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Globalisation, shareholder value, restructuring: the (non)‐transformation of Siemens

2004; Taylor & Francis; Volume: 9; Issue: 3 Linguagem: Inglês

10.1080/1356346042000257804

1469-9923

Alexander Börsch,

Corporate Governance and Law

Click to increase image sizeClick to decrease image size Notes For studies that are exceptions to this tendency and deal with the level of firms, see Jeffrey N. Gordon, Pathways to Corporate Convergence? Two Steps on the Road to Shareholder Capitalism in Germany: Deutsche Telekom and DaimlerChrysler, Working Paper 2000/161, Columbia Law School, Center for Law and Economic Studies, New York; Mark Lehrer, ‘Macro‐varieties of capitalism and micro‐varieties of strategic management in European airlines’, in: Peter Hall & David Soskice (eds), Varieties of Capitalism: The Institutional Foundations of Comparative Institutional Advantage (Oxford University Press, 2001), pp. 361–86; and Wolfgang Streeck & Martin Höpner (eds), Alle Macht dem Markt? Fallstudien zur Abwicklung der Deutschland AG (Campus, 2003). See Henry Hansmann & Reinier Kraakman, ‘The End of History for Corporate Law’, Georgetown Law Journal, Vol. 89, No. 1 (2001), p. 455. See Christel Lane, ‘Globalization and the German Model of Capitalism—Erosion or Survival?’, British Journal of Sociology, Vol. 51, No. 2 (2000), p. 210. See John C. Coffee, Jr., The Future as History: The Prospects for Global Convergence in Corporate Governance and its Implications, Working Paper 1999/14, Columbia Law School, Center for Law and Economic Studies, New York. See Rolf Bühner, Abdul Rasheed & Joseph Rosenstein, ‘Corporate Restructuring Patterns in the US and Germany: A Comparative Empirical Investigation’, Management International Review, Vol. 37, No. 4 (1997), pp. 320–1. See Sigurt Vitols, ‘The reconstruction of German corporate governance: reassessing the role of capital market pressures’, unpublished paper presented to the 1st Conference of the Research Network on Corporate Governance, Wissenschaftszentrum Berlin für Sozialforschung, Berlin, June 2000, p. 3. See also Wolfgang Streeck, The Transformation of Corporate Organization in Europe: An Overview, Working Paper 2001/8, Max‐Planck‐Institute for the Study of Societies, Cologne, p. 11. On the strategic interests of owners, see Ruth V. Aguilera & Gregory Jackson, ‘The Cross‐National Diversity of Corporate Governance: Dimensions and Determinants’, Academy of Management Review, Vol. 12, No. 3 (2003), pp. 447–65; and Carl W. Kester, ‘Industrial Groups as Systems of Contractual Governance’, Oxford Review of Economic Policy, Vol. 8, No. 3 (1992), pp. 24–44. See Sigurt Vitols, ‘Viele Wege nach Rom? BASF, Bayer und Hoechst’, in: Streeck & Höpner, Alle Macht dem Markt, p. 198. See Michael Porter, The Competitive Advantage of Nations (Free Press, 1990), p. 356. For an analysis of the German production system and Diversified Quality Production, see Wolfgang Streeck, ‘Productive constraints: on the institutional conditions of diversified quality production’, in: Wolfgang Streeck, Social Institutions and Economic Performance (Sage, 1992), pp. 1–40. See Lane, ‘Globalization and the German Model’, p. 208. See Bühner et al., ‘Corporate Restructuring’, p. 334. See Henk De Jong, ‘The Governance Structure and Performance of Large European Corporations’, Journal of Management and Governance, Vol. 1, No. 1 (1997), p. 20. See Mary O'Sullivan, ‘The Political Economy of Comparative Corporate Governance’, Review of International Political Economy, Vol. 10, No. 1 (2003), p. 63. See Andreas Hackethal & Reinhard Schmidt, Finanzsystem und Komplementarität, Working Paper Series Finance and Accounting 2000/50, University of Frankfurt, Frankfurt, pp. 23–6. See Sigurt Vitols. ‘Varieties of corporate governance: comparing Germany and the UK’, in: Hall & Soskice, Varieties of Capitalism, p. 341. See De Jong, ‘Governance Structure’, p. 20. See OECD, ‘Shareholder Value and the Market in Corporate Control in OECD Countries’, Financial Market Trends, No. 69 (1998), pp. 15–23. See William Lazonick & Mary O'Sullivan, ‘Maximising Shareholder Value: A New Ideology for Corporate Governance’, Economy and Society, Vol. 29, No. 1 (2000), p. 28. See William Bratton & Joseph McCahery, Comparative Corporate Governance and the Theory of the Firm: The Case against Global Cross Reference, Working Paper 2000/7, George Washington Law School, Public Law and Legal Theory, Washington DC, p. 18. Another mechanism that might bring about convergence is that the financial industry is growing in importance and benefits from a shareholder value orientation of companies. Thus the interests of the financial industry as well as those of consultants and academics working in this field reinforce the trend towards greater shareholder power. For this argument, see Ronald Dore, Stock Market Capitalism: Welfare Capitalism, Japan and Germany versus the Anglo‐Saxons (Oxford University Press, 2000), pp. 12–13. See Hansmann & Kraakman, ‘The End of History for Corporate Law’, pp. 449–50. Ibid., p. 468. See Mauro F. Guillen, ‘Corporate Governance and Globalization: Is there Convergence Across Countries?’, Advances in International Comparative Management, Vol. 13 (2000), p. 179. See Reinhard Schmidt & Stefanie Grohs, Angleichung der Wirtschaftsverfassung in Europa—ein Forschungsprogramm, Working Paper Series Finance and Accounting, 1999/43, University of Frankfurt, Frankfurt, p. 41. See Christel Lane, Changes in Corporate Governance in German Corporations: Convergence to the Anglo‐American Model?, Working Paper 2003/259, University of Cambridge, ESRC Centre for Business Research, Cambridge, p. 6. See Carl W. Kester, ‘American and Japanese corporate governance: convergence to best practice?’, in: Suzanne Berger & Ronald Dore (eds), National Diversity and Global Capitalism (Cornell University Press, 1996), pp. 107–37; as well as Bratton & McCahery, Comparative Corporate Governance. OECD Economic Surveys, Germany (OECD, 1995), p. 119. Jonathan Zeitlin, Americanization and Its Limits: Reworking US Technology in Post‐War Europe and Japan, EUI Working Paper Series, RSC 1999/33, European University Institute, Florence, p. 3. See Gregory Jackson, ‘Corporate governance in Germany and Japan: liberalization pressures and responses during the 1990s’, in: Kozo Yamamura & Wolfgang Streeck (eds), The End of Diversity? Prospects for German and Japanese Capitalism (Cornell University Press, 2003), p. 299. See Martin Höpner, Corporate Governance in Transition: Ten Empirical Findings on Shareholder Value and Industrial Relations in Germany, Discussion Paper 2001/5, Max‐Planck‐Institute for the Study of Societies, Cologne, p. 32. Ibid., p. 38. See, for a general introduction, Peter Hall & David Soskice, ‘Introduction’, in: Hall & Soskice, Varieties of Capitalism, pp. 1–68. Ibid., p. 64. See Guillen, ‘Corporate Governance and Globalization’, p. 200. See Peter Hall, ‘The political economy of Europe in an era of interdependence’, in: Herbert Kitschelt et al. (eds), Continuity and Change in Contemporary Capitalism (Cambridge University Press, 1999), p. 161. See Bob Hancké, Large Firms and Institutional Change: Industrial Renewal and Economic Restructuring in France (Oxford University Press, 2002), p. 2. Siemens was also the first German industrial company to establish its own capital investment fund. Frieder Naschold, Die Siemens AG: Inkrementale Anpassung oder Unternehmenstransformation?, Working Paper FS II 1997/201, Wissenschaftszentrum Berlin für Sozialforschung, Berlin, p. 5. See ‘Wie eine Lawine’, Wirtschaftswoche, 26 October 1995. See Lane, ‘Globalization and the German Model’, p. 208. See Christel Lane, ‘European Companies between Globalization and Localization—A Comparison of Internationalization Strategies of British and German MNCs’, Economy and Society, Vol. 27, No. 4 (2000), pp. 477–8. See Siemens, Annual Report 1985, p. 38. The acquisition—in the first hostile takeover in Siemens' history—of the British telecommunications company Plessey, together with GEC, was the biggest investment in the company's history and one of the biggest foreign investments of a German firm until then. The price was about DM6 billion. See ‘Siemens will das US‐Geschäft ausbauen’, Süddeutsche Zeitung, 13 March 2001. See ‘Siemens baut das US‐Geschäft um’, Financial Times Deutschland, 13 March 2001. See Günther Goth, ‘Veränderungen in der unternehmerischen Personal‐ und Beschäftigungspolitik am Beispiel der Siemens AG’, in: Winfried Schmähl & Herbert Rische (eds), Wandel der Arbeitswelt—Folgerungen für die Sozialpolitik (Nomos Verlagsgesellschaft, 1999), p. 97. Siemens, Annual Report, various years. Goth, Veränderungen, p. 85. See Heinrich von Pierer, Langfristige Ausrichtung des Unternehmens, supervisory board presentation, 11 December 1996, internal Siemens document, p. 12. See Siemens, Annual Report, various years. See ‘Von Pierer: Flächentarife müssen bleiben’, Handelsblatt, 30 April 1996; and ‘Der Riese in der Tretmühle der Globalisierung’, Süddeutsche Zeitung, 9 October 1997. See ‘Unsere Leute brauchen Teamgeist’, Der Spiegel, No. 20, 1998: interview with the head of human resource management, Peter Pribilla. See also ‘Gehaltserhöhung nicht mehr automatisch’, Süddeutsche Zeitung, 15 June 1996. See ‘Jahresüberschuß soll um mehr als 20% steigen’, Handelsblatt, 23 February 1996. See ‘Why there's still no payoff’, Business Week, 30 December 1996. Siemens, Annual Report 2002 and author's own calculations. See Gunnar Hedlund & Dag Rolander, ‘Action in heterarchies—new approaches to managing the MNC’, in: Christopher Bartlett et al. (eds), Managing the Global Firm (Routledge, 1990), pp. 22–6. Siemens attained yearly productivity increases of 8.5 per cent after 2–3 per cent in the late 1980s. In 1995 these increases saved Siemens DM7 billion, but DM6.7 billion was lost by falling prices. See ‘Rückenwind für Siemens’, Börsen‐Zeitung, 16 July 1996. See ‘Noch einmal mit Gefühl’, Manager Magazin, No. 12, 1994: interview with the chairman of Siemens' works councils, Alfons Graf. See ‘Siemens auf der Suche nach höheren Renditen’, Neue Zürcher Zeitung, 17 December 1994. Costs were DM2.3 billion. See Naschold, ‘Die Siemens AG’, p. 20. See ‘Die letzte Reserve’, Manager Magazin, No. 11, 1998. Profits in 1998 were down to the all‐time‐low of DM0.92 billion. Overall, profits had fallen by two thirds from 1996 to 1998. See ‘Siemens climbs back’, Business Week, 5 June 2000. The exchange rate €/DM is 1.95. See ‘Siemens hält Kurs’, Börsen‐Zeitung, 15 December 1995; and ‘Siemens‐Konzernstruktur steht. Osram/BSH bleiben im Verbund’, Börsen‐Zeitung, 17 April 1999. David Rothblum, ‘IR: Zweigleisige Kommunikation entscheidend’, Börsen‐Zeitung, 7 November 1996 (translation by author). Gerald Davis & Michael Useem, ‘Top management, company directors and corporate control’, in: Andrew Pettigrew et al. (eds), Handbook of Strategy and Management (Sage, 2002), p. 252. Accounting according to US‐GAAP had the pleasant side‐effect that Siemens could separate out its pension requirements, which contribute to its enormous liquidity, but which it did not like to disclose. Pension funds were transferred to a newly founded pension trust. Heinrich von Pierer, Speech at the Annual General Meeting, 18 February 1999. See Siemens, Annual Report 2001, p. 20. See ‘Siemens verschiebt Renditeziele auf 2004’, Financial Times Deutschland, 7 December 2001; and ‘Bei Siemens rücken Sanierer an die Spitze’, Financial Times Deutschland, 15 November 2001. See ‘Das neue “Win”‐Dach auf dem Siemens‐Haus’, Börsen‐Zeitung, 2 December 1997. See Bengt Holmstrom & Steven Kaplan, Corporate Governance and Merger Activity in the US: Making Sense of the 1980s and 1990s, Working Paper 2001/8220, National Bureau of Economic Research, Cambridge MA, p. 3. See Heinrich von Pierer, ‘Stock Options für 500 Manager’, Börsen‐Zeitung, 4 December 1998. See ‘Ein Bonbon für die Top‐Manager’, Süddeutsche Zeitung, 15 February 1999. See Siemens, Annual Report 2000. Holmström & Kaplan, Corporate Governance, p. 16. Also passive components, electron tubes and transistors were divested, because the division would have been too small without semi‐conductors. See ‘Wegen Halbleitermalaise fliegt Siemens in Turbulenzen’, Computerwoche, 31 July 1998. The Southeast Asian economic crisis led to a general crisis in the industry. Because of the depreciation of those currencies, semi‐conductor prices fell dramatically from US$50 to US$5 for a 16‐bit chip between 1995 and 1998. Yearly investments fluctuated between DM2 and 3 billion and R&D expenses were about DM1 billion each year. See ‘Siemens steckt Hagelschläge nicht ohne Spuren weg’, Börsen‐Zeitung, 5 November 1998. Infineon Technologies, Verkaufsprospekt, 11 July 2001, p. 27. Personal interview with a former Siemens manager. In 1990 it covered 80 per cent of the whole spectrum of electronics; the figures for its competitors were Hitachi: 71 per cent, Toshiba: 64 per cent, GEC: 52 per cent, Philipps: 48 per cent, General Electric: 28 per cent. See ‘Spotlight on Siemens' changing act’, Financial Times, 24 December 1990. See ‘Splitting Siemens up’, Financial Times, 6 November 1998. See ‘Siemens fehlt radikale Neurorientierung’, Börsen‐Zeitung, 21 January 1998. See M.M. Warburg & Co. Investment Research, Aktie im Blickpunkt Siemens, August 1998, p. 7. See ‘New lean Siemens may still need toning up’, Financial Times, 6 November 1998. Siemens has even excluded that business groups for which synergies with other divisions are hard to discover, such as the lightning group Osram or the joint venture with Bosch for household appliances, will be sold or floated. See ‘Wir meinen es ernst mit dem Umbau’, Börsen‐Zeitung, 17 April 1999. See Siemens, Annual Report 2001, p. 19. See von Pierer, Ausrichtung, p. 4. See http://aktien.onvista.de/charts.html?ID_OSI=82902 See Siemens, Annual Report 2000, p. 99. See ‘Siemens to spend €500m on employee shares’, Financial Times, 20 October 2000. See ‘Bescherung für Mitarbeiter und Aktionäre von Siemens’, Financial Times Deutschland, 20 October 2000. Lazonick & O'Sullivan, ‘Maximising Shareholder Value’, p. 23. See ‘Bescherung für Mitarbeiter und Aktionäre von Siemens’, Financial Times Deutschland, 20 October 2000. Zugehör argues that Siemens has a particularly weak form of co‐determination. However, his argument is focused on the influence of the unions in the supervisory board. The present article is more concerned with the cooperation between management and works councils. He also argues that the spin‐off of Infineon is the beginning of a large‐scale portfolio restructuring, in which the transportation, energy, medical equipment and lightning will be spun off. This, however, stands in stark contrast to the publicly stated plans of Siemens' top management and the observable developments of the last years. See Rainer Zugehör, ‘Kapitalmarktorientierung und Mitbestimmung: Veba und Siemens’, in: Streeck & Hoepner, Alle Macht dem Markt?, p. 257. Personal interview with a former Siemens manager. See Hoepner, Corporate Governance in Transition, p. 27. Rothblum, ‘Kommunikation’. Lane, Changes in Corporate Governance in German Corporations, pp. 6–7. See Zeitlin, Americanization and Its Limits, p. 3. See Jackson, ‘Corporate governance in Germany and Japan’, p. 299. Additional informationNotes on contributorsAlexander Börsch Alexander Börsch, Centre for the Study of Globalisation and Regionalisation, University of Warwick, Coventry CV4 7AL, UK. Alexander Börsch, Centre for the Study of Globalisation and Regionalisation, University of Warwick, Coventry CV4 7AL, UK.