More fallout from the Siemens bribery scandal. The heat is on former Siemens chief executive Heinrich von Pierer to step down as chairman, according to the latest news reports.

The pressure is coming from the Union members of the Siemens supervisory board. Apart from the fact that the union does not exactly have clean hands in this matter and it's filed a lawsuit against the conglomerate on another matter.

Whether von Peirer should go is one matter. What's more interesting is how the unusual way boards are set up in Germany has contributed to the problem. German boards come in two tiers: a supervisory board which appoints and takes reports from a small management board. The unions have a seat on supervisory boards of big companies and that creates all sorts of potential conflicts of interest between the rights of managers to make decisions and employee representation.

The problem is examined in some detail in the piece Hit by an Earthquake: How Scandals have Led to a Crisis in German Corporate Governance out of the Knowledge@Wharton series.

But the role of unions is only part of the problem. As the piece shows, there are also problems with close relationship between companies and banks, and the dual roles held by executives.

It's a system that leaves only a handful of winners. As Wharton professor of legal studies and business ethics Thomas Donaldson puts it:

"In 2007, we still have a Germany with an insider-controlled, shareholder-oriented system. The system tends to do pretty well for large shareholders and the people who run corporations; it does not do well for the average investor. Stockholders have much less say in the German system than in the Anglo-American system. I still think the general perception is that there's a crisis at this point in corporate governance in Germany."