Historical archive

Norwegian Government Pension Fund – Global:

Siemens under observation in corruption case

The Ministry of Finance has decided to place the German company Siemens AG under observation due to the gross and systematic corruption the group has been involved in over many years. Gross corruption can be grounds for exclusion from the Government Pension Fund – Global.

The Ministry of Finance has decided to place the German company Siemens AG under observation due to the gross and systematic corruption the group has been involved in over many years. Gross corruption can be grounds for exclusion from the Government Pension Fund – Global. "Siemens are now in the public eye and the company has initiated a range of anticorruption measures. By placing the company under observation we will contribute to keeping up the momentum on the anticorruption efforts", says Minister of Finance Kristin Halvorsen.

The Council on Ethics has earlier recommended that the company be excluded because of the risk of involvement in gross corruption. "I agree with the Council on Ethics that Siemens has been involved in gross corruption. That I, nevertheless, want to see how things develop is a result of the developments in Siemens and the measures the company has introduced to fight corruption, particularly over the last year. By placing the company under observation we, as an investor, can signal that we expect the measures to be implemented as intended. In this manner, using our stake in the company, we can contribute to keeping up the pressure to finally bring corruption in Siemens to an end", says Minister of Finance Kristin Halvorsen. 
 
In its November 2007 recommendation, the Council on Ethics stated that "Siemens behaviour shows a pattern, over many years, of acts of corruption carried out in the interest of the company. The acts have been carried out in many countries and involve transfers of large amounts". Further it states: "the state of things in Siemens must, therefore, unquestionably be considered serious in accordance with the guidelines".

The Council on Ethics points out that Siemens has been involved in corruption since the early 1990s. The apparently ambitious anticorruption measures that were initiated have not hindered the uncovering, some 15 years later, of corruption of a scope and seriousness that seems to be unparalleled, at least in Europe. In the light of these experiences the Council found that the measures that were heralded by Siemens in the autumn of 2007 were uncertain. The Council therefore recommended exclusion with a view to avoiding involvement in gross corruption.

Subsequent to this recommendation being given, further information became available on the enterprise's anticorruption measures in the company's annual report for 2007. In September 2007, the Council on Ethics advised that this information had not changed its conclusion. The matter has, however, taken a new turn inasmuch as Siemens has published a settlement with the German and US authorities on 15 December 2008. According to the information available, Siemens is to pay a total of approximately NOK 11 billion to the German and US authorities. Theodor Waigel, a former German Minister of Finance, will be the contact between the company and the US authorities. As compliance monitor he will oversee the company's anticorruption efforts over the next 4 years and check that it is not involved in any more acts of corruption. 

"There is no doubt that the conditions that have been brought to light in Siemens justify the use of the term gross corruption. However, the assessment made when considering exclusion of a company shall be forward-looking. Siemens is now in the spotlight and it is important that pressure to bring the corruption to an end is kept high. By keeping the company under observation we can contribute to this", says Halvorsen. 

"I will ask the Council on Ethics and Norges Bank to keep Siemens under close scrutiny with regard to the general anticorruption efforts, and in case new cases of gross corruption are uncovered.  We will have a low threshold for excluding Siemens if new cases of gross corruption are discovered", says Halvorsen.
 
As at 31 December 2008 the Government Pension Fund - Global owned Siemens shares for NOK 6.3 billion, representing 1.34 per cent of the voting shares.

__________________ 

Read more:
The recommendation from the Council on Ethics
The letter from the Council on Ethics
Companies Excluded from the Investment Universe
The Council on Ethics for the Government Pension Fund – Global