Siemens faces investor call at Jan 24 AGM to quit US Chamber of Commerce over bribery issue

German company faces ‘reputation risk’ say investors as DoJ reviews Foreign Corrupt Practices Act.

Siemens, the German engineering giant, faces pressure from investors at next week’s (January 24) annual general meeting (AGM) in Munich to quit its board seat at the US Chamber of Commerce over allegations that the Chamber is trying to water down the US Foreign Corrupt Practices Act (FCPA) Link under which Siemens itself paid a record bribery settlement just three years ago.
The CtW Investment Group, which advises union pension and benefit funds holding over $200bn in assets affiliated to the Change to Win (CtW) labour coalition, has written to Peter Löscher, Siemens CEO and Gerhard Cromme, the Chair of its supervisory board, calling on the company to sever ties with the Chamber. Eric Spiegel,
 President and CEO of Siemens Corporation in the US, sits on the Chamber board. The CtW letter says the Chamber has engaged in an “expensive campaign” to undermine the FCPA at the same time that Siemens has invested millions to comply with it. In December 2008, Siemens paid nearly €1bn ($1.4bn) out of court to US and German authorities to settle corruption charges over allegations it had made an estimated €1.3bn in dubious payments globally to secure business over more than a decade. At the time, investors including the Norwegian Government Pension Fund put Siemens on a blacklist watch notice over its involvement in what the Norwegian fund called ‘gross and systematic corruption’.
William Patterson, Executive Director of the CtW Investment Group, said: “With Siemens aiming to double its U.S. federal business over the next few years, it’s a mistake to flirt with the charge of duplicity, which could cost the company new business and affect share price.”
Other large institutional investors say they expect Siemens to respond to the allegations at the AGM.Hans-Christoph Hirt, Global Head of Corporate Engagement at Hermes Equity Ownership Services, which advises clients with more than £85bn in assets, said it had contacted Siemens on the issue because of the “reputational risk” to the firm: “We think there is a case to be answered,” he said.
The US Department of Justice (DoJ) is currently planning new guidance on enforcement of the FCPA, which dates back to 1977 and is one of the world’s tightest regulatory frameworks on bribery.
The DOJ and SEC have been turning up the heat on fines and prosecutions in recent years and the Chamber of Commerce says the top ten FCPA settlements have added up to $2.8bn over an issue it says can be difficult for companies to control, particularly in developing countries.
The Chamber has been arguing for a “compliance defense” response to bribery allegations where they say the company may not be aware of the actions of third parties or individuals in the company, but where the company has met a series of compliance procedures. Critics argue that the compliance defence would drive a legal get-out hole through the FCPA. The CtW letter says the compliance defence would be a “fig-leaf” absolving companies from FCPA if it can’t be proved that they did not have specific knowledge of bribery.
A spokesman for Siemens had not responded to a request for comment by the time of going to press.
It is not the first time investors have called for Siemens to quit the Chamber of Commerce over apparent inconsistencies. At its 2011 AGM, John Liu, New York City Comptroller who oversees the five city pension funds said Siemens should leave the Chamber, because it had “vigorously opposed” environmental reform against the company’s own stated policy.