Germany's well runs dry
By Wolfgang Munchau
Published: December 21 2003 20:41 | Last Updated: December 21 2003 21:16
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It was quite a sight: the top brass of German management in court, defending their professional competence.
Jürgen Schrempp, chairman of DaimlerChrysler, was cross-examined in Delaware this month over whether he had misled shareholders during the merger with Chrysler in 1998.
In Munich, another court ruling opened the way for damages to be brought against Deutsche Bank, after Rolf Breuer, its former chairman, publicly commented on the creditworthiness of the Leo Kirch media empire, which subsequently collapsed. Both cases were triggered by media interviews.
Another US court awarded two former employees at Bertelsmann, the media conglomerate, $250m worth of damages in a breach-of-contract case in connection with Bertelsmann's sale of AOL Europe in 2000.
These cases are all symptoms of a malaise in the country's corporate sector. Never mind the current debate about economic reforms. Many of the deep-rooted problems of the German economy have their origins in the corporate sector itself - and, in particular, in the quality of management.
When I returned to Germany in 1998 having spent the previous 14 years abroad, I was not prepared for how badly German companies were run. Even some of the best-known find it difficult - or seem reluctant - to recruit first-rate managers, especially from the younger generation.
One example is Bertelsmann. When it fired the maverick Thomas Middelhoff as chairman last year, he was replaced by 59-year-old Gunter Thielen, an amiable but uninspiring manager. Mr Middelhoff's main goal had been to float Bertelsmann on the stock market. He may have been a flawed strategist.
But, with Mr Thielen in charge, the company is now on course back to the corporate dark ages of family control. Following the retirement of Reinhard Mohn, the head of the controlling shareholding family, his wife Liz, a former secretary at the company, is now in effect in control.
Bertelmann is not only a case of German provincialism at its worst but also a prime example of the difficulties of finding suitable successors. Unimpressive people are in charge of many German companies these days. The gradual decline in standards is not confined to the corporate sector. After the war, Germany never regained its previously dominant position in physics and other natural sciences. In politics, neither Gerhard Schröder, the chancellor, nor any of his potential challengers has the calibre of a Konrad Adenauer, a Willy Brandt or a Helmut Schmidt. Central bank watchers, too, are wistfully looking back to the 1980s, when Karl Otto Pöhl was still in charge of the Bundesbank. Decline is not only a statistic. It is human.
The history of Germany's extraordinary rise as an economic power was largely a story of scientific and engineering excellence, good management and sound economic policies. In the 19th century, Gottlieb Daimler invented the motor car and Werner von Siemens built Europe's first telegraph network. These inventions encouraged a whole generation of entrepreneurs, many of them in the electrical and mechanical engineering sectors, to establish their own companies. A few, such as Siemens, turned into multinationals; most are smaller but many still operate today.
But they are now facing huge succession problems. This is in part due to Germany's unfavourable demography. There are simply too few children around. But there is more to it. In many cases the children are simply not interested in running their parents' businesses. As Detlef Keese, acting managing director of IFM, the Mannheim-based institute for research into mid-sized companies, points out: "When you drive through the centre of most German cities, you find boarded-up stores increasingly often."
To get Germany back on track would require a lot more than tinkering with the welfare state. It would require a rediscovery of excellence in management, science and technology. But do not hold your breath. The decline of Germany's corporate sector is for real and it is far from over. |
