Heinrich von Pierer: Taking responsibility for corporate actions

The global challenges of our times – whether political, economic or social – can be mastered only through intelligent, targeted and responsible international cooperation, says Heinrich von Pierer –

The global economic and political situation is so deeply unsettled that it is virtually impossible to make reasonable forecasts for many markets. We face a daunting array of uncertainties, including the threat of terror around the globe, a possible war in the Middle East, and the danger of Argentina’s political and financial crisis spreading in South America. There are so many imponderables that it is difficult to catch sight of any improvement in the overall economic environment. A weak capital investment climate and slumping consumer demand are continuing to plague many industries. Part of the uncertain situation, however, has been caused by the corporate world itself: the disturbing loss of public trust in stock markets that was precipitated by company scandals.

As a result of the actions of a few greedy and irresponsible black sheep in the business world, the public’s trust and confidence in the management of stock exchange listed corporations and in the free market system itself have been deeply shaken.

The collapse of the New Economy, followed by the shocking revelations of criminal activity by executives, have seriously discredited the corporate world.

The only way to restore this lost trust is through openness and transparency. Companies everywhere must prove to investors, customers, employees and the general public that they aim for enduring success based on ethical business practices, and that their goal is to maintain a fine balance among all stakeholders.

After the various company scandals, the public is demanding far greater clarity and thoroughness in financial reporting. We welcome this. Such transparency also eases the process of benchmarking among companies.

Siemens expressly welcomes the German Corporate Governance Code as a key step in the further development of the statutory provisions and practical implementation of corporate governance in Germany.

The code’s regulatory framework provides foreign investors with a concise understanding of Germany’s corporate governance model, and demonstrates the country’s willingness to adopt and comply with international standards.

However, one should keep in mind that such codes, laws and regulations are only one means to help repair eroded public trust in corporations. This trust ultimately depends on the integrity and responsibility of the primary actors in the business world – the managing boards, the supervisory boards and the independent auditors. Conservative and prudent book-keeping and accounting, as well as honesty and decency are not outdated standards but timeless values.

Along with keeping a close watch on the global economic situation, international companies like ours have to monitor political developments around the world carefully. For one, because we are a global player and are directly affected by political unrest, such as in the Middle East.

Virtually all political crises have a greater or lesser impact on macroeconomic conditions as well as on international financial markets. For another, our interest in regional developments is prompted by our desire to contribute to security, stability and prosperity in the world.

As a globally operating company, we can put our know-how, our experience, our products, our services and our solutions to work in order to help master challenges faced by every society.

The role of governments and international cooperation is to solve conflicts, protect us from terrorist attacks, and even wage war to minimize potentially devastating threats. Following the horrifying tragedy of September 11, 2001 the world community has searched for an appropriate common reaction to conditions that changed dramatically overnight. And this solidarity and common will is still needed today, particularly when it comes to dealing with people and states that are beyond the pale of civilization.

On a different level, we must ask how the gap between the haves and have-nots can be further reduced, and how we can help people in underdeveloped countries overcome their poverty and hopelessness.

This is where companies can make meaningful contributions by providing, for example, vocational training and education for young people. In our case, we apply the German Dual System of combining classroom instruction with practical on-the-job vocational training, which is a proven and internationally admired model.

It should be used far more intensively by companies and government development programmes than is presently the case. Unfortunately, the use of the public-private partnership model in this important field has so far been limited.

Companies can also exercise their social responsibility by transferring know-how and technology to developing and threshold countries through contracts with local partners and close cooperation with local universities and research institutions. These transfers spread valuable knowledge, foster economic development, and also encourage young people to work with or for global companies.

Knowledge transfers and vocational training in developing and threshold countries also help integrate these countries more closely into the global community. Positive change is achieved by giving people an opportunity to work together in a global company, and is also accomplished through open trade.

The exposure to – and interaction with – international markets inevitably accelerates beneficial changes in local economic, political and social systems. The impressive development of China and its integration into the World Trade Organization roughly one year ago is one excellent example of such a positive development.

In addition to providing vocational training and technology transfers, companies can build trust and benefit people everywhere by providing key infrastructures both in and between countries.

As a world leader in electrical engineering and electronics, Siemens focuses on developing and providing what we call “life technologies” – technologies that secure, ease, protect and enrich lives.

It is clear that the more people benefit directly from such technologies – particularly in developing countries – the less criticism and fear there will be of globalization. Remote medical diagnostics, for example, can help people living in isolated regions such as Oceania by providing them with instant access to medical expertise available in large urban hospitals. People who are helped in such ways no longer see globalization as a threat or disadvantage but as a positive development. It is the task of globally operating companies to spread such benefits and make certain this positive side of globalization is known to all.

Whether they are economic, political or social issues, the global challenges of our times can be mastered only through intelligent, targeted and responsible international cooperation. Restrictions of free trade, national isolation or unilateral actions are just as counterproductive as are bilateral confrontations.

From a German perspective, our country’s key foreign policy coordinates are the partnership with the US, the Franco-German friendship, and the integration of Europe. That has been the case for the past 50 years. And it holds true for the future as well, supplemented by intensive and constructive relations with China and the Asian world.

Heinrich von Pierer
Dr Heinrich von Pierer is president and chief executive officer of Siemens AG.