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The years from 1989 to 2006 confronted the company with challenges unlike any before, compelling its chief players to make fundamental changes. The era's dramatic events included the first comprehensive reform of the corporate organization, the launch of the Ten-Point Program, and the compliance crisis.
1989 was a year of profound changes, including at Siemens. With eight lines of business, the company had become too sprawling to manage efficiently. A reform was needed.
Karlheinz Kaske, CEO from 1981 to 1992, aimed to improve "mobility, effectiveness and competitiveness," with an organizational structure that took due account of the company's changing environment – the technological paradigm shift from mechanical devices to electronics and microelectronics, the growth of international business, a greatly expanded worldwide customer base, and ever-intensifying competition.
The new corporate structure made the individual units more autonomous, while still maintaining central control and the "unity of the company" that was so important to Siemens' self-image. The eight former business units were rearranged into 15 new, leaner units, two operating Groups with their own legal form, and two independent Divisions. Each was responsible for its own profits and value chain – from development through production to sales – and each was managed by three Group Executive Managers. Top management, which formerly included about 30 people, was cut by a third. A Corporate Executive Committee, with clear authority to decide overall strategy, replaced the former central board. Sales operations were decentralized.
The reorganization laid the groundwork for a corporate structure that would last until 2006. It was a milestone in recent company history.
Computer memory and other computer technology had been an important line of interest for Siemens since back in the 1950s. With the aim of growing further in that field, Siemens took over the majority of stock in Nixdorf Computer AG as of October 1, 1990. The new acquisition was then combined with the existing data and information technology unit to form Siemens Nixdorf Informationssysteme AG (SNI). SNI became a wholly owned Siemens subsidiary in 1992.
But hopes soon began to fade. The takeover and integration proved more complex than expected. Nixdorf had missed the boat somewhat in recent technological developments, and the differences between the two corporate cultures made integration into Siemens even harder.
A difficult round of restructuring followed, with staff cuts, management changes and two extensive reorganizations. By the mid-1990s, SNI had stabilized and became the strongest-selling European computer maker. It returned to the black in 1995.
Even so, SNI still had not evolved into a growth driver. So in 1998, Siemens Nixdorf Informationssysteme AG was dissolved as an independent company and fully integrated into Siemens AG. The personal computer business was contributed to a joint venture with Fujitsu, and held its own in the market as Europe's largest computer company.
The Ten-Point Program presented by President and CEO Heinrich von Pierer in 1998 represented a turning point in Siemens history. The company had been contending with major difficulties since 1997: the economic crisis in Southeast Asia, delivery delays in railroad equipment, profit slumps in power plant equipment, the repercussions of misjudgments of the mobile phone market, and the collapse of the semiconductor market. The company's stock was lagging behind the DAX exchange as a whole. The situation called for a systematic approach. An extensive restructuring was unavoidable.
So the "Ten-Point Program" – governed by the motto "Buy, cooperate, sell or close" – led to drastic changes in the company. The portfolio kept only those activities where Siemens was first or second in the global market. The expanded top+ corporate program made economic value added (EVA) metric the defining measure of performance. And accounting was changed over to the US GAAP standard – in part to enhance transparency, but also to prepare Siemens to be listed on the stock exchange in the USA in 2001.
The Ten-Point Program quickly yielded successes. The price of Siemens stock soared. Revenues and profits improved substantially. An overall positive EVA was achieved a year ahead of schedule.
Listing Siemens on the New York Stock Exchange (NYSE) was one of the key goals of the Ten-Point Program launched in 1998. So March 12, 2001, was a day of high hopes at the company. President and CEO Heinrich von Pierer called the day's listing a "high point" in the further expansion of business in the USA, especially because most competitors were trading on the American exchange already.
But hopes for a further vigorous upswing in the US market failed to materialize. SEC regulations were very complex and strict. In an era of computerized trading, a second listing in New York meant an immense additional expense, while investors were doing most of their trading in Germany and via over-the-counter electronic trading platforms. The amount of Siemens stock traded in the USA in 2013 was less than five percent of worldwide volume. And contrary to expectations, the listing had no impact on the company's strategic focus or presence in the United States.
In January 2014, the Managing Board decided to delist the stock in New York, following the example of many competitors who had already left the New York exchange.
When Klaus Kleinfeld took over from Heinrich von Pierer to head the Managing Board in January 2005, he was optimistic about achieving the profitability targets set for spring 2006. He viewed energy, infrastructure and healthcare as the three pillars on which the company could stand and keep growing profitably.
To that end, Kleinfeld focused the company on the three megatrends of the day: the influx of people into cities, the increase in the world's population in combination with demographic change, and accelerating climate change. These trends were covered by Siemens' core business lines: energy and the environment, automation and infrastructure for both the public and private sector, and healthcare. Acquisitions were also in line with this approach. The company reinforced its holdings in water infrastructure by adding the American company USFilter. It added Bonus Energy, the world market leader in offshore wind farms, in the energy sector. And it took over gear-unit maker Flender in industry and CTI Molecular Imaging in medical technology.
With this new setup, Siemens aimed to develop innovative solutions, while at the same time keeping an eye on dealing responsibly with scarce resources and the environment. Another emphasis was efficient, safe transportation for people and freight, as well as affordable healthcare for the population.
When Peter Löscher restructured the company into the sectors of Industry, Energy, and Healthcare in 2007, and later Infrastructure & Cities, he was maintaining this focus on megatrends.
In 2006, Siemens fell into one of the most dangerous phases in its entire history: the compliance crisis. A mixture of lack of transparency, unclear lines of responsibility, manipulation of customers' officers and employees, and vigorous criminality on the part of some individuals had long lain hidden. Investigations by the Munich public prosecutor's office brought the problems to light in 2006, throwing the company into a profound existential crisis of trust.
It responded, taking the necessary steps. Compliance work became a center of attention. A large number of top managers were replaced. With Peter Löscher as CEO and Gerhard Cromme as Chairman of the Supervisory Board, two men came to the helm who pushed for a deep-reaching, rigorous investigation. Together with Josef Ackermann and Berthold Huber, they set the company on a new course. The new Legal and Compliance department, which reported directly to the Managing Board, was headed by Peter Y. Solmssen. Extensive cooperation with American and German authorities kept the penalty imposed on Siemens relatively mild, though it still came to a record figure of some 1.2 billion euros.
In December 2008, the court proceedings in Munich and Washington, D.C., ended. A system for conduct in compliance with regulations was set up, which was declared a benchmark for German business in 2011 and has held the top position several times on the famed Dow Jones Sustainability Index. Siemens has earned the highest possible scores for compliance. Former German Finance Minister Theo Waigel came on board to oversee compliance efforts as the company's Compliance Monitor.