FRANKFURT, April 25 — The embattled chief executive of Siemens, Klaus Kleinfeld, said Wednesday that he would step down when his contract expired in September, the latest casualty in a widening corruption scandal that has shaken corporate Germany.
Events at Siemens, a giant engineering company and manufacturer, have generated headlines and radio and television reports in a country where corruption was rarely discussed, spurring debate about how German companies do business.
“In times like these,” Mr. Kleinfeld said in a statement, “the company needs clarity about its leadership. I have therefore decided not to make myself available for an extension of my contract.”
His decision followed a meeting on Wednesday of the Siemens supervisory board, where the matter of his contract had long been on the agenda. Until days ago, there was little question that Mr. Kleinfeld, 49, would be retained in the job he had held the last two years.
But the 20-member board, which represents major shareholders and labor unions, rapidly turned against Mr. Kleinfeld as the scandal deepened and members saw a need for a fresh start.
The resignation came six days after Heinrich von Pierer, a senior industrialist who led Siemens from 1992 to 2005, announced that he would quit as chairman of the supervisory board to help Siemens return to “calmer waters.”
Both men have denied any wrongdoing. Siemens said Wednesday that independent investigations to date by the law firm of Debevoise & Plimpton “have found no indications of personal misconduct or that Kleinfeld had any knowledge of events related to the affairs.”
To some extent, Siemens is a victim of a shift in the ethical climate of corporate Germany: bribery of foreign officials had been tax-deductible in this country until 1999. Mr. Kleinfeld’s downfall may be an indication that standards are indeed changing rapidly.
In this case, some Siemens board members, who have been caught up in scandals elsewhere, appear reluctant to take actions — like standing behind a chief executive — that might later call into question their own oversight.
Investors reacted to the news by selling Siemens stock on Wednesday. Shares slid 0.9 percent in Frankfurt, to 88.36 euros ($120.52), reversing earlier gains. Later in the day in New York, Siemens’ American depository receipts fell $6.67, or more than 5 percent, to $117.75. The share price had risen nearly 50 percent during Mr. Kleinfeld’s tenure.
The Siemens board will now search for a successor to Mr. Kleinfeld, who had been hand-picked by Mr. von Pierer.
Any insider is at risk of being ensnared in the scandal as investigations unfold. An outsider would need time to get a grip on a vast company that employs 475,000 and makes home appliances, computers and power plants.
“It would mean six months of stagnation at Siemens,” said Daniela Bergdolt, head of the Bavarian division of a private investors’ association, DSW.
German news reports have focused on Wolfgang Reitzle, a former executive at BMW and Ford who is chief executive of Linde, a producer of industrial gases that is based, like Siemens, in Munich.
Mr. Reitzle has turned around Linde by spinning off units, and led the recent acquisition of a larger rival, the BOC Group of Britain. He is close to Josef Ackermann, the chief executive of Deutsche Bank and the Siemens supervisory board member who reportedly led the opposition to renewing Mr. Kleinfeld’s contract.
Uwe Wolfinger, a spokesman for Linde, said Mr. Reitzle “would remain as Linde’s chief.”
Accusations of corruption at Siemens began last autumn, when Munich prosecutors began investigating reports that more than $500 million in bribes had been paid to foreign officials in the preceding seven years by Siemens’ communications unit. The company is also involved in a bribery case involving an Italian energy company.
Problems escalated for Mr. Kleinfeld, and for Mr. von Pierer, last month when prosecutors arrested Johannes Feldmayer, a member of the Siemens board of management and the second-highest-paid executive after Mr. Kleinfeld.
Mr. Feldmayer was accused of funneling corporate money to finance an independent labor union that is perceived as friendly to management and at times acted as a counterweight to IG Metall, the large and powerful German labor union.
Officials at IG Metall, which holds nearly half the seats on the Siemens supervisory board, were enraged and brought charges against the company for breaking German law. Labor representatives of large German companies hold half the board seats.
The union was a leading force pressing for the resignation of Mr. von Pierer, and it made clear that Mr. Kleinfeld would also have to go to give Siemens a fresh start.
Mr. Kleinfeld had also hurt his relationship with the union by pressing ahead with plans to sell the company’s auto parts unit, VDO, a move investors applauded but that cost him support on the board.
Mr. Von Pierer’s successor as chairman is Gerhard Cromme, a champion of good corporate governance in Germany and the first outsider to head the board. He took up that role at the meeting on Wednesday.
Siemens board members were unwilling to extend Mr. Kleinfeld’s contract while the independent investigation was still being carried out because they feared that Mr. Kleinfeld was at risk of being entangled in the scandals. Analysts said that after Mr. von Pierer resigned, it would be just a matter of time before more heads rolled.
Mr. von Pierer’s last words to the company, in a memo to employees, called for “decisive action.”
In an effort to save his job, Mr. Kleinfeld released quarterly earnings figures late Tuesday, two days earlier than planned, to underscore the company’s financial health. Net income rose 36 percent, more than analysts had predicted.
“In times like these,” Mr. Kleinfeld said in a statement, “the company needs clarity about its leadership. I have therefore decided not to make myself available for an extension of my contract.”
His decision followed a meeting on Wednesday of the Siemens supervisory board, where the matter of his contract had long been on the agenda. Until days ago, there was little question that Mr. Kleinfeld, 49, would be retained in the job he had held the last two years.
But the 20-member board, which represents major shareholders and labor unions, rapidly turned against Mr. Kleinfeld as the scandal deepened and members saw a need for a fresh start.
The resignation came six days after Heinrich von Pierer, a senior industrialist who led Siemens from 1992 to 2005, announced that he would quit as chairman of the supervisory board to help Siemens return to “calmer waters.”
Both men have denied any wrongdoing. Siemens said Wednesday that independent investigations to date by the law firm of Debevoise & Plimpton “have found no indications of personal misconduct or that Kleinfeld had any knowledge of events related to the affairs.”
To some extent, Siemens is a victim of a shift in the ethical climate of corporate Germany: bribery of foreign officials had been tax-deductible in this country until 1999. Mr. Kleinfeld’s downfall may be an indication that standards are indeed changing rapidly.
In this case, some Siemens board members, who have been caught up in scandals elsewhere, appear reluctant to take actions — like standing behind a chief executive — that might later call into question their own oversight.
Investors reacted to the news by selling Siemens stock on Wednesday. Shares slid 0.9 percent in Frankfurt, to 88.36 euros ($120.52), reversing earlier gains. Later in the day in New York, Siemens’ American depository receipts fell $6.67, or more than 5 percent, to $117.75. The share price had risen nearly 50 percent during Mr. Kleinfeld’s tenure.
The Siemens board will now search for a successor to Mr. Kleinfeld, who had been hand-picked by Mr. von Pierer.
Any insider is at risk of being ensnared in the scandal as investigations unfold. An outsider would need time to get a grip on a vast company that employs 475,000 and makes home appliances, computers and power plants.
“It would mean six months of stagnation at Siemens,” said Daniela Bergdolt, head of the Bavarian division of a private investors’ association, DSW.
German news reports have focused on Wolfgang Reitzle, a former executive at BMW and Ford who is chief executive of Linde, a producer of industrial gases that is based, like Siemens, in Munich.
Mr. Reitzle has turned around Linde by spinning off units, and led the recent acquisition of a larger rival, the BOC Group of Britain. He is close to Josef Ackermann, the chief executive of Deutsche Bank and the Siemens supervisory board member who reportedly led the opposition to renewing Mr. Kleinfeld’s contract.
Uwe Wolfinger, a spokesman for Linde, said Mr. Reitzle “would remain as Linde’s chief.”
Accusations of corruption at Siemens began last autumn, when Munich prosecutors began investigating reports that more than $500 million in bribes had been paid to foreign officials in the preceding seven years by Siemens’ communications unit. The company is also involved in a bribery case involving an Italian energy company.
Problems escalated for Mr. Kleinfeld, and for Mr. von Pierer, last month when prosecutors arrested Johannes Feldmayer, a member of the Siemens board of management and the second-highest-paid executive after Mr. Kleinfeld.
Mr. Feldmayer was accused of funneling corporate money to finance an independent labor union that is perceived as friendly to management and at times acted as a counterweight to IG Metall, the large and powerful German labor union.
Officials at IG Metall, which holds nearly half the seats on the Siemens supervisory board, were enraged and brought charges against the company for breaking German law. Labor representatives of large German companies hold half the board seats.
The union was a leading force pressing for the resignation of Mr. von Pierer, and it made clear that Mr. Kleinfeld would also have to go to give Siemens a fresh start.
Mr. Kleinfeld had also hurt his relationship with the union by pressing ahead with plans to sell the company’s auto parts unit, VDO, a move investors applauded but that cost him support on the board.
Mr. Von Pierer’s successor as chairman is Gerhard Cromme, a champion of good corporate governance in Germany and the first outsider to head the board. He took up that role at the meeting on Wednesday.
Siemens board members were unwilling to extend Mr. Kleinfeld’s contract while the independent investigation was still being carried out because they feared that Mr. Kleinfeld was at risk of being entangled in the scandals. Analysts said that after Mr. von Pierer resigned, it would be just a matter of time before more heads rolled.
Mr. von Pierer’s last words to the company, in a memo to employees, called for “decisive action.”
In an effort to save his job, Mr. Kleinfeld released quarterly earnings figures late Tuesday, two days earlier than planned, to underscore the company’s financial health. Net income rose 36 percent, more than analysts had predicted.
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