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German boardroom power

Erich Reimann/uheAugust 29, 2013

On the supervisory boards of big German corporations, a few faces crop up almost everywhere. Dubbed the ‘Cartel of Controllers,' this group raises questions about the concentration of economic power in too few hands.

Image: ullstein bild - Teutopress

Ulrich Lehner is considered to be one of the most powerful men in German business. The former chief executive of Henkel, a major manufacturer of consumer chemical products, retired from his top management post for age reasons. Since then, however, the 67-year old tycoon has obtained even more powers.

Lehner is currently the president of two supervisory boards: that of German telecoms giant Deutsche Telekom as well as of the country's biggest steelmaker, ThyssenKrupp. In these capacities he is responsible for the jobs of some 400,000 workers. Furthermore, Lehner is also on the board of Germany's biggest utility company, E.ON, where he has a say in all major management decisions.

The concentration of controlling power in Lehner's hands is not an isolated case in the German business world. The same people turn up again and again on the supervisory boards of many of the country's biggest corporations.

Werner Wenning, the former CEO of chemicals manufacturer Bayer, is one of them. He's the president of the board of E.ON, and at the same time he also oversees the management of the German engineering group Siemens.

Angela Merkel and Werner Wenning
Bayer President Werner Wennig has Chancellor Angela Merkel's ear on chemicals and energy legislationImage: picture-alliance/dpa

Another one is Paul Achleitner, who is on the boards of both Bayer and the German carmaker Daimler. He also heads the supervisory body at Germany's biggest bank, Deutsche Bank.

Elite circle

The elite of German boardroom members is still a closed circle, says Michael Wolff, an economics professor at Göttingen University.

Wolff is the author of an annual ranking of Germany's most influential business leaders. The ranking is based on the importance of the companies they represent, as well as their connections to the German management world.

The web of interdependencies reminds Wolff of the former "Germany Corporation," he told DW. This term was coined in the 20th century at a time when Germany's banks, insurance companies and leading businesses all held stakes in each other's organizations, to shield themselves against hostile takeovers from abroad. The result was a concentration of boardroom mandates in the hands of a select few, Wolff explains.

The crossholdings of the Germany Corporation largely dissolved in the 1990s after banks and insurers were allowed to sell their holdings free of tax.

All that remained from those times was personal links, says Wolff. However, a problem emerged: finding the right people for management supervisory positions.

“For a board member, it's essential that they have run a company themselves in order to be able to detect problems and management tricks,” Wolff told DW. At the same time, he added, an elite circle consisting of a select group of just a few men tends to become uncritical over time.

Shareholder control

Marc Tüngler from the German shareholder protection group DSW also says that a conflict of interest is possible when board members accumulate several offices. However, he told DW that the problem was negligible in Germany.

No quotas

He ruled out the idea of an elite circle of a few board members being able to influence the German economy.

“Perhaps the older managers might still dream of this, but they're no longer able to do it,” he said, adding that over the past 15 years or so shareholders had been given much greater controlling powers. An awareness of the need for transparency had also grown over the years, Tüngler noted.

Upper limits

Germany's DSW shareholder protection group even considers it an advantage if expert supervisors sit on the boards of several companies.

“However, we find that five mandates are enough,” Tüngler told DW. An upper limit was necessary, he said, because the stresses for board members had grown enormously, given that they had greater powers and more responsibility than ten years ago.

Wolfgang Mayrhuber
Lufthansa President Wolfgang Mayrhuber is ranked the most influential German business tycoonImage: Reuters

A powerful couple

Heading the current ranking of the most influential boardroom chiefs - once dubbed by the German business daily Handelsblatt the "Cartel of Controllers" - is former Lufthansa CEO Wolfgang Mayrhuber.

He deserves the title, says Michael Wolff, because he is not only the president of Germany's biggest airline but also head of the board at the semiconductor company Infineon, as well as an ordinary supervisor at both luxury carmaker BMW and re-insurer Munich Re.

Women play a negligible role in Wolff's boardroom ranking. Only three female supervisors are to be found among the 30 most influential board members. Unsurprisingly, the most powerful among them is Ann-Kristin Achleitner, the wife of Deutsche Bank president Paul Achleitner.

While Ann-Kristin Achleitner is ranked 15th, her husband comes in at number five. As a couple, they oversee six of the country's most important companies as listed in the German blue-chip DAX index.