It has further inflamed the so-called "capitalism debate," which started a few weeks ago as a populist throwaway line in the run-up to the important state election in North Rhine Westphalia. Franz Müntefering, the normally moderate chairman of the SPD, talked about "swarms of locusts" falling over German business. He was referring to Anglo-Saxon equity investors who make a living out of buying and selling companies, or stakes in them. For a nation of shopkeepers, buying and selling comes easy. It's not so simple for the Germans.
Müntefering was probably as surprised as anyone about the ferocity of the response—he was accused of anti-Americanism, antisemitism, and borrowing Nazi slogans. But he also became an instant hero both to German workers and large parts of the German business community.
The Seifert/Deutsche Börse story reminded many of the recent Mannesmann affair. Its chief executive, Klaus Esser, was put under huge pressure to sell out to Vodafone, took a huge payoff and finished up in court. The fact that the takeover ended up destroying shareholder value has not helped to make the Anglo-Saxon way more popular in Germany.
Under German corporate governance, Rolf Breuer's role as chairman of the Deutsche Börse AG supervisory board was to shield the management board from undue pressure from shareholders and/or unions. German corporate governance recognises not only the shareholder but also managers, employees and society in general as stakeholders in a company. By contrast, in the Anglo-Saxon model shareholders are far less constrained.
The trouble is these two worlds are now colliding inside big German companies. Non-Germans now control on average more than half of the traded shares of Germany's top 30 companies, and many of them bring Anglo-American expectations of corporate governance and shareholder return.
Yet German business leaders believe that direct pressure from shareholders, share buybacks and special dividends to "return money to the shareholders" will undermine one of German industry's main competitive advantages—the ability to invest in R&D, capital equipment, new processes and new markets all over the world, without having to worry unduly about the current rate of return.
At the macroeconomic level German performance is poor—partly because of the continuing drag of east Germany and the inability to develop a lower wage service sector. But German companies still perform incredibly well despite their high cost base. They have marked up record exports in 2004 and will again in 2005, even with a rising euro. German corporate governance is getting something right.
Compare that with the continuing underperformance of US companies in international markets, which—with a few exceptions—cannot take advantage of the economies of scale of their home market or the massive devaluation of the dollar against the euro and yen. British companies do little better.
Many people believe that, while the "Anglos" excel at industrial "creative destruction," thanks to their flexible capital and labour markets, there is still a case to be made for long-term Germanic virtues, especially in the manufacturing sector where long-term relationships are more important. Surely the international economy can accommodate more than one system?
