EMERGING

EMERGING MARKETS:
A Review of Business and Legal Issues
exceeding the price from autumn 2006, as does the DAX stock exchange index. The increased
volatility of the share price observed since July 2007 as compared to the previous period may
also result from the limited confidence of investors in the new management of the corporation
and from the uncertainty in respect of company results, which are increasingly influenced by
the costs of explanatory proceedings and the fines imposed on the company. Investors’
uncertainty concerning the response to the crisis on financial markets, i.e. the so-called
subprime crisis, may also contributed to the volatility of share prices. 1
The analysis of share quotations within the period when the events referred to in this
document took place points to the limited and poor response of the market to Siemens’
corruption problems and a stronger response in relation to the ongoing restructuring of the
company. This may be a sign of investors’ confidence in the corporation management, but
also of treating “Siemens style” corruption as common business as usual which ultimately has
a positive impact on the company’s results. Despite the multi-billion costs related to the
corruption itself (EUR 1.4 billion), the costs of investigation (ca EUR 2 billion) as well as
paid or potential fines (ca EUR 4 billion), the corporation is in a relatively sound financial
condition, generates positive financial results and informs about subsequent multi-million
transactions. The above costs incurred in the course of several years, when compared to the
annual turnover of nearly 100 bln, do not seem to be a major item in the balance sheet of the
company, although the expected fines may wipe out the annual profit. Judging by investors’
reactions one might expect that they perceived the disclosure of corruption as a signal and
pretext for changes in company management (management by means of crisis). The changes
leading to a deeper restructuring, which may improve the use of the corporation’s potential
(undervalued shares, low financial leverage, excessive employment, etc.) and therefore to
better perspectives for the future.
1 In the last two decades the price of Siemens shares was the lowest in October 1992 (EUR 18.7) and the highest
in July 2000 (EUR 120).
Page 46 Volume 1, April 2009