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If everyone had acted by the book, Siemens chairman Gerhard Cromme would soon be enjoying more free time. Internal regulations covering the German group's supervisory board originally stipulated that its members not be older than 70. Two years ago, that age limit was amended. It now allows Mr. Cromme, who will soon celebrate his 70th birthday, to seek another five-year term. His re-election is a mere formality – and it will be a major mistake.

Mr. Cromme's new stint at Siemens is an illustration of bad German corporate governance. Cozy relationships between a few well connected peers are still at the heart of German capitalism. Weak external supervision allows vanity projects and corporate negligence. And it is a perennial threat to both shareholder wealth and industrial jobs.

Mr. Cromme's performance at Siemens is mixed to say the least. In 2007 he personally enthroned the current CEO, Peter Loscher, who, after a good start, has become a controversial figure. Profitability has taken a beating. Issues with high-speed trains and North Sea wind farms have cost the company hundreds of millions of euros, and tarnished its reputation.

Moreover, in 2011, Mr. Cromme backed Mr. Loscher's ill-advised growth strategy, which caused profit to shrink. The CEO waited until late 2012 to launch a cost-cutting program. A debt-financed €2.9-billion ($38.3-billion) share buyback, pursued in the second half of 2012, may have pleased investors but looks inconsistent with the stated growth strategy.

Replacing Mr. Loscher prematurely might become necessary. It would be a personal blow for Mr. Cromme, who would find it difficult to evaluate the CEO's performance objectively.

Finally, the last argument against Mr. Cromme is his other job as chairman of ThyseenKrupp, where his track record is even worse. Under his watch, the ailing steel maker has burned billions of euros in America. Mr. Cromme's two chairmanships create serious conflicts of interests. In 2011, for instance, when he needed a new CEO for ThyssenKrupp, he hired a member of Siemens' executive board. Heinrich Hiesinger. That turned out to be a good choice for Thyssen, and a loss for Siemens.

Real corporate governance works differently. The biggest irony it that Mr. Cromme should know that well. From 2001 to 2008, he was the head of the German corporate governance commission – which may explain why the country's major companies still have much work to do on the matter.

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