Power Clusters

The New Germany Inc.

Germany, inc
Keeping it in the family. Simone Bagel-Trah, Wolfgang Porsche, Stefan Quandt and Georg Schaeffler.
  • Why it matters

    Why it matters

    Anchor shareholders control about half of the 30 companies in Germany’s benchmark DAX Index.

  • Facts


    • The conclusion about the DAX companies is according to a study from the Barkow Consulting group made available to Handelsblatt.
    • Many investors control German companies even without a majority because many shareholders don’t vote at annual meetings.
    • Minority shareholders in Germany can profit financially but, in effect, have little or no voice in corporate affairs.
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They called it Rhine capitalism, or Germany, Inc., and it referred to large companies run by just a few big shareholders.

Big banks, insurers and industrial companies were listed on the stock exchange, but in reality, only a few strong shareholders had any say in how they were run. And these tended to be other large companies.

Supporters of the model said it offered stability. Detractors criticized it for cartel-like nepotism.

The structures held strong for decades, and were only broken under former chancellor Gerhard Schröder.

But Germany, Inc. hasn’t disappeared. Rather, it has mutated into a different, more successful version.

A set of powerful shareholders, referred to as anchor shareholders, control about half the 30 companies in Germany’s benchmark DAX Index, according to a study by Barkow Consulting seen by Handelsblatt.

Some wield control with only a minority of shares. They may not own a majority stake, but control enough to dominate annual shareholder meetings, where many shareholders are absent.

That is the case at Deutsche Telekom, the former phone monopoly, where as a major shareholder, the German government shapes its direction and fate.

The same is true at automaker BMW, where the Quandt family steers the course.

And it also applies to Continental, where the Schaeffler family is in charge.

At Henkel, a consumer products maker, the founding family retained a majority, and is represented by Simone Bagel-Trah, who manages the non-executive supervisory board.

Some see this modern form of Rhine capitalism — the publicly-listed family firm — as a new model.

“It unites the advantages of both worlds,” said Rolf-Magnus Weddigen, a private equity expert at Bain & Company. His argument: Public listings can create transparency and better access to new money, while anchor shareholders are committed over the long term and provide continuity.


Powerful Anchor Shareholders 1-3


That seems to be the case. From BMW, Henkel, Fresenius, a dialysis services company, and software maker SAP in the DAX, to lubricant maker Fuchs Petrolub, optician Fielmann and clothing chain Gerry Weber in the MDAX index of mid-size companies, many are experiencing rising stock prices and dividends.

That is also the case for the DAX sub-index of the 30 largest family-owned companies.

And small shareholders profit financially, even if they don’t get much of a say in how things are run.


Powerful Anchor Shareholders 4-5


But to succeed, these companies and families have to share the same interests. Where they do, this model works, according to Wolfgang Schnorr, an expert in corporate governance.

“But if major shareholders act solely in their self-interest, this can be a curse,” he said.

At Thyssen-Krupp, for example, the anchor shareholder  – the Alfried Krupp von Bohlen and Halbach-Foundation – pushed Ekkehard Schulz, the management board chairman who was let go in 2011, seamlessly onto the supervisory board, which hires and fires top managers and sets strategy. That the action contradicted the principles of the company’s leadership – Mr. Schulz had been responsible for a disastrous Brazilian business – was of no importance to the foundation.

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