Herlin not stepping down from EK Board, despite Kone price-fixing fines

"Company did not know of activities of subsidiaries"

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"This hasn't been a very jubilant beginning", says Antti Herlin, Chairman and former CEO (until 2006) of the elevator and escalator manufacturer Kone, concerning his two months as Chairman of the Board of the Confederation of Finnish Industries (EK).
      Last week Kone was fined EUR 142 million by the European Union for illegal price fixing that took place with three of the company's competitors in four countries.
      The fine will basically ruin the company's result for the first quarter of this year.
      "Should I say that the event is terribly boring, disgusting, and irritating? At the same time I have been asked to speak strongly on behalf of the future of Finnish business", Herlin said in an interview with Helsingin Sanomat.
      The prospect of a possible fine is one reason why Herlin had to be persuaded, almost unwillingly, to serve as the figurehead of EK.
      On Sunday, he noted that when he was chosen, he reminded those who made the choice of what might be forthcoming.
     
Herlin will not admit to having actually considered resignation from EK: "However, I am not clinging on to this job by force", he added.
      "Time determines the preservation or disappearance of the credibility of the Chairman, and the membership will decide on it", he said adding that he believes that his back is secured as well as is possible. He noted that he has received only messages of encouragement from his members.
      Officially, the position of Chairman of the Board of EK involves a one-year term, but in practice, those who hold the post have served two concurrent terms.
     
A possible resignation of the Chairman of the Board would come at a most inopportune time for EK; labour market organisations are expected to start putting out feelers for the next round of incomes talks as soon as Parliamentary elections are over.
      Most outstanding incomes agreements expire next autumn, and although the negotiators do the negotiating, the EK chairman draws the main policy lines for the employers' side.
     
Herlin is embarrassed at the uproar that resulted from the fine over the price fixing issue.
      Kone gave out plenty of information at an early stage about the cartel investigation and its cooperation in the investigation, but the company could not comment in advance on the likelihood of fines, or their possible size.
      "Professional investors certainly knew how to measure it, and nothing happened to the company's share price. That is a sign that we can focus on the future", Herlin says.
      However, the company's main owner says that the damage to the reputation of Kone had to be a considerable shock to investors.
      "I believe that it has been a shock to the staff, and it can bother them for a long time. We have nevertheless wanted to promote an attitude among our people that we should not celebrate even a record result for any more than a quarter of an hour."
     
Herlin notes that those who took part in illegal cooperation comprise a very small group. Some of them had already retired when the investigations concerning the years 1999-2004 began.
      Herlin emphasises that none of the main figures, and none of those who refused cooperation in the investigations, are working with Kone any more.
      "It is unequivocally one hundred per cent certain that in Finland we did not know about the activities in the subsidiaries that violated competition legislation. If we had been aware of it, the activity would have stopped right away", Herlin insists.
      Herlin adds that the price fixing was pointless, considering Kone's position on the market. Three out of four subsidiaries have improved their results after matters were fixed.
     
Of all Finnish companies, Kone has the longest experience in internationalisation, and its systems of internal scrutiny are said to be the toughest.
      "That should be the case, and it probably is. However, nobody can know what 30,000 people are doing."
      "Kone is now being managed in a different manner than it was five years ago. Even the monitoring systems have developed, and we have increased our internal training very much in this."
      Herlin is convinced that international studies on the high moral standards of Finnish companies are true. "Perhaps the other side of the coin is that we are also a bit naive", he ponders.
     
Kone had nearly half of its fine forgiven when it agreed to help the investigation into the cartel.
      "The procedure is rather unpleasant, but it seems to be an efficient system. I can't criticise it, if it is the only way to remove the rot."


Previously in HS International Edition:
  Kone fined EUR 142 million in elevator cartel case (22.2.2007)

Helsingin Sanomat