Episode 10 - From Corruption to Transformation: The Rebirth of a Global Conglomerate

Redefiners Podcast
Hosted By:
December 14, 2021 | 33 min
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joe-kaeser.jpg
Joe Kaeser
President and Chief Executive Officer Siemens AG

Episode 10 - From Corruption to Transformation: The Rebirth of a Global Conglomerate

What do you do when you’re the CEO of one of the world’s most iconic companies? If you’re Joe Kaeser, you do things differently. In this episode, we’ll talk with the former CEO of Siemens AG and current chairman of the supervisory board of Siemens Energy about how he transformed the company—and how he thinks today’s business leaders must be more purpose-driven in their approach to societal and climate change.

But let’s back up. Three months into Joe’s role as CEO at Siemens AG, Joe found out the company was embroiled in a massive corruption scandal. The fallout informed how he handled crisis, change, and the future, and it’s part of what led him to make a colossal and, at the time, unpopular decision: to break Siemens AG up into three separate businesses. It was one of the most complicated, most massive business transformations of all time—and it paid off. This is an episode about the courage to change, the power of intuition, and leaders’ responsibility on matters that extend way past business.

 

Joe Kaeser
President and Chief Executive Officer Siemens AG

Joe Kaeser is the former President and Chief Executive Officer of Siemens AG, a global powerhouse in electronics and electrical engineering. After more than 40 years at the company, Kaeser recently left Siemens and is succeeded as CEO by Roland Busch. He was the thirteenth CEO in the company’s more than 165-year history. Over his years at Siemens, Joe held a variety of leading management positions in finance and strategy both in and outside Germany. Immediately prior to his appointment as CEO in August 2013, Joe had served as Siemens’ Chief Financial Officer for seven years.

Joe began his career at Siemens in 1980 in the business field of components and semiconductors, where he also worked in Malaysia and the U.S. In 1999, he joined the Corporate Finance department. Here, he took part in preparations for Siemens’ stock market listing on Wall Street in New York, and overlooked the worldwide conversion of the company’s accounting system to the US GAAP standard. In 2001, Joe was appointed Chief Financial Officer of the Information and Communication Mobile Group. From 2004 to 2006, he served as Siemens’ Chief Strategy Officer and guided the company’s long-term strategic orientation to global megatrends.

Joe is member of the supervisory boards of Daimler AG, Allianz Deutschland AG and NXP Semiconductors N.V.

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Three months into Joe Kaeser’s tenure as CFO of Siemens AG, an iconic company with a sterling reputation, he walked into the office to find 200 police officers searching the premises. It was the beginning of the infamous corruption scandal that rocked the company, and the international news, for one tumultuous year.

Eventually, Joe ended up “defeating the dragon” and helping the company navigate out of the scandal. But he then found himself faced with a longer, and potentially even harder, battle: that of making the conglomerate truly future-ready. He decided to break Siemens AG up into three separate businesses in one of the most complicated and massive business transformations of all time. And it paid off.

Here’s a taste of what you’ll hear from Joe in this episode, in his words (edited for length and clarity):

“The private sector needs to take charge and lead by example, and not by putting a lot of programs out there which may or may not be reached in 2050 or 2060. We need to act based on milestones which we can tell stories about and motivate others to follow suit.”

Joe’s Redefiner Moment: Emerging from existential crisis
One of the darkest moments in our company, if not the darkest moment, was what we called the compliance crisis. It was uncovered in November 2006. About 200 policemen, well armed, searched our headquarters in what turned out to be a massive corruption scandal. The year that followed has been the biggest, most decisive moment, because we didn’t know whether the company would still be allowed to do business or not.

At that time I had been CFO for three months. Had I been a CFO for three years, it would have been the end of my career. I was lucky that I was a latecomer. But I didn't know whom to trust anymore. Well, somebody told me, "Look, Joe, move. Just do whatever you can and don't stop. That's the worst you can do." And it was very right. I built a reliable team to help fix it.

On the mistake that led to his decision to split up Siemens
The biggest mistake I’ve been involved with was Siemens losing its telecommunications business. Siemens was founded with the pointer telegraph; the telecommunication business was the root of the whole company. We were number one in the world.

At some point, a couple of people from the West Coast came over to see our managers. They said, "Look, we have this invention. We believe that you can make phone calls over the Internet." And our people said, “You're nuts. You have no clue. First of all, does it work? Secondly, had it ever worked, we would be the ones to invent it.” And they sent them home.

Those people were from Cisco. They wanted to win over Siemens to support their IP protocol technology. We lost the telecommunications notch, a 20 billion business gone, because we did not listen to the market and how disruptive it would be. That was the biggest failure.

After that I said, this must never, ever happen to our company again. That was the driving force for the split-up of the company. It made me so certain that it needed to be done.

On his decision to split Siemens into three companies
The company was in bad shape in 2013, so the first thing was to realign the company to what we are good at. We finished ahead of time, in 2018, with an all-time high merger price. But then I said, "Is the company prepared for the future?" And the answer was, "Maybe but potentially not, because we are too big, not focused." That was just not good enough.

So I decided to stay for another three years. The outcome was what we called 2020+. We divided the company into three: one healthcare company, one energy company, and one industrial automation software company.

There was a lot of resistance. If I had put that to vote with the employees, nobody would've given me a majority. In the end, everything turned out even better than we thought.

This is what leadership is all about. If you really are convinced you're doing the right things, you need to put the potato on the fork and say, “This is what I stand for.”


If you like this episode, you may also enjoy our conversation with Jim Hagemann Snabe, Chairman of the Board of Siemens.

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