previously part of the firm’s financial system. No longer, Kaeser says, can a payment be generated for which there is no corresponding liability. “When we analyzed the situation,” he says, “we found that there were $1.2 billion in ‘questionable’ payments. Not all of that was for bribes, but we could not prove who the end user of the money was.”

Asked why an ethics problem inspired an IT solution, Kaeser says that “enforcement is key. It’s not enough to fire people after something is detected; we must prevent it.” Given that Siemens may process up to 40 million transactions a day during peak periods, even a beefed up internal auditing staff of 550 people can’t be expected to catch everything.

For the 50-year-old CFO, the past few years have been a trial by fire. But, as he says, “it often takes a crisis to take a company to the next level. If the sun is shining, anyone can steer the boat.” Given that Siemens plans a workforce-reduction sure to be unpopular with its unions, and that it recently took a $1.4 billion extraordinary charge when an internal review uncovered problems with some major contracts, he may need to keep a firm grip on the wheel.

Recent travails have hammered Siemens's stock price

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