April 26, 2007 / 1:14 AM / 12 years ago

Siemens CEO resigns, leadership vacuum grows

FRANKFURT (Reuters) - Siemens AG (SIEGn.DE) Chief Executive Klaus Kleinfeld said on Wednesday he will leave the scandal-hit group when his contract expires in September, widening a leadership vacuum at the German conglomerate.

CEO of Germany's Siemens AG Klaus Kleinfeld passes an emergency exit sign as he arrives for the company's annual shareholders meeting in Munich in this January 25, 2007 file photo. Kleinfeld said on Wednesday he will leave the scandal-hit group when his contract expires in September, widening a leadership vacuum at the German conglomerate. REUTERS/Alexandra Beier/files

Kleinfeld said he was unwilling to tolerate further uncertainty about his and the company’s future after divisions among Siemens board members about whether to renew his contract became public in the last few days.

“In times like these, the company needs clarity about its leadership. I have therefore decided not to make myself available for an extension of my contract,” Kleinfeld said in a statement. “The company must have complete freedom of action.”

In a letter to Siemens staff, Kleinfeld said a committee of the supervisory board — which includes new Chairman Gerhard Cromme and influential Deutsche Bank AG (DBKGn.DE) CEO Josef Ackermann — had asked to postpone a decision on his contract.

“I consider the lack of clarity on leadership as well as regarding myself personally to be damaging and intolerable for the company,” he wrote in the letter seen by Reuters.

Siemens’ New York-traded shares SI.N dropped more than 5 percent on fears by investors that improvements set in motion by Kleinfeld would grind to a halt. Siemens pre-released forecast-beating quarterly results on Tuesday night.

“I am rather astonished,” said WestLB analyst Adrian Hopkinson. “I think it is disappointing for the company.”

Markets had been on tenterhooks waiting for word on whether the board would support or rebuff Kleinfeld after Chairman Heinrich von Pierer resigned last week.

Von Pierer, who was CEO until Kleinfeld took over just two years ago, said last week he was quitting for the good of the company, hoping to stem the widening effects of corruption allegations that have rocked the group, which manufactures everything from trains to light bulbs.

Neither von Pierer nor Kleinfeld has been personally implicated in four separate suspected bribery investigations of current and former Siemens staff.

Incoming Chairman Gerhard Cromme, reported by German media to be part of the anti-Kleinfeld faction on the Siemens supervisory board, thanked Kleinfeld for his “decisive and successful leadership of Siemens over the past two years.”

Cromme, who heads the German government’s corporate governance commission, confirmed that internal investigations had not linked Kleinfeld to any wrongdoing.

Deutsche Bank’s Ackermann was also reported to have been in favor of ousting Kleinfeld.

The powerful IG Metall trade union, which declined to express a firm opinion before Wednesday’s board meeting, issued a statement thanking Kleinfeld for his work to stamp out corruption and saying its duty was to protect workers.

“We deeply regret that Mr Kleinfeld will no longer be available as CEO,” it said.

The question of who could succeed Kleinfeld remained open after German industrial gases group Linde AG (LING.DE) reiterated on Wednesday that CEO Wolfgang Reitzle, touted as a possible replacement, would remain at Linde.

Former Volkswagen AG (VOWG.DE) manager Wolfgang Bernhard, named by German newspaper Sueddeutsche Zeitung as a candidate, was not immediately reachable for comment.

Sources familiar with the matter told Reuters on Tuesday that some supervisory board members wanted to put off a decision about Kleinfeld’s contract, fearing the corruption scandals could sooner or later reach him.

WestLB’s Hopkinson said: “I’m surprised that the supervisory board allowed the situation to reach this stage and I am also surprised that there seems to have been this misunderstanding whereby he is not willing to continue any more.

“It is not a simple group to manage ... It will take a new manager coming in from outside probably two or three years to get to understand it properly.”

Siemens said late on Tuesday that its operating profit had surged 49 percent in the quarter to end-March, easily beating market expectations. It was the latest in a run of surprisingly good results from Siemens, helped by an upturn in the world economy.

Siemens is due to present detailed second-quarter results on Thursday, when Kleinfeld had also been expected to announce new targets for the group after achieving mid-term goals this quarter, as promised shortly after he became CEO.

To read a newsmaker on Kleinfeld, please double click on <ID:nL25681944>

To read a Reuters story on Siemens’ preliminary second-quarter results, please double click on <ID:nL24560512>

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