The Reality of M&A Governance: Transforming Board Practice for Success

The Reality of M&A Governance

Farsam Farschtschian

The Realityof M&A Governance

Transforming Board Practicefor Success

Foreword by Helmut Maucher

123

Dr. Farsam FarschtschianDufourstrasse 499000 St. [email protected]

ISBN 978-3-642-22777-6 e-ISBN 978-3-642-22778-3DOI 10.1007/978-3-642-22778-3Springer Heidelberg Dordrecht London New York

Library of Congress Control Number: 2011937699

© Springer-Verlag Berlin Heidelberg 2012This work is subject to copyright. All rights are reserved, whether the whole or part of the material isconcerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting,reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publicationor parts thereof is permitted only under the provisions of the German Copyright Law of September 9,1965, in its current version, and permission for use must always be obtained from Springer. Violationsare liable to prosecution under the German Copyright Law.The use of general descriptive names, registered names, trademarks, etc. in this publication does notimply, even in the absence of a specific statement, that such names are exempt from the relevantprotective laws and regulations and therefore free for general use.

Printed on acid-free paper

Springer is part of Springer Science+Business Media (www.springer.com)

Note on the Author

Dr. Farsam Farschtschian is an experienced Investment Advisor, whose primarybusiness relationships are with CEOs and Chairmen, and who has worked for lead-ing institutions such as Morgan Stanley. He studied at the Universities of Genevaand Berkeley and has a PhD in Business Administration from the University ofSt. Gallen, Switzerland. He is also a Research Associate at its IFPM Centre for Cor-porate Governance. Farsam Farschtschian first published his empirical findings inhis book “The Secret of Successful Acquisitions: Abandoning the Myth of Board In-fluence”. His pioneering approach and acute board room observations are praised byleading business practitioners for their important additions to strategic managementunderstanding. He was born and grew up in Switzerland, has a Persian backgroundand lives in London.

v

For my parents

Foreword

Farsam Farschtschian’s analysis of M&A and the board of directors’ evolvingresponsibilities addresses the subject in a way that has never been done before.

Studies of M&A typically only take strategy, objectives and the related roles andactions into account. To date, these studies have not considered the way in which theboard and management cooperate on these questions or the division of their rolesand responsibilities. He illustrates, in a very striking way, the difference betweenthe way in which legislation views these roles and the reality, and what should,practically, be done. In this way, Farsam Farschtschian has identified a crucial gapin current research.

Farsam Farschtschian’s analysis demonstrates that today’s business world isbecoming progressively more diverse, there are not only clear so-called traditionalacquisitions, but new diverse forms are emerging in the shape of co-operations,joint ventures, alliances, participations and so on. This, in turn, implies new formsof corporate governance and organisational structures, which he argues require, toa certain extent, different qualities in top managers. He also explores the elementsof a productive environment created though board-management interactions, whichdiffer according to the firm’s structure and the quality and philosophy of the CEO.

I believe that this analysis is, in many ways, highly original. FarsamFarschtschian’s work is greatly enriched by the detailed depiction of the realityof top management’s work in the context of M&A and by the exploration of howexperienced business leaders think about these matters and have dealt with them.

This work deserves a broad readership and I hope that many managers dealingwith such matters benefit from this research.

Honorary Chairman of Nestlé Dr. h.c. Helmut Maucher

ix

Acknowledgements

It was a privilege to conduct this research with the guidance of two renowned aca-demics who are also successful practitioners. I would like to thank Prof. Dr. MartinHilb for sharing his broad experiences of interaction with board members. Hiscontribution to my understanding of the board room was of great importance.I would like to thank Prof. Dr. Fredmund Malik for his constant encouragementto review my conclusions and to challenge academic misconceptions of corporatereality. Attendance of the diverse business seminars of the Malik Management Zen-trum, as well as our numerous discussions were instrumental to my understandingof right and good management. As such, he has had a profound influence on thedirection of my research.

It is not matter of course that internationally renowned business leaders whoshaped some of today’s most successful multinational companies showed inter-est and committed their time and knowledge to this thesis. In particular, I wouldlike to thank Dr. h.c. Helmut Maucher. He made this research possible, practicaland, most importantly, relevant in the context of the changing face of leadership andcorporate governance in the 21st century. Many of his ideas on leadership informedthe conclusions of this work.

I am also very grateful to Nestlé’s board members who gave me access to uniquecompany sources that are incorporated in this book. I would especially like toacknowledge the contributions of Philippe de Weck, Bruno de Kalbermatten andDr. h.c. Fritz Gerber.

In addition, Dr. h.c. Thomas Schmidheiny’s valuable insights, discussions withProf. Dr. h.c. Wolfgang Schuerer and contributions from all of the other intervieweesenriched the research markedly.

Prof. Dr. h.c. Rolf Dubs was an important source during the initial stages inidentifying the topic of research and his encouragement to tackle such a sensi-tive research topic and develop thoughts against mainstream Corporate Governanceresearch were motivating.

I would like to thank Deirdre Mullins. Her contribution was beyond editorialinput, and her critical questioning of my arguments made her an indispensableresource in honing the final draft of this book.

xi

xii Acknowledgements

Prof. Dr. Thanh-Huyen Ballmer-Cao’s encouragement at the University ofGeneva was crucial. Without her, I would never have begun this work.

London, September 2011 Dr. Farsam Farschtschian

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Fundamentals and Originality of the Study . . . . . . . . . . . . . 11.2 Goals of the Research . . . . . . . . . . . . . . . . . . . . . . . . 31.3 Boards: Their Current Position and Challenges . . . . . . . . . . . 41.4 Definition of Key Terms . . . . . . . . . . . . . . . . . . . . . . . 51.5 Structure of the Book . . . . . . . . . . . . . . . . . . . . . . . . 7

2 Conceptual Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.2 M&A Literature Review . . . . . . . . . . . . . . . . . . . . . . 11

2.2.1 Historical Analysis of Research on AcquisitionsManagement Phases . . . . . . . . . . . . . . . . . . . . . 12

2.2.2 Research Approaches to Acquisition Success . . . . . . . 152.2.3 Theories on Acquisition Motives . . . . . . . . . . . . . . 172.2.4 A Normative Approach to M&A: Peter Drucker’s

Acquisition Success Factors . . . . . . . . . . . . . . . . 272.2.5 Conclusion: M&A Literature Review . . . . . . . . . . . . 32

2.3 Corporate Governance Literature Review . . . . . . . . . . . . . . 332.3.1 Discussion of the Concept . . . . . . . . . . . . . . . . . 332.3.2 An Agency Perspective . . . . . . . . . . . . . . . . . . . 332.3.3 Boards of Directors Come into Play . . . . . . . . . . . . 372.3.4 The Swiss Board System . . . . . . . . . . . . . . . . . . 442.3.5 Theoretically Reasonable Board Stances . . . . . . . . . . 462.3.6 Conclusion Corporate Governance Literature Review . . . 48

2.4 Gaps in Literature . . . . . . . . . . . . . . . . . . . . . . . . . . 482.5 Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . 48

3 Research Methodology . . . . . . . . . . . . . . . . . . . . . . . . . 513.1 Research Methods . . . . . . . . . . . . . . . . . . . . . . . . . . 513.2 Population of the Research . . . . . . . . . . . . . . . . . . . . . 533.3 Limitations of Methodology . . . . . . . . . . . . . . . . . . . . 56

xiii

xiv Contents

4 Empirical Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594.1 Nestlé . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

4.1.1 Description of the Firm . . . . . . . . . . . . . . . . . . . 604.1.2 Corporate Governance Structure . . . . . . . . . . . . . . 624.1.3 Maucher’s Reign . . . . . . . . . . . . . . . . . . . . . . 664.1.4 Nestlé’s Acquisitions . . . . . . . . . . . . . . . . . . . . 68

4.2 Swissair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964.2.1 Introduction to the Ernst & Young Report . . . . . . . . . 974.2.2 Description of Swissair . . . . . . . . . . . . . . . . . . . 984.2.3 Corporate Governance Structure . . . . . . . . . . . . . . 994.2.4 Goetz, Honegger & Corti’s Reigns . . . . . . . . . . . . . 1044.2.5 Swissair’s Acquisitions . . . . . . . . . . . . . . . . . . . 109

4.3 General Conclusion on the Case Studies and TheirSignificance for Acquisition . . . . . . . . . . . . . . . . . . . . 130

5 Analysis of Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1335.1 A Comparative Analysis of the Nestlé and Swissair

Acquisitions Based on Drucker’s Framework . . . . . . . . . . . 1335.2 Creating an Environment that Enables the Acquisition

Principles to Be Successfully Implemented: A ComparativeAnalysis of Nestlé and Swissair’s Boards . . . . . . . . . . . . . . 147

6 Best Practice Recommendations for Boards . . . . . . . . . . . . . . 1536.1 Creation of an Environment Which Enables

the Acquisitions Principles to Be Fulfilled . . . . . . . . . . . . . 1536.2 Governing the Board-Management Relationship in order

to Enhance the Acquisition Success Likelihood . . . . . . . . . . 1626.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

7 Outlook and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 1677.1 Outlook: The Changing Nature of M&A . . . . . . . . . . . . . . 1677.2 Current Corporate Governance and Future Challenges . . . . . . . 1707.3 Limitations of the Research . . . . . . . . . . . . . . . . . . . . . 1747.4 Suggestions for Future Research . . . . . . . . . . . . . . . . . . 174

Appendix A: Maucher’s 13-Page Acquisition Memorandumto the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Appendix B: Expert Interview with Dr. h.c. Helmut Maucher . . . . . . 189

Appendix C: Expert Interview with Philippe de Weck . . . . . . . . . . 211

Appendix D: Expert Interview with Bruno De Kalbermatten . . . . . . 219

Appendix E: Expert Interview with Dr. h.c. Thomas Schmidheiny . . . 227

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253

List of Figures

Fig. 2.1 Hilb’s approach to integrated board managementFig. 4.1 Nestlé committee minutes for the board (Rowntree), 7 June 1988Fig. 4.2 Correspondence de Weck to Maucher, 1982Fig. 4.3 Maucher’s communication with the board (“Decision regarding Offer for

Rowntree”), 6 June 1988Fig. 4.4 Maucher’s communication with the board (“Developments regarding

Buitoni and Rowntree”), 3 May 1988Fig. 4.5 Maucher communication to board (“Rowntree”), 24 June 1988Fig. 4.6 SAirGroup structure (E&Y)Fig. 4.7 Hunter strategy (E&Y)Fig. 5.1 Fulfilment of Drucker’s principles at Nestlé and SwissairFig. 5.2 Environment that enables the principles to be successfully implementedFig. 6.1 Recommendations for creating an effective environment

xv

1Introduction

1.1 Fundamentals and Originality of the Study

One of the most important business activities that a company conducts areacquisitions, but they are also one of the riskiest strategic manoeuvres. Even thoughacquisition success factors are known, the majority of acquisitions still fail. Surpris-ingly, there are still no adequate theories to explain this phenomenon, despite thetremendous negative impact of these failures and the vast amount of academic andpractical research on M&A.

It must therefore be concluded that some supporting structural managementelements are lacking; the board or the management body must not be functioningproperly, and hence their interaction is rendered ineffectual. Put another way, the“environment”, in terms of the company’s orientation, TMT structure, power re-lations and interaction, is not conducive to the effective application of acquisitionsuccess factors. Thus, the key question becomes “Who is responsible for creatingthis environment”? Prima facie, the board of directors.

Therefore, due to academic research illustrating the board of directors as thehead of a firm with ultimate overall responsibility as it is defined by law, researchwas initiated on the topic by looking at the role of boards in acquisitions.

It will be shown through the empirical field work, however, that the reality ofboards in general, as the highest governing body in running companies, surprisingly,does not always correspond to what has broadly been described in the literature.

As a result of many interactions with business leaders who have created someof today’s leading multinational companies, the realisation was made that academicliterature with regard to boards’ roles was often inadequate and “counter intuitively”boards were not as significant to the acquisition process (and even its broader duties)as initially presumed due to their legal representation and emphasis in corporategovernance.

Therefore for the present empirical research focus is centred on the top man-agement team (TMT), which includes the board and the CEO with his team. Thisenables a holistic perspective of how acquisitions are run and should be run in

1F. Farschtschian, The Reality of M&A Governance,DOI 10.1007/978-3-642-22778-3_1, © Springer-Verlag Berlin Heidelberg 2012

2 1 Introduction

terms of the required constructive environment enabling the fulfilment of acquisitionsuccess factors.

Hence, by analysing the interplay between boards and management, the studyfocuses on acquisitions and explores the way in which boards of directors could con-tribute to better acquisition results. The reason for this is that acquisitions representthe most visible part of firm strategies, and as a complex phenomenon, they areproof of companies’ capabilities and ultimately of leadership.

It should also be mentioned that international M&A and the role of the board ofdirectors within the M&A process are of particular relevance in Switzerland, homeof the chosen case studies. Swiss companies encounter a limited home market andare therefore obliged to operate on an international level relatively early in theircorporate developments. This makes international M&A a key issue for boards ofdirectors of Swiss corporations.

The two cases chosen for this study, Nestlé and Swissair Group, are polar oppo-site examples. Nestlé’s acquisition strategy, under the leadership of its long-standingchairman and CEO, Helmut Maucher, was highly successful not only in terms ofacquiring companies but also in their integration within the whole organisation. Incontrast, in the second case study, the Swissair Group experienced the most dramaticbankruptcy in Swiss economic history as a result of its acquisition strategy.

Both case studies were conducted under almost identical situational conditions,a unique occurrence which has probably never existed previously in economic his-tory. Both case studies are about typical large corporations. While Nestlé was largerthan the Swissair Group in absolute numbers, both were multinationally active com-panies in which the board had to be capable of dealing with the challenges of themulti-cultural elements of their business activities. Though based in Switzerland,both companies did almost no significant business within the country itself but ratherachieved most of their revenues internationally. Importantly, both entities were sub-ject to the same legal jurisdiction, and therefore had the same juridical and politicalframework for their corporate governance. The acquisitions covered in the case stud-ies happened during the same timeframe and both boards were highly respectedand composed of personalities who were seen as capable of fulfiling their duties.Both companies followed, in principle, the same strategy, which was forced growththrough acquisition. The Swissair Group failed dramatically in this, whereas Nestlébecame one of the most successful companies in the world.

As mentioned, M&A success factors have been widely researched and arebroadly known by both academics and practitioners. This study is unique in itsambition to find a corporate governance answer to the apparent difficulty of effec-tive implementation of the known M&A success factors. To the author’s knowledge,despite its importance, the role of boards of directors as the ultimate governingbody of companies in acquisition has barely been researched to date and constitutesa true research gap. Until now, the approach usually concentrated on generatingkey acquisition success factors without concomitantly touching upon the necessaryleadership environment that enables effective implementation of the known successfactors.

Peter Drucker, as a management thinker widely accepted and recognised byacademics and foremost practitioners, established six acquisition principles in 1981

1.2 Goals of the Research 3

that are multi-disciplined. This study takes the Drucker principles as a normativerequirement and as broadly accepted rules for acquisition success.

In order to discover the reality of board practices and to understand the requiredenvironment that enables the acquisition success factors to be realised, empiricalfield research was conducted looking at the extent to which Drucker’s principleswere fulfiled as a result of board-management interactions. In order to do this, ex-tensive qualitative field work was carried out with board members and CEOs in thetwo case studies and unique, internal document sources which have never been seenby the public are analysed in depth.

Despite the current trend and bias towards quantitative lead research, it wouldbe a scientific and methodological miscomprehension to believe that empirical re-search has to consist of mainly numerical quantification. In order to analyse thecomplex human relationships involved in board-management interaction, the qual-itative method is a more appropriate approach in terms of its explanatory power.In this way, an attempt is made to identify which board-management relationshipspositively contribute to an environment that enables good acquisition results withthe aim of proposing best practices in acquisitions for boards of directors.

Moreover, as the case studies will reveal, the reality is markedly different tothe theory of corporate governance in terms of the board-management relation-ship. This raises fundamental questions about whether current corporate governanceadequately reflects the reality of today’s business world and the current structuraltransformations resulting from new types of business practices and methods. This isaddressed in the outlook chapter of this book.

The study therefore aims to make a significant contribution to practice by strivingto provide boards and managers with tools enabling them to perform more effec-tively within acquisitions, ultimately leading to higher acquisition success rates1.The research concludes by suggesting possible directions in which corporate gover-nance could be advanced in order to meet challenges of a world where the nature ofacquisition is likely to change fundamentally.

1.2 Goals of the Research

This study strives to achieve the following overarching goals:1. To integrate the role of the board in the analysis of how M&A success factors are

implemented.

1 From a stock market perspective and building on the author’s professional background as an in-vestment advisor, time and time again, history has clearly demonstrated that companies with goodmanagement, where management adopt a long-term approach, deliver superior returns to theirshareholders. Nestle is an outstanding example of the beneficial impact that long-term strategicmanagement can have on shareholder returns, delivering nearly 70% share price outperformancerelative to world markets over the last 10 years. Despite the evidence, analysts and investorsfrequently ignore this factor when making investment decisions, instead preferring to rely on short-term valuation and earnings momentum factors. This is arguably a key reason why these decisionsfrequently prove to be wrong.

4 1 Introduction

2. To reveal business leaders’ understanding and experiences regarding their M&Aresults and achievements in order to explore how their corporate governanceaffected the acquisition process.

3. To formulate recommendations for boards and managers as to how a successfulacquisition management environment can be fostered.

These goals are of both an academic and practical nature: academically, the studycontributes to the M&A literature in light of corporate governance; practically, thestudy suggests best practice recommendations to boards and management as to howto collaborate in order to maximise the success of M&A.

The above goals will be pursued through investigation of the way in whicha board of directors can contribute to M&A success through a good relationshipwith management and, ultimately, the way in which boards can establish a fruitfulenvironment, enabling the well known M&A success factors to be fulfilled.

1.3 Boards: Their Current Position and Challenges

Even now, many acquisitions are still failing. The way in which an active boardof directors should develop and execute corporate acquisitions is not yet suffi-ciently researched within the corporate governance field (Oliver 2000, p. 7). TheSwiss situation is particularly interesting:Switzerland’s legal system assigns a non-transferable and inalienable role to directors with regard to the overall strategy ofa firm as will be explained in the following chapters. Directors on the board areconfronted with a double-edged sword with regard to their involvement in corporateacquisitions.

On the one hand, there are significant external pressures for a strong involvementin important strategic corporate decisions (see the debates on corporate governance,investor activism, legal threats, etc.). Furthermore, the involvement of boards is notonly externally motivated in terms of better control, but it is an increasingly ac-cepted opinion among academics and practitioners that board directors, with theirknowledge and experience, are an instrumental resource to firms which they shouldutilise.

On the other hand, in order for boards of directors to maintain their indepen-dence, a key quality of directors as described by the literature, boards are expectednot to overly involve themselves in daily operational activities of a company. Ifboards interfere too much in the firm’s management, they may alienate the top man-agement team, and particularly the chief executive of the firm. It should also benoted, that even if boards would like to interfere more frequently, directors gener-ally do not have sufficient time to do so, nor, very often, the specific knowledge tobe more involved in daily operational corporate activities.

Therefore, boards of directors have a challenging and difficult task in simulta-neously tackling these two competing forces. The contrast in these prescribed rolesin terms of support and control is concerning for boards and it is a challenge toensure balance (Daily, Dalton & Cannella 2003). Boards have a fiduciary respon-sibility to the company’s owners to act in the interest of the owner’s investments;however, directors must fulfil this responsibility in a manner that does not alienate

1.4 Definition of Key Terms 5

management’s responsibility for running the business (Lorsch & MacIver 1989).Nevertheless, boards of directors remain, in the eyes of the law, the most importantbody of a firm, due to their ultimate responsibility and accountability for it.

Corporate acquisitions illustrate the most complex matters firms face. Bearing inmind that many boards of directors serve only on a part-time basis and because theyoften have no executive experience within the corporation, they lack both specificinformation and time to deal suitably with the given complexities. Therefore, inter-national M&A decisions mark an advanced difficulty and challenge for boards. Thisrepresents a rewarding focus for the present research.

It must be mentioned that international M&A and the role of the board of di-rectors within the M&A process are of particular relevance in Switzerland. Swisscompanies encounter a limited home market and are therefore obliged to become in-ternational relatively early in their corporate developments. This makes internationalM&A a key issue for boards of directors of Swiss corporations.

As described above, the board of directors’ role in acquisition is controversial.Boards do not have clear guidance. Surprisingly, there is hardly any discussion ofbest practices by academics, practitioners and consultants that could be of assistanceto directors in performing their roles (Oliver 2000, p. 8).

One of the challenges that boards face is to build and retain trust in their rela-tionships with the management, by keeping a certain distance, but simultaneouslyachieving effective control and monitoring (Daily et al. 2003). In other words, asHilb suggested:

Boards have to keep the nose in and the hands out

Hilb, during interview

Though current corporate governance developments mean that boards, as the gov-erning body of the firm, have become sensitized to their responsibilities and moredutiful in critically analysing and approving management proposals, such as acqui-sitions, acquisition failure rates are still high. Why are acquisitions such apparentlydangerous exercises pursued with ever greater intensity and why, being so cruciallyimportant for their companies, do managers fail almost systematically?

Until now, the usual approach was to suggest key acquisition success factorswithout concomitantly touching upon the necessary leadership environment that en-ables effective implementation of these known success factors. In order to reallyunderstand the situation, one needs to take a broader approach to the problem inorder to assess the underlying governance structures, a fundamental prerequisite forsuccessful acquisitions.

Surprisingly, this approach has not been treated by research nor applied andconstitutes a true research gap.

1.4 Definition of Key Terms

Mergers and Acquisitions (M&A)A merger is defined for the purpose of this research as a combination of assetsby two previously separate firms into a new single legal entity. In an acquisition

6 1 Introduction

or takeover, the control of assets is transferred from one company to another. In acomplete takeover, the acquirer absorbs all the assets of the acquired company andthe takeover target henceforth disappears.

As a matter of fact, the effective number of mergers in “mergers and acquisitions”is negligibly small. Less than 3% of cross border M&A are mergers (UNCTAD2000, p. 99). Complete acquisitions with a 100% control accounted for more thanhalf of all cross border M&A in 1999. Due largely to legislation, however, theproportion was lower in developing countries.

Even when mergers are officially communicated between equal partners, in re-ality most result in one party dominating the other. As a matter of fact, the numberof real, equal mergers is insignificant. Hence, for the purposes of the study, “M&A”and “mergers” are referred to by their ultimate meaning, as “acquisitions”.

There is a distinction in mergers and acquisitions between friendly and hostiletakeovers. In friendly acquisitions, the board of the target firm agrees to the trans-action. This may, however, be after a period of opposition to it. But the majority ofacquisitions are friendly. Contrary to this, hostile acquisitions are undertaken againstthe will of the target company.

M&A are conventionally grouped into four categories, according to the directionof expansion and the relatedness of the businesses to be merged. Generally, theliterature distinguishes between horizontal, vertical, concentric and conglomerateactivities (Kootz 1996).

Ahorizontal merger occurs when two businesses are operating in similar or equalmarkets with similar or equal products. The merger objective is to expand theproduct portfolio or to increase the market share.

Avertical merger occurs when companies which represent different stages of thevalue creation process merge. To increase the value added, either a business pre-ceding or succeeding the stage in the value chain is integrated. As companies followthe trend of reducing the activities along the value chain (Macharzina & Wolf 2005),this type of merger is becoming less frequent.

A concentric merger occurs when the merger is centred on a set of core compe-tencies, such as product technology and marketing, with the aim to complement, toleverage the existing core competencies, or even to build up new competencies.

Aconglomerate merger is different in nature as it shows no relatedness in thevalue chain. Typically, these types of mergers are part of portfolio and diversificationstrategies.

Corporate GovernanceThe Cadbury Report, which is a Code of Best Practice formally entitled “The Reportof the Committee on the Financial Aspects of Corporate Governance”, published inDecember 1992, was the first report aiming to improve corporate governance. Thecommittee defined corporate governance as “the system by which companies aredirected and controlled”.

The Report presents recommendations for the executive directors, non-executivedirectors, and those responsible for reporting and control. Specifically, it recom-mends that listed companies should incorporate a formal statement in their Report

1.5 Structure of the Book 7

and Accounts outlining whether or not they have complied with each of the Code’sprovisions. In respect of areas of non-compliance an explanation is required. Fur-ther to this, the Report recommends that the compliance statements made by thecompanies be reviewed by auditors prior to release of the Annual Report.

The key focus of the provisions of the Code of Best Practice were the com-position of boards, the appointment and independence of non-executive directors,the service contracts and remuneration of executive directors, and the company’sfinancial reporting and controls.

TopManagement Team (TMT)While TMT in literature often relates to the chief executive and his managementteam, for the purpose of this study TMT includes both the executive managementbody of a company as well as the board of directors.

1.5 Structure of the Book

Chapter 1 As an introduction to the study, the first chapter treats the fundamen-tal questions of the significance and success of acquisitions and in this context,discusses the relevant functions and duties of the board. Furthermore, this chapterconsiders research methodology and the goals and originality of the study.

Chapter 2 The second chapter includes an extensive literature review on M&Aand corporate governance. With regard to the M&A literature, a special focus isgiven to the acquisition principles of Peter Drucker, the most important expert inmanagement. Drucker proposes six principles for successful acquisitions; these arediscussed in depth because they are used to compare the acquisition strategies inthe two case studies in order to analyse the board-management relationships. Withregard to the corporate governance literature, the shareholder and stakeholder valueapproaches are discussed and a third and alternative option, the costumer valueapproach, is illustrated. Furthermore, the main characteristics of Hilb’s integratedboard approach are elucidated. This chapter also looks at the Swiss board system asthe two case studies are subject to Swiss law. It concludes by identifying the gap inliterature and thereby the research questions are formulated.

Chapter 3 The third chapter concerns the research methodology. This study isempirical though not in the conventional sense; the research is not a numericalquantification but rather a comprehensive, descriptive and analytical linguistic rep-resentation of these two cases. The methodology uses semi-structured interviewsthat are evaluated and are utilised within the text in order to illustrate events, per-sonalities and facts and thereby resulting consequences. This chapter also outlinesthe population of the research, listing the interviewees, and it finishes with thelimitations of the methodology.

Chapter 4 The fourth chapter constitutes a detailed representation of both com-panies, Nestlé and Swissair. The corporate governance structures are examined

8 1 Introduction

comprehensively by looking at all dimensions of their acquisition strategy, historyand development. The authentic language of the Nestlé managers is directly quotedin the text, supported by confidential company sources, in order to reflect realityas accurately as possible. In the Swissair case, however, the situation was differ-ent because interviewees were reluctant to fully disclose their opinions because thecompany was involved in the biggest lawsuit in Swiss economic history. Thereforethis section in the chapter is based to a large degree on the Ernest & Young reportand other available company sources. Furthermore, it is revealed that the E&Y reportdoes not recognise major and significant reasons for Swissair’s failure. This chapterfinishes with a general conclusion on the case studies and their broader significancefor acquisition.

Chapter 5 This chapter contains the results of the analysis. Using the acquisitionprinciples of Peter Drucker, this chapter contrasts the Nestlé and Swissair GroupTMTs and reveals the completely different modus operandi of their highest govern-ing bodies. Through the comparison of the case studies based on the six principles,the environment necessary is revealed for the success principles to be fulfilledenabling effective acquisition.

Chapter 6 The sixth chapter illustrates the best practice recommendations to en-able and create such an environment. Various board stances are then outlined whichenable boards to govern the board-management relationship during the acquisitionprocess effectively. Finally, this chapter illustrates that in order to be successful theboard need to be able to incorporate different stances based on different corporatesituations.

Chapter 7 In this last chapter, an exploration is made of the movement of M&Atowards new and diverse forms of co-operations which are different to traditionalacquisitions. The current, very visible limits of the corporate governance systemare revealed through the research and most strikingly the discrepancy between legalrequirement and practical reality. Clearly, new forms of corporate governance needto be urgently prioritised. Thus, an attempt is made to offer innovative structuralsolutions to cope with these complex challenges. Finally, limits of the research areacknowledged and also recommendations are given for future research with regardto acquisitions and the function of boards in this context.

2Conceptual Part

The literature review begins with a high level introduction to M&A in the broadercontext and then gives a recent, chronological history of developments, highlightingthe way in which the focus of M&A research shifted dynamically. Following thisoverview, the chapter briefly touches upon the topic of acquisition success and thenfollows a description of business and economic explanations of acquisition motives,showing the variety of M&A theories. Thereafter, Peter Drucker’s six acquisitionprinciples are introduced and discussed as they represent a normative requirementfor successful acquisitions for the purpose of this study. A conclusion of the M&Aliterature review section then follows.

2.1 Introduction

By way of a broad introduction, mergers and acquisition are an effective way ofaligning the structures of an economy experiencing fundamental changes both inglobal markets and with the arrival of new technologies. Even if recent increasedglobal competition is not the primary reason for this process, it has accelerated itspace. Schumpeter’s (1942) creative destruction of obsolete ideas and structures inorder to create new combinations of productive capacities is incorporated in suchadjustments. The cost of destruction would be bankruptcy. Now mergers and ac-quisition enable existing businesses and their employees to be retained with alltheir knowledge and experiences. In the “restructuring phase”, these resources areregrouped and optimised.

Contrary to public opinion, most mergers and acquisition do not restrict com-petition by creating large multinational companies, but rather enhance competitionby promoting competitive pressures. Acquisitions are therefore not a route to largemonopolies. As a matter of fact, new companies within new industries are continu-ously created. It must be mentioned, that the structures that are created by mergersare again exposed to competition. Even numerous tie-ups cannot withstand the force


10 2 Conceptual Part

of competition. A fact that is often ignored is that acquisitions are accompanied byspin-offs. These outsourced businesses lead again to new companies.

Judging by the headlines in newspapers, M&A are very often considered a threatdue to the increased size of the newly created firms. In spite of this, acquisitionsare not a threat. All sizes of firm can be managed successfully, however, differentcompany sizes need different management structures and subsequently managers ofa special calibre are required. Furthermore, acquisitions do not inherently lead tolarge monopolies, and size does not mean strength (Malik 1999).

Despite an understanding of the above, acquisition success is not automaticallygenerated. Corporate world realities have demonstrated that the timing of an M&Amust be accurate and furthermore, managers must pay important attention to the ac-quisition integration process. All human aspects related to transformations followedby acquisition are of highest importance.

Acquisitions are typically carried out in a bid to enhance the competitiveness of acompany. Ultimately, the consumers and customers are the main beneficiary. M&Atherefore do not stifle competition; for example, acquisitions can lead to the restruc-turing of the core competencies of a company, or they can contribute to repositioningan organisation in the value chain when facing new global challenges. Nevertheless,mergers and acquisitions can only be an effective way of increasing a company’scompetitiveness if they are handled properly.

The past two decades show increasing activity in spectacular mergers andacquisitions. The prominent “M&A contests” between Rio Tinto and Alcan, Man-nesmann and Vodafone, Daimler and Chrysler or Hewlett Packard and Compaq arestriking examples.

In many ways, mergers and acquisitions are often unique business transactions.For most firms, acquisitions are relatively infrequent events. This implies that thecompanies have little experience and often rely heavily on outside help. Further-more, M&A involve more outside assessment, and therefore increase the pressureto succeed. They typically require a large amount of resources, financially and, cru-cially, managerially. Contrary to other investment projects, there are no test runsand no milestones at which a firm may choose a different path, i.e. modify or evenabandon the acquisition project.

Considering their importance and scale, one would presume that acquisitions arewell planned in order to create added value for the organisation. Despite this, acqui-sition, as one of a firm’s most important investment decisions, more often destroysvalue rather than creating it by strengthening the long-term competitiveness of acompany (King, Dalton, Daily & Covin 2004).

Furthermore, it is worth noting that acquisitions still prevail, as most companiesstill focus solely on shareholder value, which is based on profitability and on growth(Mueller Stewens, during interview).

Companies have focused on profitability over the last few years since the marketcrash in 2000–2002 and many companies got to the point where it became difficultto further increase their profitability (Mueller Stewens, during interview). Currently,

2.2 M&A Literature Review 11

there is a shift in the corporate agenda towards the growth factor. Before the creditcrunch, this was supported by the large amount of liquidity available on corporatebalance sheets (Interview Mueller Stewens).

Companies’ excessive liquidity is not always viewed positively by shareholdersand analysts, nor, ultimately, by the market. It is regarded as a lack of ideas fromthe management (Boutellier, during interview). In order to avoid this and to actagainst a fall in share prices, several authors argue that this fact led to a momentumof increased acquisition activity in the corporate world, which was not necessarilyaccompanied by the desired success. In order to do effective deals and to increasesuccess rate, however, managers need more industry expertise (Mueller Stewens,during interview).

One would expect managers to understand the important risk of failure and totherefore ensure that they have all the tools to effectively analyse and execute thesetransactions. Bad transactions not only waste management resources but destroy thevalues of both the target and acquiring firms.

Academics and management’s well-known thinkers have attempted to create for-mulas for successful M&A. Despite the tremendous amount of analysis regardingsuccess factors, an explicative theory for the acquisition phenomenon does not yetexist. Still, the majority of acquisitions fail to create long-term value for compa-nies and are subsequently often demerged (King et al. 2004). Ultimately, successfulacquisitions require good and effective management and governance.

Major corporate failures based on abuses by CEOs over the last few years haveled to intensified corporate governance discussions and regulations around the word.Subsequently, these developments appear to have caused board distrust of executivemanagement and boards have become more sensitised and increasingly critical inapproving management proposals.

Any board owes fundamental duty of care to its shareholders and this calls forboard members to act prudently and on an informed basis with due deliberationbefore approving any decisions. Indeed, there are few, if any, strategies that are as-sociated with as much immediate and ongoing risk to the company, target company,shareholders and stakeholders as major acquisitions.

In spite of this, many acquisitions fail to achieve the promised results, destroytrillions of USDs and lead to a psychologically destructive environment for employ-ees. This begs the question: what are the problems and do boards actually have thetools to act effectively in acquisitions?

2.2 M&A Literature Review

The next chapter gives an overview of the way in which the emphasis on differentresearch areas has changed in recent times.


2.2.1 Historical Analysis of Research on AcquisitionsManagement Phases

The acquisition process can be structured in four phases (McCann & Gilkey 1998).The initial phase is described as the targeting of the seller; the second phase beginswhen negotiations start; the third phase includes the implementation; and the finalphase is described in literature as the integration of the target employees in the newconfiguration.

Hereafter, to simplify, the acquisition process is structured as two major manage-ment phases, a pre-merger and a post-merger management phase. Furthermore, theway in which research has developed on the topic of M&A is analysed and researchdeficits are identified.

2.2.1.1 Pre-merger ManagementSuccess of acquisitions has been analysed intensively. Both economical studies andfinancial theories have demonstrated that at least every other acquisition fails interms of not fulfilling the expectations of wealth increase for shareholders (Mueller1980, Jensen & Ruback 1983, Bühner 1990, Cartwright & Cooper 1992).1

The literature presumes that misguided motives of managers and their personalinterest lead to the excessive failure rates of M&A. Indeed, there is evidence to sug-gest that managers act in their own interests, for example, to extend their poweror increase status. By doing so, they overestimate their ability to successfully han-dle and lead an acquisition deal (Roll 1986, Jensen 1986, Mueller 1987, Morck,Shleifer & Vishny 1990). Shareholders react negatively to M&A announcements,because they deem their own interests are in danger. Indeed, several authors demon-strated that this is the case particularly when acquisitions are not related to a firm’score businesses, since shareholders do not assume there will be a large synergyeffect or complementary business relations (Berger & Ofek 1995). The increasedfailure of M&A in practice during the 1970s meant that research started to focusmore intensively on different aspects of planning (Humpert 1992, Coenenberg &Sautter 1988). This development was simultaneous with the beginning of scien-tific discussion of strategic planning in firms (Ansoff 1981). Hence M&A becameissues of strategic planning. Acquisitions were understood as instruments for real-ising corporate strategies. During the 1970s and until the 1980s, Europeans firmsmostly followed a growth strategy through diversification. The foundations for thiswere laid down by US example, for instance in the BCG Portfolio Matrix.

This development of diversification, however, was not hindered by regular, newresearch, which showed that more focused firms perform better than largely diversi-fied, conglomerate firms (Rumelt 1982, Ravenscraft & Scherer 1987a, Lang & Stulz1994).

Cross-border M&A followed international acquisitions. Research, however, stillfocused on acquisition success. The research results based on the success of

1 Depending on Consulting firms (BCG, KPMG, McKinsey) we find failure rates from 50 to 85%.


international as opposed to national acquisition, however, are vague (Doukas &Travlos 1988, Bühner 1991, Hitt, Hoskisson & Kim 1997). Some authors say thatthe possible reasons for unsuccessful international mergers are things like legal,market, and culture differences (Bühner 1991, Elsner 1986).

Other authors say that danger is inherent to removing management focus fromorganic growth and specifically innovation (Hitt, Hoskisson, Ireland & Harrison1991). Contrary to this, Vermeulen and Barkema (2001) say that the short-term dis-traction of the management and the wasting of resources initiates firm restructuringand fosters the competitiveness of the firm in the future. This conclusion may seemexaggerated, but the numbers of M&A continue to increase despite the huge amountof research in the 1980s and 1990s on M&A failures.

Acquisition continuity has therefore been a challenge in strategic discussionsand led to a shift of focus in M&A research. Instead of strategic planning, researchnow questioned the implementation of acquisitions and, as such, the focus moved topost-merger management. Alongside this shift, theory approach also changed. Theresource-based view seemed to better explain the new focus compared to agencytheory which became less important. The research shifted from an owner-orientedmisbehaviour of management to a that of core competences (Prahalad & Hamel1990, Wernerfelt 1984, Peteraf 1993). With this, Porter’s external strategy orien-tation shifted to one which was internal. Authors demonstrate that the adequatepositioning of a firm in an industry, the ability to select appropriate resources(Makadok 2001) and to combine them (Teece 1987, Milgrom & Roberts 1995) isimportant for the success of the firm.

The new resource-based view also caused a re-evaluation of intangible assets(know-how, brand, reputation). Hence, research explained M&A failures as the lackof skills to mobilize intangible assets and to make use of them. In this way, organ-isational and management capabilities that are decisive in making an acquisition asuccess are at the centre of business research.

The resource-based view later induced discussion on disinvestments, recom-mending that firm parts that do not add value to a firm’s core business should besold off. Porter (1987) pointed out the impact on competitiveness of disinvestmentsin the context of acquisitions. Other authors deem disinvestments a result of ac-quisition failures (Ravenscraft & Scherer 1987a, b, Allen, Lummer, McConnell &Reed 1995). Lambrecht and Steward (2007) noted that takeovers serve as a mecha-nism to force disinvestment in declining industries. Their arguments lead to takeovertransactions occurring mostly in industries that have experienced negative economicshocks.

Defenders of the resource-based theory criticise this “partial” view of M&A.They consider acquisition as only a part of the reconfiguration and restructuring pro-cess of a firm and they see acquisitions as a means of readjusting a firm’s capabilitiesand resources (Nelson & Winter 1982, Ahuja & Katila 2001, Capron, Mitchell &Swaminathan 2001). Hence, disinvestments following acquisition reduce theirnegative character and are understood as part of a continuous process to increasecompetitiveness in the market.


2.2.1.2 Post-merger ManagementVarious business and organisational theories have explored how to successfullyimplement acquisition (Gerpott 1993). Of key concern is finding the best wayto eliminate organisational complications generated by acquisitions and to realiseexpected synergies.

Several authors suggest looking at compatible and complementary resourceswhich need to be created with an acquisition. The process of creating these re-sources, however, can only be effectively managed if a strategic and organisationalfit is present (Drucker 1981, Venkatraman & Camillus 1984, Datta 1991, Naman &Slevin 1993). Hence, the acquired target needs to be similar to the acquiring com-pany in terms of its strategy and organisation. Such similarity should facilitateintegration and decrease resistance from the employees.

The defenders of the “fit-argument” say that there is a strong correlation betweencorporate culture similarities (common goals, values, employee attitudes) and thesuccess of the integration process. In this context, the literature uses the conceptsof assimilation and integration (Nahavandi & Malekzadeh 1998, Krystek 1992).While assimilation leads to cultural dominance of the acquiring firm over the target,integration should create a new identity by combining the best parts of each culture.

Regarding international, cross-border M&A, several authors discuss national cul-tural differences as failure factors (Hofstede 1980, Barkema, Bell & Pennings 1996).There is a clear relationship between “national cultures’ divergence” and “acquisi-tion failure” (Chatterjee, Lubatkin, Schweiger & Weber 1992, Gertsen, Soderberg &Torp 1998). Regarding R&D performance, Ahuja and Katila (2001) demonstratethat national cultural distance does not have a significant impact. This result con-forms to the research of Weber, Shenkar and Raveh (1996), who did not find anyspecific integration difficulties in international acquisitions (see also Very, Lubatkin,Calori & Veiga 1997).

Following the considerations of cultural aspects in M&A, research becomes moredifferentiated and hence isolated issues within the integration process are analysed.In relation to this, several authors found that at the commencement of an acqui-sition, management-strategists dominate the pre-merger phase (Jemison & Sitkin1986, Haspeslagh & Jemison 1991). Nondisclosure, leadership image and differentremuneration systems do endanger the integration success (Jemison & Sitkin 1986,Haspeslagh & Jemison 1991).

New research looks at acquisitions through a learning and evolutionary approach.Acquisitions are seen as a knowledge-based process and the resource allocation inthis process is mainly built on human capital and on corporate governance consid-erations. Hence, the generation and transfer of implicit know-how is at the centreof research interest (the simple allocation of physical capital becomes secondary)(Kogut & Zander 1996).

Acquisition experience matters. Large, acquisition-oriented companies with awide range of acquisition experience have an internal process based on guide-lines which they use systematically for implementation. Implementation know-howmight be a necessary criterion for a successful merger, but it is surely not the onlyone since the acquisition must first of all be based on an effective strategic decision.


As this brief historical overview shows, over time different schools have lookedat various aspects of the issues. Notably, no multi-disciplined approach has beenconducted to date. Peter Drucker’s acquisition success factors, that are the topic ofdiscussion in Section 2.2.4, are relevant as they include the most critical elementsin six pragmatic principles. Before discussing and critically reviewing Drucker’ssix principles, the topic of acquisition success is explored and an overview of thedifferent schools of thought with regard to the acquisition phenomenon is presented.

2.2.2 Research Approaches to Acquisition Success

Success is an important idea when M&A are planned and executed. Managers tendto base their decisions on the benefit assessments of the acquisition when planningthem. Once integration occurs as a result of acquisition, the management assessesif the deal has been a success or a failure. The management’s behaviour is thereforeimpacted by its evaluation of success. It then follows that future decisions are alsoaffected by the perceived success of a given acquisition. For instance, when man-agement believes that an acquisition is successful, it is more likely to make similaracquisitions and strategic moves in the future.

Previous Research on Acquisition SuccessThough much has been written about acquisition success, the literature very oftentackles research questions such as the success of particular acquisitions or fac-tors which seem to impact, positively or negatively, their likely success. Theseresearch studies have been conducted in a variety of ways, the indicators of successhave varied, and they have sometimes been implicit. A large number of differentexplanations have also been developed for the failure and success of M&A.

Different Success IndicatorsStock prices, according to many event studies, served as indicators of success. Thesekind of studies were popular primarily in the 1980s but since then a number ofstudies have measured success in acquisitions by using these methods. A com-pany’s stock price development is normalised in the context of event studies andthis explains the price movements of all traded shares that bear similar risks. Af-ter the normalisation of the share price developments, unexpected returns are anindication of the reaction of the stock market with regard to the acquisition. Inthis approach, a positive or negative stock market reaction measures the successof an acquisition. Singh and Montgomery (1987), for example, have published suchstudies.

In many research studies, financial performance has been the indicator of success.Numerous studies have examined the financial performance of samples of M&A byusing either regression analysis or other statistical methods. Several publications ofthis type were made before the event studies became popular at the beginning of the1980s. Later in time for example, Schmidt and Fowler (1990) have published suchstudies.


In some case studies, financial performance has also been an indicator of success(Vaara 1993).

A number of M&A studies based their success measurements on the evaluationsof managers of the involved companies. Subsequently, based on the evaluations ofthese managers, numerical success indicators were constructed. Studies by Cannellaand Hambrick (1993) and Datta (1991) are examples of such research.

Synergy has also often been used as an indicator of M&A success, in particular,in case studies. Vaara (1993) has published on this issue.

Further success indicators have also been used. Porter (1987) used a simplersuccess measurement in his publications: acquisitions were regarded as failures ifthey were later liquidated or divested.

It must be mentioned, however, that in many case studies the success indicatorsare not always explicitly defined. They were mentioned and described in an im-plicit way in the descriptions of the cases in question. The studies of Ghoshal andHaspeslagh (1990) and Haspeslagh and Jemison (1991) represent such examples inresearch.

In addition, several studies have used multiple indicators of success. Ravenscraftand Scherer (1987a), for example, combined analyses of stock price and financialperformance in their research.

Several Explanations for Failure and SuccessWithin the acquisition context, the explanations of business relatedness or strate-gic fit elements have probably received the most attention in research (Singh &Montgomery 1987). The principle argument here is that the potential value addedfrom an acquisition is a function of the relatedness of the businesses of the mergingcompany. According to this view, M&A between organisations in similar businessesshould provide more gains compared to acquisitions between companies in more un-related businesses. However, the empirical research findings with regard to strategicfit have not been consistent (Mueller-Stewens, during interview).

The argument of cultural fit between merging companies has also received broadattention (Chatterjee et al. 1992). The main argument here is that cultural differencesare likely to make the merger more difficult. Empirical research has found evidencethat clearly supports the negative consequence of cultural differences with regard tothe success of an acquisition.

Further to this, a number of studies have looked at the way management affectssuccess in the M&A process (Haspeslagh & Jemison 1991). A key argument here isthat the success of an acquisition is very much dependant on the way the acquisitionprocess is managed. From this point of view, skilful management can contributeto success in acquisitions. Likewise, the causes of failure in mergers and acquisi-tions are often managerial mistakes. The empirical findings are numerous and richregarding management’s impact on the success of mergers and acquisitions.

Several studies have also examined issues related to employee resistance and itssubsequent effect on M&A success (Fowler & Schmidt 1989). The main argumentis that contested acquisitions are likely to imply unproductive behaviour, a declinein morale and even acts of sabotage, and other behaviours that are not constructive


or healthy for organisational performance. The research results strongly supportthis view.

It is also worth noting that there have been many other explanations forwardedfor the reasons behind M&A success and failure. Some researchers have studiedthe impact of management turnover on acquisition success (Cannella & Hambrick1993), while others have examined methods of financing as a factor influencingM&A success (Datta, Pinches & Narayanan 1992). Several analyses have also beenconducted looking at the effect of the relative sizes of merging firms on acquisitionsuccess (Kusewitt 1985). Furthermore, studies have looked at the impact of priorexperience in M&A on the M&A outcome (Kusewitt 1985). The pre-merger perfor-mance of the acquiree and its effect on the deal success is also of research interest(Kusewitt 1985).

2.2.3 Theories on Acquisition Motives

As mentioned above, over the last years, prior to the financial crises, M&A havebecome progressively more popular and now represent an important part of to-day’s economy. Acquisition failure rates, however, are still high. For decades, M&Aobjectives have been of research interest.

Based on the high acquisition failure rate, the obvious question is why do organ-isations still continue to implement acquisitions? Phrased differently, what are theunderlying rationales for acquisitions? In the literature, there are numerous theoriesattempting to find explanations for the rationales and motives for corporate acqui-sitions. The focus in this chapter, therefore, will be the theoretical explanations formergers and acquisitions. The acquisition motives are grouped in theoretical clustersand described. This chapter concentrates on acquisition rationales that predominatethroughout economic and business research:

The growing tendency to implement M&A has revitalized interest in acquisi-tion motives (Salter & Weinhold 1982). Because the analysis of M&A deal motiveseventually requires an examination of management motivation, assessment of theacquisition process necessitates a brief examination of management goals. This willresult in several interesting insights with regard to analyzing current acquisitionactivities.

Many authors agree that M&A are driven by different motives. Researchers agreethat no single approach has explicative power (Ravenscraft & Scherer 1987a/1). No-tably, authors such as Ravenscraft (1987/2) demonstrated up to fifteen acquisitionmotives, ranging from the desire to build an empire, or a monopoly of power to man-agement arrogance. Hayward and Hambrick (1997) offer a more condensed version,presenting only three major acquisition rationales: firstly, taking over a unprofitabletarget company with unproductive management; secondly, synergy motives; andfinally, management hubris motives (Walsh & Seward 1990).

Trautwein (1990) presents a good overview of the major motives for undertakingacquisitions and are often cited in merger and acquisition literature. Typically, themotives are grouped into three different areas.


Firstly, the real motives: the efficiency theory and monopoly theory. Sec-ondly, the speculative motives: the speculation theory and raider theory (Hughes,Mueller & Singh 1980). Finally, the managerial rationales: the theories based on“empire-building” and “managerial-agency”.

In the following sections these approaches are explored and the major acquisitionmotives described along with relevant empirical evidence.

The Efficiency TheoriesOften M&A are viewed in terms of synergy in industrial organisation and strategyresearch. The hypothesis is based on the idea that, as a result of managerial, fi-nancial and operational synergies, the joined organisations deliver more merits thancorporations working separately.

The operational synergies delivered by acquisitions apply to economies of scopeand scale along with experience-based economies. Augmenting volumes on theoutput side is the basic rationale for an economy of scale acquisition, while re-ducing the marginal cost of production (Hughes et al. 1980). An organisation canreduce its costs post-acquisition by reorganizing or augmenting its output derivedfrom manufacturing if the corporation is operating beneath the minimum efficiencycapacity.

Cost savings can also be achieved through larger volumes of production, as thisenables the use of more efficient technology of manufacturing. Despite the opinionsof some authors, achieving these advantages is not in fact easy. As Scherer andRoss (1990) explain in their publication, manufacturing plants already exist whentwo organisations merge and, in the short-term, not much economy of scale can beachieved. If, after an acquisition, only the plant that offers most efficiency is used,one wonders why the other plant was acquired in the first place.

Nonetheless, in the long-term, horizontal acquisitions can contribute toeconomies of scale. Firstly, a merged organisation will eventually possess increasedcapacity due to replacement (Scherer & Ross 1990). Secondly, an organisation withan augmented market share eventually benefits from its size as this can potentiallycontribute to the purchase of an additional plant (Scherer & Ross 1990). Comparedto scale economies that are production specific, product specific economies are lessdifficult to implement. For this, the merged organisations’ process of manufacturingdoes not need to be entirely replaced but rather reorganized.

The term “economy of scale” is often used too broadly. It is refers to abroad-ranging drop in costs while, at the same time, augmenting the volume of man-ufacturing. By abolishing the duplication of existing operations, costs that are fixed,such as research & development, marketing and support can henceforth be allocatedto an increased number of products. This eventually decreases product cost.

Furthermore, operational synergies that are present in a multi-product com-pany but absent from a one-product company can be generated by economies ofscope. However, this is only important when the merger or acquisition expands acompany’s product range or there are synergistic possibilities such as applying abrand name across different types of products (e.g., Nestlé sell diverse productswith identical brand names), similar distribution channels or clientele base. Such


synergies may make entering a new market simpler or contribute to achieving alarger market share in an existing one. Apart from that, firms can reduce costs byconsolidating strategies. This implies tying up different lines’ outlets.

Another potential competitive advantage that arises from acquisitions is the so-called economies of experience. This concept deals with outcomes relating to thelearning curve, as well as the transfer of management knowledge between the twocompanies involved in the merger or acquisition. According to Scherer and Ross(1990), research and development is enhanced when ideas and financial resourcesenrich the organisation through the acquisition. This rationale for acquisition is oftenquoted in industries such as pharmaceutics, and in particular when larger companiestake over smaller organisations that have a research-focus. Indeed, this was the ra-tionale of Roche when they acquired Genentech (Gerber, during interview). Despitethe fact that both economies of experience and scale often compliment each other,they are clearly not alike. Economies of experience create difficulties in comprehen-sion in terms of the employees’ knowledge of each organisation, while economiesof scale relates to effective utilization of plant and machinery and the technologiesof production.

Another motive for an acquisition is managerial synergies. As Trautwein (1990)explained, this type of synergy sometimes accompanies economies of experience,for example, when it is expected that the acquiring firm’s management has more de-veloped skills, it will eventually result in the target company’s better management.Furthermore, a change in management can lead to the reduction of an organisation’smanagerial running costs (Scherer & Ross 1990). On the other hand mergers ac-cording to Neary (2007) can raise costs, economies of scale and scope is usuallyachieved through that stage.

Another motive worth mentioning is that of achieving a “market for corporatecontrol”. This motive is completely different from acquisitions that aim to achievemanagerial synergies. Manne (1965) led the way in developing this idea. Later,Jensen and Ruback (1983) formulated a practical argument for this motive, definingthis term “market for corporate control” as: a market in which several managementteams compete in order to receive the right to be in charge of managing the corporateresources.

In contrast to acquisition motives aiming to achieve managerial synergies, thisnew motive which looks to achieve a market of corporate control, focuses on thevaluation of an organisation and on the way and extent to which the organisation’sresources are utilized. In this context, it should also be mentioned that at the core ofthis motive is the view that a management team’s key goal in running the businessis to maximize the shareholder value. An example would be that if an organisationinvested in a poor project rather than giving the funds back to the firm’s sharehold-ers, then competing firms would discover these “management inefficiencies” andattempt to purchase the firm and then fire the target company’s management team.Jensen and Ruback (1983) allege that a divergence from the shareholder value max-imization concept is limited as managements of organisations compete against eachother for the right to manage resources. Furthermore, the authors claim that this


competition enables an environment in which economies of scale and further syn-ergies are created through the reorganisation or combination of corporate resourcesmanagement.

In summary, it could be said that acquisitions are applied in terms of a disci-plined restraint of capital as reparation of the deficit based on hands-on control byshareholders (Jensen & Ruback 1983).

Finally, the efficiency theory category along with financial synergies will beexamined as a possible reason for acquisitions (Trautwein 1990). Building on adiversification strategy, an organisation may attempt to progressively increase andenhance its safety and business. Acquisition can also be a means of allowing smallerfirms the opportunity to profit from a larger organisation’s more favourable capitalcost. Lastly, post-acquisition a company can achieve efficiencies by installing aninternal capital market (Farschtschian 2004).

The internal market is able to provide capital in a more efficient way based onaccess to better information (Trautwein 1990). Another reason often cited as anacquisition motive is that savings can be made in terms of upcoming tax events(Ravenscraft & Scherer 1987a). The consolidation of losses and internal fund trans-fers may reduce the tax requirement of the acquirer company. It should be mentionedthat in this example, unlike the advantages described above of efficiency benefits,the tax advantages only benefit the involved organisations. Hence, the broader econ-omy does not experience any gains, but only the involved companies (Hughes et al.1980).

There is no statistical evidence to confirm that acquisitions are driven by themonopoly rationale based on the described efficiency theories. Research has foundfault with the idea that acquisitions result in financial synergies. Assuming thatcapital markets are efficient, it is difficult to realise synergies. Indeed, Ravenscraft(1987) illustrated that research does not support the argument that acquisitions de-crease risks in a systematic way, or improve internal capital markets. The onlyidentified advantages after an acquisition in capital markets were those relating tosize (Trautwein 1990). The existing publications covering the utility of acquisitionare quite poor. When studying over three hundred acquisitions in the 1960s and1980s, Auerbach and Reishus (1988) missed the significant tax savings that were aconsequence of the acquisitions.

In terms of rationales for acquisitions, a major focus in research was on synergiesrelating to managerial issues. Considering the published research, the most oftenquoted rationales relate to efficiency theories (Trautwein 1990).

Analyzing the situation in the United States, Ravenscraft and Scherer (1987a)demonstrated that organisations did indeed achieve some efficiencies through ac-quisitions. At the same time, their research outcomes documented that in manycases the synergies did not actually materialize after an acquisition. As a matterof fact, the statistics support their argument in that efficiencies typically slump afteran acquisition. Trautwein (1990) also agrees with this viewpoint.

Although several authors disagree, many of the measurable gains relating to theefficiency theories have been evidenced by research. As an example, using his “mar-ket for corporate control” model, Jensen (1984) was able to show that the activities


in the corporate control market consistently augment efficiencies and shareholder re-turns. On the one hand, efficiencies assumptions have been verified by case studies,but on the other, research findings based on the organisation’s tangible productivitiesrefused the rationales relating to the efficiency theories (Trautwein 1990).

With regard to supporters of the view of efficiency in capital markets, it seemsthat the facts, which are openly available in financial reports, do not correspond tothe actual stock prices of the organisation in question. Such discrepancies should notexist. Furthermore, there is no evidence which supports the management substitu-tion rationale as a motivation for acquisition. Building on the theories of Ravenscraft(1987), organisations seek instead for target companies with solid management inplace and aim to leave them there. Other authors agree on this point, such as Schererand Ross (1990). They reject, therefore, that the rationale behind acquisitions isbased on motives related to managerial synergies.

The Monopoly Power TheoryThe monopoly theme is one of the first topics that research explores with regardsto acquisition motives. The monopoly theory considers both the organisation’sshare in the market and barriers that the organisation needs to overcome in or-der to access other markets. There is an evident correlation between market entrybarriers, the market share of a company and the profits that the company gener-ates. An organisation’s power to determine its prices and therefore to augmentits profits is clearly positively correlated to its market share and hence its powermonopoly.

One of the consequences of horizontal acquisitions is that they lead to a rapidmarket share increase which diminishes competition in the industry. Conversely,vertical acquisitions can contribute to an organisation’s enhanced market positionby preventing other entrants to the market. This is explained by the fact that in orderto compete successfully with an established firm, a new organisation would needto ascend the market at the same time (Gaughan 2007). Hughes et al. (1980) positsthat organisations will eventually face difficulties in a vertical integration, as therequisite management know-how and resources are vast.

Another advantage of an organisation that is vertically integrated is the possi-bilities in terms of cross-subsidizing some of its products. Trautwein (1990) statesthat profits that are made in one sector serve to initiate an eventual price war in adifferent segment or market.

The acquisition rationale based on the monopoly theory used to have greaterpopularity. In fact, the monopoly rationale along with the speculative rationale istypically considered a principal reason for the huge first wave of acquisitions in theUnited States over a period of 17 years beginning in 1887 (Scherer & Ross 1990).These acquisitions, whose ultimate goal was to strengthen a company’s position,were only of advantage to the involved organisations and not for the broader econ-omy due to the fact that they resulted in markets that were distorted, deterioratedcompetition landscape, and the transference of wealth from the organisation’s clientbase to the organisation itself. Based on these reasons, several laws were created torestrain such behaviour. As an example of the response to the first acquisitions surge


in the Unites States, the first antitrust law was passed at the end of the 19th century,and was called the Antitrust Sherman Act (Scherer & Ross 1990).

Research has not found significant evidence for the monopoly rationale(Trautwein 1990, Jensen 1984).

The Speculation and Raider TheoriesThis acquisition rationale is primarily of importance for companies that are basedon stocks. In the past, the speculation and raider theories had significant relevanceand importance during the massive acquisition waves at the turn of the 20th centuryin the United States.

The organisations that typically helped other firms in their acquisition activitiescontinued to carry out their services even in cases where their clients had a lim-ited chance of achieving a monopoly position in the market. These financial servicecompanies also used tricks to increase their own profits, such as manipulating themarket by disseminating untruths and rumours. Consequently, two important reg-ulations were announced in the United States in 1933 and 1934 (Scherer & Ross1990): The Securities Act and the Securities Exchange.

Nowadays, the organisations involved in promotion activities have much less im-pact, however, speculation continues to be a delicate matter in relation to acquisitionactivities. Authors such as Hughes et al. (1980) claim that “today, the inside man-agers act in the way that in earlier days the promotion organisations would do”. Insuch cases, revenues would not be based on actual economic earnings but rather onspeculative investments during the pre-acquisition phase in terms of the target com-pany’s stocks. Obviously, the legal framework has changed and such action wouldnot conform to what is tolerated by law.

In order to examine the current form of the speculation theory, one needs toconsider Trautwein (1990) and his raider rationale. Trautwein’s rationale is oftenmentioned in research. He views acquisitions a result of the actions of an individ-ual, the so-called “raider”. These raiders attempt to make a bid for a corporationand, by doing so, to generate wealth that originally belonged to the shareholders ofthe corporation. The raiders achieve this goal by various methods, such as “green-mailing”, whereby a raider who owns a large amount of the corporation makes thethreat that he will bring the company down after the acquisition, unless he receivesa significant share premium (Bressmer, Moser & Sertl 1989).

Nevertheless, authors like Trautwein refuse this acquisition rationale, arguingthat it is not rational and empirical research does not support it. Empirical research(Traudwein 1990, Jensen 1984) reveals instead that, typically, it is not the acquirerand the acquirer’s stockholders who profit from an acquisition, but the company thatgets acquired and its stockholders.

The Valuation TheoryResearch that looks at the topic of acquisition from a financial perspective, as op-posed to a strategic one, assumes that a firm’s current market price does not reflectthe true value of the organisation. Authors like Trautwein (1990) call this “valuationtheory”.


Expectations concerning an organisation’s prospects, as well as inefficiencies inthe market space based on dispersion of knowledge, eventually result in underval-ued companies. Evidently, this acquisition theory is relevant for companies thatare based on stocks. The acquirer could have a more information than other mar-ket participants. Furthermore, it is possible that the acquiring company is betterequipped to lead the target company and increase its efficiency and productivity. Asa consequence, the acquirer evaluates the company it seeks to take over as being un-dervalued with regard to its given value in the market. This increases the motivationto take the target over. In these circumstances, synergies are not the primary concernbut rather taking advantage of prevailing inefficiencies in the market.

On a further note, the above argument should not imply that there are no tiesbetween the valuation theory and the efficiency theory. As a matter of fact, the ratio-nale as to why an acquirer buys a target that is undervalued rests on the fact that theacquirer considers itself better able to effectively manage the target than its currentmanagement. The synergy argument is therefore linked to this thinking.

There are also differences between the two theories. While the efficiency theoryfocuses on financial gains based primarily on synergy, the valuation theory focusesrather on acquisitions based on financial reasons.

The Empire-Building TheoriesAlso called managerial theories, they represent an essential trait of the specula-tion theories. Within this perspective, the managing directors of a company tendto act in their own interests and not those of the shareholders. Several acquisitionrationales are based on a manager’s personal goals and, more precisely, can be sepa-rated into two groups. Hughes et al. (1980) describe one group under their so-called“managerial theories”, and Trautwein (1990) investigates the other group under theso-called “empire-building theories”. To summarize, the management forms the fo-cus in both of these theory groups, one which acts solely in its own personal interestand diverges from the interest of the company’s owners.

According to the research, Baumol (1967) and Marris (1963) are the first authorsto classify and describe these two theory groups. They are of the opinion that thecompany’s management strives to achieve major goals which both increase the com-pany’s earnings and volume of sales. Neither of these goals, however, are primarilycorrelated with the increase of shareholders’ gains. The rationale for this kind ofmanager behaviour can be seen as an attempt to fulfil their own personal goals.

It could be argued that managers, instead of focusing on profitability, usually fo-cus their efforts on augmenting their company’s size and growth rate as these arestrongly correlated with the above mentioned manager goals of earnings and salesmaximization. In this way, managers consider growth of their company as an effec-tive means to fulfil their personal ambitions. Interestingly, this theory is strengthenedby psychological research which shows that, to some extent, the management alignsits sense of worth with that of the company (Marris 1963).

Managers and shareholders also have a different attitude to risk. Typically, themanagement is considered to be less willing than stockholders to take risks. Wheremanagement’s means of existence, including non-financial rewards, depend on the


shape of the company, shareholders can diversify their risk into other companies ifthey wish.

Another acquisition theory to mention here in the context of managerial theoriesis that of management hubris motive (Roll 1986). Roll argues that the managementthat is acquiring a target usually pay too high a price. Roll asserts that managementoverestimates its competence particularly when attempting to effectively integrateand manage a target. As a consequence, the acquisition fails. As explained byScherer and Ross (1990), the problem of a failed acquisition is exacerbated whenmanagers and chief executives are motivated by the objective of building a hugeorganisation through numerous and frequent acquisitions, in other words, “empirebuilding”. The hubris theory may not explain acquisition actions, nevertheless, thistheory presents good arguments as to why executives continue to do acquisitionseven though history shows that the majority fail to create value.

At the time of the American acquisition wave during the 1980s, the was a greatinterest in managerial acquisition theory primarily in business research. In gen-eral, empirical findings with regard to the managerial acquisition rationales aresupportive.

Nevertheless, several authors reject this theory, such as Jensen (1984). Ratherthan the empire building rationale, he supports the synergy rationale with regardto acquisitions. Jensen’s view, however, is against that of the broader research.Trautwein (1990) gives a good overview of the empirical research outcomes.

Despite broad credibility and some supportive empirical outcomes, the manage-rial rationales fail to deliver a full account of acquisitions. The managerial theorymay apply to a specific example. But taking a broader view on acquisition over time,the managerial theory does not provide strong explicative illustrations.

The Agency TheoryJensen’s (1986) free cash flow rationale, which supplements the other acquisitionrationales, is often quoted separately but is actually related to managerial acquisitionrationales.

This agency rationale is based on a perspective which can be characterized by aprincipal-agent relationship. The theory focuses on differences of interest betweenthe owners of a company and the company’s management. Although the manage-ment is elected by the company owners to run the business on their behalf, conflictsemerge as the management operates for its own interest rather than the objectivesof the company’s owners. This conflict of interest can be explained through theseparation of ownership and control.

Even if the owners could implement an all-embracing monitoring system, itwould not be realistic to completely monitor the agent, as the executive managersmust always have flexibility in running the businesses.

A consequence of the principal-agent problematic is the complications arisingfrom the employment of free cash flows2 (Jensen 1986). Some authors believe that

2 Taking free cash flow to be the excess cash after the funding of an entire project with net presentvalues that are positive when they are discounted at the accurate capital costs.


executives are likely to dispose of such capital flows rather than paying it back tothe company’s stockholders. In this light, an acquisition of a company can be seenas an instrument to gain control of such flows of capital (Jensen 1986).

Based on this rationale, acquisition activities can be impacted by higher free cashflows. Jensen furnishes practical proof of this argument and he believes this to be amajor factor in the explanation of the impressive growth of big American concerns.

The Process TheoryThe M&A process theory has its roots in the strategic decision processes. In thistheory, the argument is put forward that decisions are not made rationally but rather,are the outcome of processes that are already in place. Obviously these processesare contextual and influenced by the individuals involved.

In this theory, therefore, a company’s simple routines, its social and politicalinvolvements, and its characteristics such as experiences of previous executives,have an impact on the decision making process and its result.

Jemison and Sitkin (1986) discuss the different environmental and contextualrationales in their publication.

Consequently, according to this theory’s argument, some acquisitions are notdeemed a result of rational evaluation. A great deal more acquisitions are seenas the consequence of discussed outcomes of an entire corporate decision mak-ing procedure. Furthermore, the authors Jemison and Sitkin (1986) propose treatingacquisitions as procedures that impact an organisation’s agenda and outcomes.

In the literature, the dominant point of view of acquisitions as rational decisions ispaired, to some extent, by a process point of view. The latter point of view acknowl-edges that acquisition procedures are an inherent element of the M&A activity andresult (Jemison & Sitkin 1986).

These assumptions conflict with the efficiency theory, which argues that acquisi-tions are founded on rational decisions.

Compared to other theories, however, the acquisition process rationale is weakas it is not supported by much empirical evidence (Trautwein 1990). A reason forthis lack of support may be that executives actually construct their decision in arational way. Trautwein (1990) supports the theory and argues that it has potentialto elucidate acquisitions.

The Disturbance TheoryThe disturbance theory is primarily of significance to public companies. The theoryis founded on the forecast of a company’s earnings based on its stockholder baseand those who do not have stocks in the company. Gort (1969) was the first authorto write about this theory. He argues that business jolts and crises matter in the for-mation of forecasts and expectations. These jolts result from changes in technologyand also from variations in the cost of security.

According to the disturbance theory, prevailing forecasts and expectancy have tochange in order to make an acquisition. The theory postulates that more forecastdistinctions are made during moments of duress.


Hence, at times of economic duress, for example, the managers of the acquir-ing company could become more bullish in terms of the target, while the target’smanagement and its shareholders become more bearish. This difference in viewmay result in an exchange of company shares and an acquisition. According to thistheory, acquisitions take place due to business difficulties and moments of duress.Thus in moments of changing market prices, acquisitions will occur. In particu-lar, during bear markets, acquisition activity should intensify as more significantdistinctions appear between the expectations of shareholders compared to those ofnon-shareholders. In reality, however, empirical research has shown that acquisitionactivities are more intense in bull markets when the share prices increase, whileacquisitions decline with falling share prices during bear markets (Hughes et al.1980).

On a further critical note, the disturbance theory loses validity because it failsto explain the tremendous amount of acquisition activity towards the end of the1960s even though the period was not characterized by significant business turmoil.Conversely, acquisition activity should have increased during the 1973 oil crisis, butit did not. It must also be said, however, that there may not be enough instances ofduress to make a statistically significant judgment regarding this theory.

ConclusionIn this chapter different rationales for acquisition activities were explored. Itwas revealed that rationales and motivations for acquisitions are not solely ori-ented towards strategic efficiency. The various acquisition theories demonstrate thatdifferent opinions influence the companies’ acquisition activities. These schoolsof thoughts address different issues and questions, have different objectives andtherefore employ different methodologies. Researchers of the theories continue toanalyze and investigate acquisition success producing incomplete but relevant re-search. Indeed, considering their empirical evidence, these theories are logical andpartially explicative and so none of them can be fully rejected (Ravenscraft &Scherer 1987a, b).

Nevertheless, none of these serve as a comprehensive explanation for the frequentfailure of M&A. As a result, one cannot operate from a single perspective, but ratheracknowledge the different research results and the limits of these schools of thought.This is instrumental to understanding the broader issues surrounding acquisitionsuccess.

Hence, as the theory overview shows, different schools have looked at differentissues at various points. Furthermore, to date, no multi-disciplined approach hasbeen conducted. Straub (2006) took the first step in this direction by combiningstrategic, organisational and financial elements in his framework to illustrate acqui-sition outcomes. Straub’s study had a conceptual nature, however, and was not testedempirically.

Empirically relevant and widely accepted by academics and practitioners, PeterDrucker’s approach appears highly relevant as he includes the most critical ele-ments in six pragmatic principles. In this thesis, these are defined as the normativerequirement for successful acquisitions.

The next section presents and critically reviews Drucker’s six principles.


2.2.4 A Normative Approach to M&A: Peter Drucker’s AcquisitionSuccess Factors

Making an acquisition successful necessitates close attention to human and or-ganisational development. Integration activities require a fine combination ofself-monitoring and action. A management which understands the benefits of suc-cessful integration makes important alliances with the relevant stakeholders of thetarget company throughout the integration process.

How do successful acquisitions differ from those that fail? The reasons for fail-ures of previous strategic management research on acquisitions can be grouped areasas follows: firstly, strategic reasons, in that the acquiring company targets the wrongfirm; secondly, integration reasons, in that the acquired company is badly integrated;and thirdly, price reasons, in that, typically, too much is paid for the target company(Hayward 2002).

With the exception of Drucker, previous studies on the topic of acquisition haveonly partially addressed the problem of why such a large number of well-advised ac-quisitions ultimately fail. The majority of acquisition studies prior to this dealt withindividual elements of the acquisition process such as the acquisition motivation,post-merger integration and other isolated areas.

It is evident that a more comprehensive approach is required, which treats thecritical M&A issues within a multi-dimensional framework. Drucker postulates thatacquisition success is driven by numerous factors and their simultaneous impact onan acquisition.

This study aims to be of practical relevance. Peter Drucker is widely acceptedby practitioners and his six acquisition principles outlined below integrate, in apragmatic way, the relevant success factors appearing in existing literature.

2.2.4.1 Drucker’s Six Acquisition Principles

Very few acquisitions are successful. The reason why most acquisitions fail is because theydisregard Peter Drucker’s principles for successful acquisition.

Malik, during Interview

Drucker’s six principles for a successful acquisition:1. For an acquisition to be successful it has to be founded on business strategy rather

than financial strategy.2. A fruitful acquisition has to be based on what the acquirer brings to the

acquisition.3. At the core of a successful acquisition there must be a common unity, for example

marketing, the market, and technology or core competencies.4. The acquirer must have respect for the target business, product, the customers of

the acquired company, as well as its values.5. The acquirer has to be ready to provide senior management to the acquired

business within a reasonably short period, maybe 12 months maximum.6. In a successful acquisition clear opportunities for advancement must be visible

in both the acquired and the acquiring business.


2.2.4.2 Discussion of the Drucker Principles

There are six simple rules for successful acquisitions and they have been followed by allsuccessful acquirers since the days of J.P. Morgan a century ago.

Drucker, The Wall Street Journal, 15. 10. 1981.

Building on Paine and Power (1984), Drucker’s success principles are based on thepremise that the management’s actions have a decisive impact on the success ofacquisition.

Conversely, Porter (1980)3 argues that external factors such as the financial healthof the target firm, the state of the industry and, more broadly, the economy signifi-cantly influence an acquisition’s success likelihood. Porter believes that acquisitionshappen independently of the management’s actions.

The interviews conducted for this research with renowned business leaders whocreated some of the most successful companies today, strongly support the Paine &Power’s assumptions.

1. For an acquisition to be successful it has to be founded on business strategyrather than financial strategy.

In essence, this means that successful acquisitions must be based upon a well-developed business plan, and not solely on financial analyses. The target companyshould match with the business strategy of the acquiring company. Without a match,there is every chance that failure will result.

In his publication, The Daily Drucker (2004), Drucker reviews the following twocase studies with regard to his first principle.

During the last decades of the 20th century the worst acquisition track record ofany senior executive was that of Peter Grace, CEO of W.R. Grace. Drucker con-sidered him a smart manager. He set out in the 1950s to develop a multinationalenterprise but only through acquisitions that were financially based. Grace put to-gether the most able team of financial analysts and dispatched them around theworld in search of potential acquisitions with low price-earnings ratios. Grace thenpurchased these firms thinking that these buys were at bargain prices. As a matter offact, the financial analysis that Grace’s team did before each buy was impeccable.The problem was, according to Drucker (2004), that the acquisitions were not basedon any business strategy.

As a contrasting case, Drucker uses Jack Welch and GE as a prime example ofa successful acquirer. Welch shaped the company in an impressive way during histenure from the beginning of the 1980s until 2001, and to a large extent its expansionwas based on acquisition. Almost all of GE’s acquisitions were based on a soundand solid business strategy. This resulted in an impressive growth in the company’searnings as well as its market value (Drucker 2004).

3 In Paine & Power (1984).


2. A fruitful acquisition has to be based on what the acquirer brings to theacquisition.

An acquisition can only be successful if the acquirer carefully considers the wayin which they could contribute to the target company. Crucially, the question is notwhether the target firm will contribute to the acquirer. Drucker re-iterates the im-portance of this, noting further that the potential synergies are irrelevant from thebuyer’s point of view.

The way in which the acquiring firm can contribute to the target varies in thatit could bring benefits in terms of technology, management, or even strength indistribution. Drucker specifies that this contribution must be more than just mone-tary; “Money by itself is never enough” (Drucker 2004). Hence, before making anacquisition, management must focus on contribution, not synergy.

As an example, Drucker mentions the acquisition of Citibank by Travelers. Theacquisition was successful because Travelers conducted an in-depth analysis of thetarget company and planned, well in advance, what Travelers could offer Citibank inorder to bring about a significant change in its operations. Citibank had implementedits businesses successfully in almost all countries. At the same time, Citibank hadbuilt a management that was transnational. In terms of services and products, how-ever, the bank was still quite a traditional bank. Its management and distributivecapacity, however, exceeded the service and products that typical commercial bank-ing delivered. Furthermore, Travelers had a strong position in terms of product andservices, and considered itself capable of handling an increased volume of businessbased on Citibank’s first class international distribution system and management(Drucker 2004).

One could argue with Drucker’s second principle based on the fact that it seemsto be a limited in that it neglects the potential contributions made by the target tothe acquirer. Indeed there are cases where the management acquires a firm as muchfor what it can contribute to the target, as for what the target can contribute to thefirm. This happens, for instance, when a target is purchased to increase the pool ofresources, such as talented managers.

3. At the core of a successful acquisition there must be a common unity, forexample, marketing, the market, technology or core competencies.

Both companies, the acquirer and target, must share something in an area in whichboth firms are highly competent. Drucker argues that there must be a shared cultureor, at the very least, some kind of cultural affinity. Like all successful diversifi-cation that is achieved through acquisition there is a presumption of “a commoncore of unity”. Both companies must share either the same technology or markets.Sometimes, however, similarities in the production process are enough to fulfil thecriterion. The same areas of expertise and experience, the same language and so onare elements that bring organisations together. Drucker (2004) argues that withouta common core of unity, an acquisition cannot work, as the financial tie-up alone isnot sufficient.


By way of example, Drucker cites the case of a large French company that hasgrown by taking over companies operating in all areas of luxury goods be it fashiondesigners, champagne, exclusive watches or handmade shoes. At first sight, they ap-pear to be unrelated businesses in a conglomerate, the products do not seem to havemuch in common. But Drucker argues that all of them are purchased by customersfor the same reason: not the price or the utility of the products, but the status gainedby owning them. Hence, all the acquisitions in this case have customer values incommon, albeit each product is sold in quite different ways (Drucker 2004).

Bettis’ (1981) study supports Drucker’s rule. He analyzed large industrial com-panies and realised that the economic success is higher for companies in whichhugely diverse areas of activity are related to a specific core competence. Based onhis outcomes, Bettis argued that related diversified companies perform better thanunrelated diversified companies with regard to their Return on Assets (ROA). Ex-amples include companies like Johnson & Johnson or Bristol-Meyers. This resultis, therefore, in line with Drucker’s ideas.

Although this principle seems straightforward, Drucker’s concept of “commoncore of unity” can be both broadly and narrowly defined. Large companies typicallymake several acquisitions. If an acquisition is not related, and therefore does notshare “a common core of unity”, a subsequent acquisition may share this conceptwith it and they then become related acquisitions.

Thus, despite the fact that Drucker’s principle appears powerful and explica-tive, the rule is also ambiguous. Above all, defining and recognising a “commoncore of unity” can be more challenging to define in the moment, compared toretrospectively.

Malik’s (1999, p. 252) view supports the Drucker principle:

The logic of a merger must relate to the market and-or to the technology and be anchoredthere. Everything else is accompanied by substantial additional risks. If the logic of a mergeris not right, nothing will help. There is no way of leadership – not even to the highest levelof sophistication – that could compensate a logical mistake within the basic architecture ofa merger.

4. The acquirer must have respect for the target business, product, the cus-tomers of the acquired company, as well as its values. There must be a“temperamental fit”.

A merger or an acquisition will be a failure unless the staff of the acquiring or-ganisation respect the target company, its products, its market, and ultimately itscustomers. Drucker (2004) cites the example of several pharma companies whichacquired cosmetic firms, none of the which turned out to be a success. He arguesthat “pharma people” and “cosmetic people” have different values. Biochemistsand pharmacologists are interested in disease and health in general. Conversely,“cosmetic people” deal with lipsticks and similar products. Thus, pharmacologistsdo not have similar values to lipstick users. If firms are not respectful or do nothave a “comfortable” feeling about the target, their businesses, product range, andultimately their customers, they will keep making the wrong decisions (Drucker2004).


5. The acquirer has to be ready to provide senior management to the acquiredbusiness within a reasonably short period, maybe 12 months maximum.

Drucker posits that the acquiring firm must be capable of providing top managementfor the target within a maximum time frame of one year. The acquiring companymust be prepared to lose the target firm’s key people. These key people are used tobeing leaders and may not accept demotion to division managers. In the case wherethese players have ownership or part ownership in the target, the acquisition willmake them rich. As a consequence, they will not continue their duties for the firmif they do not enjoy them or like the change. The acquirer must also be sensitive tothe fact that the professional managers of the target company, who do not have anownership stake, will usually be headhunted by other companies, making the shifteasy for them. In the case of such a management departure, where the acquiringcompany is not prepared to provide new management itself, the recruitment of newpeople is difficult and rarely succeeds (Drucker 2004).

This is particularly relevant in the case of a chief executive who founded the tar-get business. In some cases this chief executive has actually initiated the acquisitionprocess. This CEO may expect the acquiring firm to implement the personal changesthat he is reluctant to do. Such changes could include, for example, firing a well-settled colleague and friend, who is underperforming professionally because thecorporate environment has changed, leaving this person outgrown by his previousjob description (Drucker 2004).

The attempt to keep senior management is usually of higher importance than suc-cession planning for those who leave. It is therefore usual for an acquired companyto try to retain the management post-takeover. During discussions, Malik notes par-ticularly the social implications for a target management. An acquisition can createjob insecurity for a target management which may be harmful. Indeed, matters re-lated to human relations in acquisition are important for Malik. The top managersof a target company see their status in their private social lives damaged due to theloss of power and responsibility in their jobs.

It is interesting to see that authors like Hayes (1979)4 have already shown in earlystudies that in almost all cases, in a study conducted in the late 1970s, where the keypeople of the target management were retained, the pre-acquisition negotiations ac-tually happened on both social and business levels. It is very interesting to note thatthe author found out that discussion typically included the wives of the managers.

In order to retain the target’s top management, it would therefore seem instru-mental for the acquiring company to stress considerable involvement of the target’smanagement in negotiations.

6. In a successful acquisition clear opportunities for advancement must be visiblein both the acquired and the acquiring business.

With regard to his final principle, Drucker states that during the first 12 months of theacquisition, it is vital that a significant number of key people from both the acquiring

4 In Paine & Power (1984).


and target company receive significant job promotions. These promotions need tohappen across the companies, meaning the promotion of target company managersto new positions at the acquiring company and vice versa. The reasoning behind thispromotion activity is powerful, as it shows and convinces the business staff in eachfirm that the changes to come will bring them new opportunities. Drucker states thatit is very important to be aware that although the acquired business is now legallypart of the acquiring firm, politically, the managers of the target become an “us”determined to defend their business against “them”, the staff and management fromthe acquiring company. Similarly, managers in the acquiring company behave andthink in the same terms. These invisible and impenetrable barriers can last a wholegeneration, thus, it is vital to promote key people on both sides within the veryfirst months of an acquisition. This enables managers from “both sides” to see theacquisition as a personal opportunity. In fact, this principle applies not only to topmanagers or those near the top, but also to the younger executives and professionals(Drucker 2004).

Conclusion: Drucker’s Six PrinciplesThe stock market too seems to sense the practical relevance of Drucker’s principles.Thus, in numerous instances, report of large deals in the news lead to significantdrops in the acquiring company’s share price. Despite this fact, to date, managers ofboth acquiring and target companies continue to ignore these principles, as do thebankers in agreeing to finance the acquisition, because they still, to a large extent,base the deal on financial rather than business concerns.

In conclusion, managers appear to be able to impact acquisition outcomes byacquiring information and planning thereon. Thus, ultimately, managers’ skill andexperience enable successful acquisitions. The quick implementation of a mergeror acquisition is instrumental to success and as well as the high priority of humanrelations issues.

Hence, albeit that risks are inherent to all acquisitions, following Drucker’s prin-ciples significantly reduces these risks and creates competitive companies in thelong-term.

2.2.5 Conclusion: M&A Literature Review

It is apparent that despite a tremendous amount of research we still face high ratesof failure. While most analyses of M&A are conducted within the bounds of theresearcher’s field, Peter Drucker’s principles for successful acquisitions are, in con-trast, multi-dimensional, drawing from various different fields. Notably, almost allprevious research focuses on management, and, in particular, the chief executive. Todate, there is still a lack of the research with regard to the role of boards of directorsin the acquisition process.

2.3 Corporate Governance Literature Review 33

2.3 Corporate Governance Literature Review

After a general introduction, the corporate governance literature review comprises adiscussion of the emergence of boards and a director’s duties and roles. Thereafter,the Swiss board system is reviewed and theories of reasonable board stances aresuggested. Finally, a conclusion closes the section on corporate governance.

2.3.1 Discussion of the Concept

To understand the duties of a board of directors, the subject of this study, it is impor-tant to contextualise the emergence of the board of directors as a controlling body,in the broader corporate governance discussion.

The subject of corporate governance has been discussed in literature for a longtime. Debate most likely began with the emergence of larger corporations in which,for the first time, ownership no longer coincided with management. In the late 18thcentury, control over resources was thus transferred from owners to managers.

Discussion of how to define management tasks and control by shareholders be-gan. Monks and Minow (2001, p. 94) posit that this separation was first discussedby the authors Berle and Means (1932). Other authors even quote Smith (1776),who already discerned problems in the motivation of managers “of other people’smoney” to the extent that managers’ interests do not align with the principals.

The term “corporate governance” has only been in use since the 1980s. As men-tioned above, however, the discussion of the concept is long-standing. The earlierdiscussions mainly came under the topic of “agency theory”, i.e., that the dis-union between the owners and managers in organisations leads to a principal-agentsituation.

Defining the focus of corporate governance as that of directing the company inthe interest of its shareholders and on controlling management’s actions on theirbehalf, it is obvious that these two concepts refer to the same research area. Hart(1995) demonstrated the overlap when he explained that corporate governance is-sues are related to agency and transaction cost issues. As both of these exist inpublicly traded companies, agency theory appears to be the basic framework forcorporate governance structures.

2.3.2 An Agency Perspective

Many authors consider the focal point of corporate governance to be the agency rela-tionship between owners and managers of a company. Looking back in history, mostcompanies were directed by their owners until the late 18th to early 19th century.At some point, however, the amount of capital and managerial resources needed inlarge and expanding companies led to the sale of equity to the public. Due to the in-creased size of the companies, hiring of managers to lead a company on the owner’s


behalf became necessary. With this, the ownership and management of companiesseparated.

The classic principal-agent situation is characterised by the conflicts that mayresult due to the differing interests of owners and managers. This was already de-scribed in the early days of larger companies: Adam Smith pointed out even in 1776that managers do not have the same interest in promoting a firm’s success as theywould have if they owned the company (Smith 1776).

In agency theory solutions to these problems are recommended in the form ofefficient contracts that force the agent to behave according to the owner’s intention.The perspective of Jensen and Meckling (1976), who describe a company as a nexusof contracts, is often used to describe the agency problem.

This theory needs expansion, however, since the principal-agent situation nolonger exists. Instead, “the owner” is usually a diverse group of shareholders, and, inaddition, other stakeholders often influence the relationship or even take on the roleof yet another principal. Furthermore, structures have developed between the prin-cipal and agent in the form of intermediates, especially supervisory boards, whichclearly do not represent just one of the parties.

The question of whose interests the boards should serve is also vital to un-derstanding the purpose of a supervising body, as supervision and control can beexercised in quite different ways, depending on what goals are being pursued.

2.3.2.1 Whose Interests Are Served?Building on the above, one immediate conclusion would be that supervision must beconducted in the interest of the owners, i.e., the shareholders. After all, supervisionbecame necessary due to the separation of ownership and management. There are,however, two other possibilities: to manage a company in the interest of the stake-holders, amongst whom the shareholders may or may not be counted; or, one couldassume that the company, as a legal personality, has an interest in its own right andshould therefore be managed accordingly.

Aspects in favour of the owners’ interests are the fact that, initially, the super-visory committee was created to represent the owners. This situation was certainlyvalid until the 19th century (Drucker 1974). It could also be argued that, from a le-gal perspective, the owners of a company have the right to conduct their company’sbusiness the way they like. After all, anyone can do whatever he wants with his ownproperty, as long as it conforms to the law.

Another question now arises: what interests of the owners should be pursued? Assoon as there is more than one owner, one is potentially confronted with diverginginterests.

This is best seen in large corporations, which can be owned by thousands ofshareholders. Some of these shareholders may have bought the shares hoping thatthe stock price would skyrocket in the short-run (e.g., this often occurs in situationsof M&A speculation) and they would be able to make a fast profit. Others mayregard their shares as a long-term investment, count on the payout of dividends ormay even wish to pass them on to their children. Furthermore, some people mayhave emotional reasons for taking a stake in a company. In the most extreme case


there are as many interests as shareholders. On which of these interests should thesupervising body’s actions now be based? Depending on this, the perception of aboard’s duties varies completely.

It should also be mentioned that this question cannot be answered in a demo-cratic way: stating that the interest of the majority is all-dominant would mean that,in the long-run, nobody would buy shares anymore. Becoming a minority share-holder would mean that the majority could do whatever it likes with one’s moneyand the minority shareholder could not count that his interests are being consideredeffectively. This would imply that a public company could no longer do what it isthere for, i.e., raising capital in order to act with this capital according to its purpose.

In this context, there is the view that at least one interest is shared by all own-ers, which is the maximization of return on capital of every single shareholder.The management should be bound to this goal. This so-called shareholder valueapproach was designed by Alfred Rappaport (1998) and is discussed in detail byMalik (2002).

As ultimate ownership of a company resides with the shareholders, many prac-titioners and researchers argue for a shareholder value perspective. Some authorsargue that shareholders are the most vulnerable stakeholders, since all others canensure their position by efficient contracting with the firm (Williamson 1984, 1985).In contrast, others argue that focusing on only one principal lowers the cost ofdecision-making and restricts managerial discretion.

The authors Jensen and Meckling (1976) add the reasoning of economical ef-ficiency to this view. They assume the existence of complete contracts with allother stakeholders, thereby leaving all residual claims with the shareholders, andassume therefore that agency problems would not exist. Since these assumptionsdo not hold – especially due to managerial agency problems – a pure shareholderview could lead to inefficient investments; excess risk-taking in highly-levered firmsmight occur, as well as underinvestment in the case of debt overhang.

In this case, a shareholder plus debt provider perspective would seem to be eco-nomically efficient (Shleifer & Vishny 1997). It has become obvious, however, thatnumerous companies that were managed according to this concept have recentlyexperienced difficulties.

In order for corporations to be governed efficiently in their entirety, some arguefor the employment of a broader stakeholder perspective. It is important to notethe greater importance of stakeholders other than finance providers in ContinentalEurope.

Many proponents of the shareholder value theory thereupon switched to thestakeholder approach, which was developed in 1952 by the past chairman andCEO of General Electric, Ralph Cordiner (Malik 2003, p. 37). This approach wasabandoned later. According to the stakeholder approach, the centre of focus is theinterests of the employees, suppliers and investors. Depending on the interpretation,shareholders could also be regarded as stakeholders.

Some researchers and journalists argue that there is no substantial differencebetween shareholder and stakeholder value as a consideration of important stake-holders is part of achieving a sustainable shareholder value. The key term in the


discussion is “sustainable”. In theory, assuming that the markets correctly evaluatethe future cash flows of companies, including long-term aspects, there is no reason tocall a shareholder value orientation short-term. But since the assumption of perfectmarkets does not hold, a strategy focusing on short-term stock price performance atthe stock market is possible.

The stakeholder value orientation demands a stronger orientation towards serv-ing all stakeholders and thereby laying the foundation for sustainable development.It is argued by many Europeans that American shareholder value orientation consid-ers other stakeholders too insignificant for sustainable economic development, andtherefore also for sustainable shareholder value.

2.3.2.2 A Third ApproachBoth the shareholder and the stakeholder approach have a shared focus on interestgroups. An alternative approach would be to regard the interest of the companyitself as central. One of the first proponents of this theory was Peter Drucker who isconsidered to be the father of modern management. According to him, the separationof management and supervision alone expresses the idea that the company cannotand must not be managed in the interest of a specific group (Drucker 1993).

In line with Drucker’s view, Malik (2002, p. 30) suggests that one should act onthe assumption that the company has an interest of its own:

Instead of focusing on the interests of the diverse interest groups (. . .) I suggest, that thecompany itself is regarded as a productive unit, that creates standard of living and wealththe more effectively, the better it functions, and as such completely independent of anyspecific interests of the various interest groups.

According to Malik, this approach offers the best guarantee that management willalign itself with the prosperity of an organisation. He further states that if a companyis conducted in the interests of the various interest groups, an organisation becomesa playing field of changing political and social powers which can potentially lead tothe destabilization of the entire company.

Malik (2002) argues, therefore, against both shareholder and stakeholder ap-proaches. Malik (2002) calls for the “strength” of the company as the top priority ofcorporate governance, and not interest groups, such as shareholders or stakeholders:

Corporate capitalism, not stakeholder or shareholder capitalism. Ask the question – what isa strong company – what is a strong, viable company? The answer is: a company that hashappy customers.

Malik explains a corporation’s purpose as that of “creating customers” and if a cor-poration has customers it will, as a consequence, have happy shareholders. Insteadof shareholder value or stakeholder value, he coins “customer value” as the guidingprinciple for entrepreneurially led companies.

With regard to the purpose of a company, Peter Drucker initially speaks about“economic performance” of the company and then that “there is only one valid def-inition of business purpose: to create a customer” (1993, p. 35). Malik shares thisopinion and adds that customers must be satisfied with the company’s services andproducts in order to remain customers. He further notes that customers are satisfied


if, and only if, the company supplies them with more benefit than other competi-tors in the market. This implies that a company has to be competitive (Malik 2003,p. 36). Competitiveness, therefore, can also be understood as part of the definitionof purpose, and is related to Drucker’s expression of “economic performance”.

This logic ultimately leads to the idea that the organisation’s interest cannot beconfused with that of the management. Furthermore, a company that has customershas the greatest opportunity to fulfil the interests of all groups, they “will alwaysfind investors and, ultimately, will also have satisfied shareholders and stakeholders,not as an objective, but as a consequence of successful management” (Malik 2002,p. 36).

All of these approaches have their merits and consequences. There are manygood arguments in favour of placing the management under the service of the inter-est of the company itself and in this study, this approach is used. Again, however,it is important to stress that this study explores only one choice among severalpossibilities.

As described above, there is an ongoing debate as to whose interest the CEOshould serve. In practice, however, CEOs usually follow the wishes of those prin-cipals with the greatest power over their future. This is typically the majorityshareholders, who elect the directors, who then support or dismiss the CEO.

2.3.3 Boards of Directors Come into Play

Despite a more stakeholder-oriented perspective in Continental Europe, there is stilla need to fulfil the interests of the many principals rather than those of managers.But there is a collective action problem (especially among shareholders), as costsof intervention have to be borne by the acting individual(s), while the benefits aremostly shared by all shareholders.

Boards of directors were created to overcome this issue. Indeed, the law andcorporate governance regulations require such a body in companies, that shares theinterests of the shareholders and to which the CEO is responsible.

It should be mentioned, however, that the establishment of a board of directorscannot directly solve the agency problem. Instead, the problem is split into twoparts: an agency problem between shareholders and the board, and another betweenthe board and management. This begs the question: Who monitors the monitors?The structure is prescribed in many countries in one form or the other and it appearsto be seen as a positive structure, however, the discussion about its optimal designremains a central topic in the corporate governance debate.

Discussion of board models revolves around the question of how and in whatstructures boards can be used to overcome the common agency problem between topmanagement and shareholders or more stakeholders. Because boards are requiredby law for all large companies in industrialized nations and legislators put suchstrong emphasis on them, it is useful to discuss their role and the way in which theyfunction.


2.3.3.1 Board RolesDepending on their underlying perspective, scholars have divergent views on therole of directors. Some see them as pawns of powerful managers (followers of themanagerial hegemony approach), others are of the opinion that directors are a strongmonitoring authority for the shareholders of a company (agency theory), and yetothers consider them a valuable affiliate to the managers (stewardship theory). Al-though the duties boards assume are dependent upon local regulations, there aresome responsibilities that are applicable to boards almost globally.

The multitude of board roles are condensed into the following three groups: strat-egy, service and control (Zahra & Pearce 1989). A few authors integrate strategyinto the two other roles (Forbes & Milliken 1999). The board’s involvement in rati-fying and monitoring strategic decisions is thereby included in the control role. Theprovision of strategic advice and boundary spanning for the CEO and the manage-ment team is regarded as part of the service role. The control role is mainly basedon agency theory and involves controlling the managers in order to defend share-holder interests (Fama & Jensen 1983) or stakeholder interests (Freeman 1984). Theservice role, derived primarily from resource dependency, calls for an attachment tothe environment by establishing contacts and facilitating business matters (Pfeffer &Salancik 1978).

These roles complement, overlap, and, in some cases, contradict each other. Theycomplement each other when, for example, the board’s in-depth knowledge from itsstrategy role allows it to better control management in its progress towards thesestrategic objectives. They overlap each other, for example, in the case of a CEOchange, when the board may simultaneously act in its control role (dismissing theold one), strategy role (supporting a new strategic orientation with a new CEO whorequires experience), and service role (complying with a demand from external con-stituencies). These roles may also contradict each other, for example, when effectiveparticipation in strategic matters may impair the directors’ independence and thusits control role.

It is interesting to note that priorities in terms of board roles can change dur-ing the cycle of an organisation’s life (Minichilli & Hansen 2004). Boards of anearly venture may place a different emphasis on their roles than boards of a declin-ing company. The emphasis may also differ depending on firm performance andprofitability.

2.3.3.2 From Individual Board Characteristics to Hilb’sIntegrated Approach

Most board models discuss board structures, composition, remuneration or pro-cesses. Only some of them try to integrate these issues (Hilb 2002a, b). Variousaspects of board characteristics are described below and then followed by anintroduction to Hilb’s integrated corporate governance approach.

Board StructureThere are many kinds of board structures. The biggest difference between thesevarious forms is that some boards have a one-tier and others a two-tier structure.


One-tier boards combine shareholder representatives and the top managementteam on one board. The board, therefore, fulfils the roles of adviser, decision makerand monitor as one group. Since conflicts of interest are sure to evolve betweenthese functions, committees are set up to focus on certain functions, e.g., execu-tive committees for decision-making (or at least for decision preparation), advisorycommittees for specific aspects such as technological specialties, compensationcommittees, and audit committees. Nevertheless, within the entire board these func-tions overlap although it is sometimes difficult, or even impossible, to fulfil twotasks at the same time.

The main advantage of the one-tier board is the opportunity it gives of hav-ing shareholder representatives, independent outsiders and the TMT on one board,which can improve communication between them.

It also allows, in principle, the combination of the roles of CEO and chairman.This can ease decision-making and creates the possibility of having one responsibleperson at the top of the company rather than two. Although such a concentration ofpower in one person is often criticised as resulting in too little board control, it canbe helpful for fast decision-making.

There are various disadvantages associated with CEO duality. Based on theagency theory, CEO duality is associated with a much lower monitoring efficiencysince, in his or her simultaneous function as chairperson, the CEO can effectivelycontrol the board by, for example, setting the board agenda or influencing the suc-cession of directors and executives (Pearce & Zahra 1991). CEO duality may thuslead to a lack of checks and balances. Furthermore, when combining the two po-sitions, firms may also have lower information processing capabilities, particularlyin complex issues such as international business, which is why international com-panies are likely to separate the two jobs (Sanders & Carpenter 1998). While thereis limited empirical support for the superiority of separated leadership structures(Dalton et al. 1998), there seems to be agreement that CEO duality should beavoided.

In contrast, two-tier boards separate board functions more strictly. While themanagement board is committed to running the business and to preparing strategicdecisions, the supervisory board focuses on approving or denying such proposals,on monitoring management, and on the hire, dismissal and compensation of theTMT. This allows for a greater focus on tasks with less conflict of interests. It does,however, put the supervisory directors in a less strategic role with potentially lesscommunication with the TMT.

Although these two board structures are superficially very different, they work invery similar ways: the appointment of committees in the one-tier system substitutesthe task division of the two-tier structure, shareholder representatives often have aspeaker or even appoint the chairman of one-tier boards, supervisory boards engagein direct discussions with management, and meeting frequency has always been sim-ilar in both structures. Furthermore, both structures have developed towards havingfour to five committees, in particular for auditing and remuneration.

These days, the audit committee is crucial. Large companies have become in-creasingly complex and committee members are required to take on even more


responsibility. For this reason, authors call not only for educated directors but alsofor their strong personal commitment (Bender & Vater 2004).

In the past, many companies had an executive committee that was used as a sub-stitute for the full board when immediate actions were required or as a preparatorybody for proposals prior to disclosure to the full board (Kesner 1988). The risingnumber of committees made Kesner (1988) conclude that much of the board’s workis actually done by board committees. Establishing special board committees hasseveral advantages. Committees break down task complexity for directors (Kesner1988, Bilimoria & Piderit 1994) and through the division of labour, each task canbe handled in much more detail and directors are able to become experts in their as-signed tasks. The smaller group size also allows for better group dynamics with lesscoordination costs. Lastly, committees allow for certain functions (such as decidingon remuneration) to be performed by independent outside members only.

Nevertheless, there are also arguments against committees. Foremost, there areconcerns that committees create two classes of directors, despite the board membersbeing equally responsible. Furthermore, specialist directors on the committees maynot have all the relevant information on the issues facing the firm. Empirical re-search on the performance impact of board committees is still limited. Klein (1998)found that, overall, board composition is unrelated to firm performance but that thepercentage of inside directors on finance and accounting committees positively im-pacts firm performance. Thus, on the whole, committees are considered beneficialto aboard in fulfilling its control role.

Board CompositionBoard composition has been the focus of a great deal of research, albeit with contra-dictory findings. Important elements of composition are board size, insider-outsiderratio, diversity, and interlocks.

Among the most analyzed variables is board size. Large boards are associatedwith both advantages and disadvantages (Dalton, Daily, Johnson & Ellstrand 1999).The advantages of large boards are mostly based on arguments from the resourcedependency perspective. Having more directors increases the number of links withthe external environment. Large boards are also favoured in light of the stewardshipperspective, since a larger board can draw upon a larger pool of expertise and ex-perience, as well as possessing higher cognitive processing capabilities. There are,however, significant disadvantages associated with large boards. From an agencytheory perspective, larger boards tend to be ineffective monitors because individualdirectors can hide behind the mass.

Large boards may also complicate decision making processes. While empiri-cal evidence is ambiguous (Dalton et al. 1999), medium-sized boards appear ideal,as they benefit from a significant pool of expertise and external links, while notsuffering from excessive coordination and communication costs.

Furthermore, according to the agency perspective, board independence is con-sidered a crucial characteristic. While there are varying attempts to measureindependence objectively, most research uses the inside-outside board member ratioas a proxy. A large number of outsiders is seen as advantageous for boards with


regard to fulfilment of their monitoring role. Inside directors’ careers are directlylinked to the chief executive. They could therefore be cautious in objecting to theCEO’s projects. A large number of outsiders can also bring disadvantages however.Unlike full-time officers of the firm, the part-time outside members typically knowless about the organisation’s businesses (Carpenter & Westphal 2001). Moreover,outside directors may divide their resources between several other organisations orpositions. This limits the board’s involvement and contribution to all three rolesof service, strategy, and control. While intuitively appealing, there is limited em-pirical support for the superiority, in terms of performance, of outsider-dominatedboards (Dalton et al. 1998). Nevertheless, overall, there appears to be agreementthat boards, at least in their control function in bodies such as the audit committee,should be dominated by outside directors.

Furthermore, recent discussions on board composition focus on board diversity(Milliken & Martins 1996). On the one hand, it increases the level and diversityof resources and perspectives available to a group. On the other, it is associatedwith higher levels of conflict, lower levels of integration, and interaction difficul-ties. Boards in particular may fall prey to these problems as they meet infrequentlyand do not work together closely. The most commonly researched variables of di-versity include tenure (Vafeas 2003), age, educational and functional background(Golden & Zajac 2001), gender (Hyland & Marcellino 2002), and nationality (e.g.,Ruigrok, Peck & Van del’ Linde 2004). Overall, this research concludes that theinfluence of heterogeneity is not simple and direct, but rather complex.

Another stream of board composition research focuses on interlocking direc-torates, denoting situations where one director is simultaneously a member of theboard or TMT of another company. Again, there are both advantages and disad-vantages associated with this situation (Mizruchi 1996). The benefits of interlocksare advocated mostly by the resource dependence perspective, which contends thatfirms may enjoy benefits of collusion, cooptation, lower transaction costs, accessto information, and learning opportunities for corporate leaders (Keller 2003). In-terlocks may also help to diffuse management practices. In terms of disadvantages,Keller (2003) posits that at the societal level, shortcomings include accumulationof social power, anti-competitive misuse, and inefficient resource allocation. At thefirm level, they include limited board monitoring, conflicts of interest, and lack ofdirectors’ time. The effect of interlocks is unclear however. While much of the lit-erature focuses on the number of boards a director is sitting on concurrently, it hasbeen suggested that the nature of the ties is more important. Carpenter and West-phal (2001), for example, have found that if a director sits on several boards, thedegree to which their respective strategies are related has a significant impact on thedirector’s involvement in a given firm’s strategy.

Board ProcessesSince the influence of boards with regard to the overall performance of an or-ganisation is complex (Forbes & Milliken 1999), several authors deem it vital tounderstand the inner workings of a board (Roberts et al. 2005). It has also been sug-gested that matters surrounding the inner workings are significant (Lawrence 1997).


This (including comes under the term “board processes” and includes “characteris-tics of boards” and “firm performance”. There is, however, no clear definition of thisconcept of “board processes”, though it may include easily observed aspects suchas meeting frequency, working style, and information flow, or more complex issuessuch as cohesion, power, and agenda-setting (e.g., Finkelstein & Mooney 2003).

It is widely assumed that board structure and composition determine the board’sability to fulfil a certain role. Whether the board actually fulfils this role, however,is determined by board processes (Roberts et al. 2005). It is not enough that capableand knowledgeable directors sit on a board; they must actively use their knowl-edge and skills, and combine their experience and expertise in constructive ways(Forbes & Milliken 1999).

Board processes have still not been explored widely, mainly because the task ofobserving board processes is a very difficult one. Macus (2003) was the first authorto integrate interaction into a theoretical model for boards, and to test his model us-ing a case study. He also used a dynamic method, being the first to integrate changesover time in his model in terms of structures, compositions and demands on direc-tors. This represents a significant advance from more static models which are unableto explain several famous corporate crises occurring in companies whose boards hadbeen praised for their ideal composition a few years earlier. Macus (2003) cites theEnron scandal, which involved a board that complied with all of the best gover-nance standards, but which was not able to catch up with new developments in thecompany, in particular, with new complex financial vehicles.

Hermalin and Weisbach (2001) have also developed a dynamic model, whichviews the activities of a board as dependent on the power of the CEO and the lengthof time the CEO has been in office. This is based on the idea that long-term CEOshave demonstrated their abilities and have had more influence on the nominationand re-appointment of the current directors.

Hilb’s Integrated Corporate Governance Perspective

Integrated Board Management PreconditionsA board’s duties and functions are controlled by various jurisdictions. Swiss civillaw endows the body which supervises with the responsibility of leading the firmand the following duties: control and planning of finances, decision making regard-ing organisational structure, responsibility for structure and conduction of accounts,overseeing top management, electing executive management, overseeing the meet-ing of shareholders and the annual report and, lastly, reporting to the law in the caseof insolvency or excess debt (Swiss civil law, OR716a1).

This is discussed further in the following chapter. In terms of boards and cor-porate governance, many countries have created standards for best practice whichgo well with regulations already in operation. This resulted from cases of badmanagement when function fulfilment, in terms of the board’s supervision andshareholder-representation, was questionable.

As Hilb contends, no single approach to board management works in every so-cial or economic circumstance. In spite of this, in the last few decades, American


corporate governance approaches have become dominant as a style of board man-agement because of the globalisation of capital markets which are largely dominatedby America. These styles are often unsuitable to the various contexts of transnationalfirms (Hilb 2004, p. 3).

According to Pic (1997), unprofessionalism in choice and composition of boards,a board’s deficiency in strategic vision, entrepreneurialism, compensation and boarddevelopment, as well as insufficient assessment of the performance of supervisoryand management boards, is the reason for the majority of failures in transnationalfirms (Hilb 2004).

Previously, the qualities of a board were examined mostly in isolation. But thevarious elements of a board of directors are amalgamated in Hilb’s perspective. Inhis book, “Transnational Management of Human Resources”, Hilb (2002a) proposesthat for international firms there are three key aspects in an integrated corporategovernance approach:

The first aspect deals with the preconditions of an integrated board manage-ment in terms of the best possible board composition, an effective board structure,a stakeholder-oriented vision, and a culture which is productive and open (seeFig. 2.1).

Effective board management through four integrated stages constitutes the sec-ond aspect of the approach, which includes board composition based on vision,board compensation, individuals’ development, and feedback inside the team.

Lastly, the intermittent assessment of the board’s progress constitutes the thirdaspect of the approach. This is illustrated by the pointers in Fig. 2.1.

Board selection +composition

Added value

CostsBenefits

Board development

Added value

CostsBenefits

Board feedback

Added value

CostsBenefits

Board remuneration

Added value

CostsBenefits

CustomersPublicH.R.

Shareholders

Boardteam

Boardstruc- ture

Boardculture

Boardvision

Fig. 2.1 Hilb’s approach to integrated board management


In Sections 4.1.2.4 and 4.2.3.4, this approach forms the foundation of the corporategovernance examination of both case studies in the empirical section.

2.3.4 The Swiss Board System

The board system in Switzerland differs, for example, from the system of a unitaryboard in the American-British business world or the strict dual board system of Ger-many. Below follows a discussion on the particularities of the Swiss board systemand the non-transferable and inalienable responsibilities assigned to the board.

Swiss Board SystemThere are three sources of legal provisions that are relevant to a Swiss joint stockcorporation’s board: federal law, articles of association, and corporate bylaws. Inaddition, Swiss quoted firms need to comply with Swiss stock exchange regulations(SWX 2002) or provide an explanation for their non-compliance. They may also de-cide to comply with the Best Practice Corporate Governance Code of Switzerland(Economiesuisse 2002) as a non-binding recommendation for Swiss public corpo-rations. This regulation and code focus mainly on additional disclosures and aredetailed here.

Switzerland’s Code of Obligations leaves companies quite a bit of discretion indesigning and optimizing their top structures (Biland 1989, p. 18). The law requiresfirms to have a minimum of one board, consisting of at least a president and a sec-retary (Art. 712OR). In principle, the board is in charge and accountable for alltasks that, according to law or the articles of association, involve the corporation’sday-to-day business dealings and do not fall under the responsibility of the generalassembly (Art. 716,1OR). The directors can, however, delegate duties to the “del-egate of the board” or to other “directors”. In the case of delegation, the board isresponsible for the “business of the firm, to the extent that is it does not delegate itto management” (Art. 716 2OR).

(. . .) the governing board, according to Swiss Law, has ultimate responsibility (“Ober-leitung”). This means that the board normally runs the business.

In practice, of course, that isn’t very realistic; in a large company a board of 15 peoplecan’t run the business. As a rule, the board delegates the management function to the so-called “delegate of the board”. If this is the case, then this delegate has a relatively stronglegal authority and the Swiss type of governing board has a reduced responsibility, similarto a German supervisory board. In this case, the governing board has re-assigned its respon-sibility. Though it never goes so far as in Germany where a management board can buy acompany for 10 billion without consulting the governing board.

This isn’t the case in Switzerland. Here the board not only decides on the nominationsfor the director generals but is also involved in anything that concerns the management aswell as important strategies and acquisitions.

Maucher, during interview

As such, Swiss firms can choose from a continuum of systems, depending on theextent and modus of delegation. Three models stand out (Bleicher 1989, Forstmoser1996). The first model is based on the premise that the management of the firm is


being handled by inside board members and the supervision is handled mostly byoutside board members, the American and British one-tier/unitary board system canthus be realised. The second model depends on the board delegating the majority ofthe firm’s management to a non-board member CEO. In this way, the German dualboard system with strict separation of management and supervision is emulated.The last model is based on the delegate of the board assuming much of the powerand authority, through holding the chairperson position simultaneously. This modelconforms closely to the French system of a President Directeur General. These threemodels, however, can only be implemented to the extent that the board retains thenon-transferable tasks of ultimate direction and the right to withdraw its delegationat any time.

In practice, most listed companies in Switzerland adopt a two-tier board struc-ture, which is more similar to the German model than the American-British modelof a unitary board. The first tier, the board of directors, is comprised mostly of non-executive directors and is responsible for supervising management and shaping thecompany’s long-term strategy (Biland & Zahn 1998). The second tier, the manage-ment board (sometimes referred to as the executive committee), consists only ofmanagers and is in command of daily operations. Swiss firms are often arranged sothat the CEO is the delegate and vice chairperson of the board, complemented by anexternal board chairperson (Forstmoser 1996).

Non-transferable ResponsibilitiesAs indicated, the board has certain responsibility that it must not delegate to anotherbody of the firm. Art. 716a OR lists these non-transferable and inalienable respon-sibilities, the foremost of which is determining the company’s ultimate direction.This is generally understood to be limited to fundamental decisions and not dailyoperative management (Forstmoser 1996).

Six activities constitute this ultimate direction (Forstmoser 1996, Böckli 2004).The first and most important activity is the development of the firm’s strategic objec-tives. In addition, the board selects the means to achieve these goals. Moreover, theboard prioritises the use of scarce financial resources (Böckli 1994) and balances theobjectives and means throughout the peaks and troughs of the business cycle (Böckli2004). Furthermore, the board must give the management the necessary directionsas to how to achieve targets and use the means. The board is then responsible formonitoring the firm’s various bodies for achievement of these objectives. Lastly, theboard must be ready to intervene in times of crisis (Böckli 2004). In short, the boardis responsible for corporate strategy (Böckli 2004).

There are a number of other non-transferable aspects such as the shaping of theorganisational structure and responsibility for financial management and reporting(Art. 716a OR). These other duties can be considered part of the realisation of theultimate direction (Forstmoser 1996). Moreover, boards must always comply withthe duty of care and equal treatment and the fiduciary duty (Böckli 2004).

Views differ as to the extent to which Swiss boards are active. Some researchersposit that corporate policy and long-term planning represent the core of board workin Switzerland (Buchmann 1976). Others maintain that, as it is in other countries,the reality of board work differs significantly from the highly strategy-oriented one


prescribed in the legal documents and bylaws, which suggests that boards retreat ina controlling and rubber-stamping role (Biland 1989).

2.3.5 Theoretically Reasonable Board Stances

In the next section, a range of theoretically reasonable board stances are introduced,with the aim exploring these stances in the context of M&A in the empirical part ofthis study.

According to the law, the board of directors has a duty to conduct the business ofthe company “with due diligence”. As mentioned above, however, the law entitlesthe board to delegate this duty to other parties. Nevertheless, it is important to notethat the responsibility for the direction of the business remains with the board ofdirectors in spite of delegation. If the board does not fulfil its duties, with conse-quently implied losses for the corporation, the law claims that the board is liable tothe corporation, the shareholders and the creditors.

The delegation of the management function has, increasingly, pushed the boardof directors into a passive role. The responsibility for the company, however, hasnot been affected. Spectacular lawsuits of shareholders against directors and man-agement in the US have shown that boards of directors are, increasingly, beingheld accountable for their management’s actions. Considering these developments,a broader interpretation of the responsibility of the board of directors is necessary.

Theoretically Reasonable Board Stances

The regulator of board duties has produced several different interpretations as tohow a board should be organised. Accordingly, several quite different board modelsare conceivable, each of them implying different activities and characteristics of theboard of directors. These can co-exist and overlap. Building on Puempin (1990), thefollowing board stances are possible.

The Representative BoardParticularly in public companies with strong management, the board of directors hasa very limited influence on the business operations. The board functions more likea supervisory board as designed by German law. To underpin the prestige of a com-pany, these boards are often key representatives of important political groups, e.g.,members of parliaments, association representatives or former top-ranking officials.

The representative board of directors only meets a few times a year. During themeetings, several standard agenda items are discussed, such as the company resultsor budgets. The board’s most important duty is that of exercising its control function.Participation in the creation of company policy or other entrepreneurial activities ishardly expected in this model.

The Knowledge BoardIn this model, the board of directors is normally presided over by a person who isalso an active member of the executive board. In addition, the board is supplemented


with several experts who function as specialists in specific areas: lawyers are themost common, who take charge of legal issues; in technically oriented companies,there are specialists from corresponding areas of technology; and finally, auditorsserve as specialists in areas such as financial accounting and auditing on the boardsof directors.

It is crucial in this model that board focus is not on the overall firm strategyand business development, which are sporadically discussed at best, but rather theoperational management. The chief executive is the driving force in defining thestrategy and will do this at his sole discretion.

The board members therefore contribute with their specific knowledge on mat-ters: the lawyer will be asked for legal advice, the natural scientist for advice ontechnical issues, the auditor for questions about accounting and so on. Matters ne-cessitating referral are principally solved on an individual basis and, in general, theyare not discussed at the board’s official meetings. Furthermore, the knowledge boardassumes, to a certain degree, a control function, but this is not its primary role.

The knowledge board model is used in many medium-sized firms, but also inbigger companies. It usually consists of a larger number of board members and theboard meetings are conducted in a very formal way.

The Entrepreneurial Board of DirectorsAn entrepreneurial board is one which includes entrepreneurial members. Buildingon Maucher (2007), entrepreneurs, as opposed to managers, are individuals whoseobjective is to innovate and create rather than supervise and create routines. Wherethe manager predicts and plans for the short-term, the entrepreneur uses her imag-ination and vision for the future and looks to the long-term. A manager makesdecisions based on rational evaluation of pros and cons where an entrepreneurcounts on his intuition and creative interpretation of the information in difficultsituations; in this sense he has the personality of a leader.

In terms of stance, the entrepreneurial board model5 not only benefits fromspecialists’ contributions and fulfils its control function, but the top managementexpects an active participation in shaping the company. In the legal sense, the boardof directors should deal with the essential issues that affect the existence of the com-pany. In this capacity, the design of company policy and even important businessactivities belong to the board’s responsibilities. The entrepreneurial board typicallyconsists of personalities who are elected due to their experience as entrepreneursand managers. This kind of board of directors has recently gained popularity and isoften found in successful companies.

The Active Board of DirectorsThis model comes closest to that demarcated by the law. Board members fulfil tasksrelated to both operational management and business operations simultaneously.Thus, the board of directors and management are, to a large extent, identical. Typical

5 This model corresponds most closely to Hilb’s Corporate Glocalpreneurship Approach (Hilb2002a)


examples of this model can be found in many small and medium-sized family en-terprises, where the entrepreneur is president as well as delegate of the board ofdirectors.

Other Types of Boards of DirectorsFor the sake of completeness, it should also be mentioned that in particular situ-ations other types of board models are, in principle, possible. In Switzerland, forinstance, according to Art. 711 Abs. 2 OR, the majority of the board of directorsmust consist of Swiss citizens. One would expect that some Swiss companies withforeign dominated capital are likely to elect board members solely on the basis oftheir Swiss citizenship, despite the fact that an international board of directors maybe more appropriate. Another possible model is a board of directors with only oneperson, so-called “letterbox companies”, which operate only pro forma.

2.3.6 Conclusion Corporate Governance Literature Review

Corporate governance was created by lawyers looking to establish responsibility andaccountability in the case of failure. This explains why corporate governance litera-ture did not, at the time, focus enough on topics directly related to success. The factthat approaches are becoming dynamic may help to turn research towards construct-ing tools for success and analysing the interplay between board and management atspecific moments in the strategic process, such as M&A.

2.4 Gaps in Literature

With regard to M&A literature, acquisition success factors are known. In spite ofthis, the majority of acquisitions fail and although this has a tremendously negativeimpact, and there is a vast amount of academic and practical research on M&A, thereare still no adequate theories to explain this phenomenon. Furthermore, existingM&A research focuses primarily on management and the CEO. To date, researchhas not seriously considered the role of boards of directors in the acquisition process.

Corporate governance aims to discover what constitutes fair regulation of thepower balance between a company’s board and management. While corporate gov-ernance defines the roles of boards and recommends ways to actively animate them,it does not analyse their role in the face of a decisive kind of event such as M&A.This gap in the literature is reflected in the codes of corporate governance wherethere is no provision for dealing with acquisitions.

2.5 Research Questions

This study addresses these gaps. As illustrated, although acquisition success fac-tors are established, most acquisitions fail. Despite much academic and practicalresearch on M&A, to date, no theories exist to adequately explain this. An approach

2.5 Research Questions 49

is clearly needed that takes into account the underlying or more fundamentalconditions that affect M&A success likelihood. This “environment” such as thecompany’s orientation, the board-management structure, its functions, power re-lations and interactions, is obviously not conducive to the fulfilment of the knownsuccess factors. This, it is proposed, is the source of acquisition failure.

In order to understand this environment, Peter Drucker’s acquisition principlesare used to study board management interaction in two in-depth, contrasting casestudies. In this way, the conditions for the most productive environment are revealed.

Based on these considerations and to address how boards of directors contributemore effectively in order to achieve better acquisition results, the following researchquestions will be investigated:1. How can the board of directors create an environment that enables greater

fulfilment of the M&A success factors?2. How can the board of directors govern the board-management relationship

during the acquisition process in order to enhance acquisition success likelihood?

3Research Methodology

3.1 Research Methods

In order to understand, in detail, the corporate governance issues associated withmerging companies the case study methodology is considered most appropriate.Gilbert, Ruigrok and Wicki (2008) suggest that since case studies involve closeinteraction with practitioners, they are an ideal way of creating managerially rele-vant knowledge (building on Amabile et al. 2001, Leonard-Barton 1990). Gilbert,Ruigrok and Wicki add that case studies are especially appropriate as a researchmethodology in the early stages of a new management theory, when key variablesand their relationships are being explored (building on Eisenhardt 1989, Yin 1994).This is particularly relevant to this study as board-management relationships inthe acquisition context are being explored for the first time. Hence, the case studymethodology is deemed most appropriate.

There are many quantitative scientific papers published on the topic of M&A.They do not, however, conclude in explicative theories with regard to the currentrate of acquisition failure or acquisition based board-management interaction. Incorporate governance, they often arrive at outcomes that are plausible ex-ante. Whilequalitative research has not, to date, delivery explicative theories either, it is a bet-ter methodology to penetrate this difficult subject and the complex nature of humanbased factors involved in board-management interactions. Despite the current trendand bias towards quantitative lead research, it would be a scientific and methodolog-ical miscomprehension to believe that empirical research has to consist of mainlynumerical quantification.

For this study, relevance and innovation were the key notes as this research seeksto be relevant both academically and to practitioners in the business world. Withthis in mind, world renowned business leaders were interviewed with a view to thepractical reality of management action and the board’s role.

Two case studies were conducted which were contrasting and in-depth to ensuremore compelling evidence and the robustness of the study (Heriott & Firestone


52 3 Research Methodology

1983). Cross-case replication analysis (Yin 2009), which is highly detailed was usedto draw conclusions and develop implications in terms of theory and practice.

Following the criteria for validity and reliability summarized by Gilbert et al.(2008), the internal validity of the analysis was ensured by matching the empiri-cal observations with predictions established during the literature review, and bytheory triangulation covering M&A and corporate governance theory. For constructvalidity, a clear chain of evidence was established, and triangulation was ensuredby adopting different data collection strategies such as secondary data, interviews,etc. External validity was ensured by adopting a cross case analysis of two very con-trasting companies, i.e., Nestlé and Swissair. Additionally, for the sake of reliability,a comprehensive case study protocol and database were created.

Nestlé and Swissair, two Swiss multinational companies, were selected as bothconducted many acquisitions. With regard to the geographical focus on Switzerland,it is also important to note that international M&A and the role of the board ofdirectors within the M&A process are of particular relevance in Switzerland, homeof the chosen case studies. Swiss companies encounter a limited home market andare therefore obliged to become international relatively early on in their corporatedevelopments. This makes international M&A a key issue for boards of directors inSwiss corporations.

Initially, a structured interview with a formalized and limited set of thirty-twoquestions on various aspects of the role of boards in acquisition was drawn up withthe aim of gathering the relevant information with regard to the case studies. It wassoon clear, however, that it would be inhibiting to limit the scope of the discus-sion by forcing a predetermined structure on it. Thus a semi-structured interviewmethod was adopted allowing new questions to be brought up during the interviewas a result of what the interviewee said. This was because interviewees were keento express their opinions and experiences and naturally developed the conversa-tion towards original ideas which were not covered by the question format. For thisreason spontaneous follow-up questions were asked. It would have been counter-productive to restrict this and detrimental to the research as the information elicitedwas so valuable due to the calibre of the interviewees.

The interviews were conducted using the method of open questioning becauseof the primary aim of eliciting detailed and rich information about the interviewee’sexperience as well as allowing them to focus on what they deemed important in thecontext of acquisitions.

Bearing this in mind, in order to proceed academically and scientifically, theinitial questions were formulated as generally as possible, such as “how did youmake acquisitions?”, in order to see what the interviewee prioritised, which lead tomore detailed questions based on their answers. Cross analysis was used afterwardsto compare transcripts.

In order to maximise the value of these unique sources, the conversationswere long and in-depth, typically lasting between two and four hours. They werealso recorded on audiotape and afterwards typed up, resulting in several hundred

3.2 Population of the Research 53

pages of typed sources which allowed for thorough review, analysis and compari-son. These documents were examined after being scrutinised using the “clusteringmethod”.

Due to the valuable information they contain, several of the interview transcriptsare included in the appendix of this study in their original language.

Furthermore, access was gained to highly important sources relating to board andCEO matters with regard to the case studies. This meant the interview outcomescould be supported by hard proof and are incorporated in the text.

With regard to the Nestlé case, besides documents, company sources and othermaterial, a tremendous amount of interview material was created. This was not thecase with Swissair, as the trial was taking place at the time of the study and manyboard members were not willing to discuss sensitive information. Moreover, boardmembers generally do not want to talk openly about failures where they are pleasedto talk about successes.

Therefore, in the case of Swissair, along with a certain amount of interviewmaterial, the primary attention was on analysis of the E&Y report and other avail-able company documents. Indeed, the E&Y document functions as a vital sourceof facts in determining if particular organisational parties, like the board of direc-tors, precipitated the decline of the firm. Not all of the important materials were attheir disposal and E&Y were open about the fact, but despite this, they posit thatthe accessible documents were enough to work with in terms of their report. Severalthousand pages made up this document, which examined a huge quantity of materialaccessible to the audit and consulting firm (invoices, reports, documents to do withthe organisation, etiquette for meetings etc.).

A few business leaders, in particular from Swissair, wished to remain anonymousdue to the fact that they were facing legal claims at the time of the interviews. Inorder to protect the identity their names were not disclosed. On the whole, however,most authors agreed to their opinion being published, hence the case studies andanalysis were underpinned with the words from the practitioners themselves.

Despite the fact that other prominent business leaders agreed to an interview,when the collected information began to repeat itself the interviews were stopped.In the end, six interviews were conducted with world renowned CEOs and boardsmembers. Another twenty experienced experts, consultants and other managerswere interviewed.

3.2 Population of the Research

Despite the fact that two in-depth case studies were the subject of this work,the research population was set to be much greater than this in order to graspa more wide-ranging view of the business world with regard to the topic underdiscussion. In alphabetical order, the following people were interviewed in 2006 andthereafter:


Nestlé board members:

Dr. h.c. Fritz Gerber

• Nestlé (former board member)• Roche (former CEO and chairman)• Zurich Financial (former CEO and chairman)

Mr. Bruno de Kalbermatten

• Nestlé (former board member)• Bobst (former CEO and chairman)

Dr. h.c. Helmut Maucher

• Nestlé (honory chairman, former CEO and chairman)

Mr. Philippe de Weck

• Nestlé (former board member)• UBS (former chairman)

Board members of other Swiss multinationals:

A1 – made anonymous on request

• CEO and chairman of several companies• Close to several board members of Swissair


• Board member of several companies• Close to several board members of Swissair


• Board member of several companies• Close to several board members of Swissair

Prof. Dr. Roman Boutellier

• SIG (former CEO) & member of management in several Swiss companies• Professor for innovation and technology ETH

Prof. Dr. h.c. Rolf Dubs

• Schindler (former board member)• Bank Julius Bär (former board member)

Prof. Dr. Karl Hofstetter

• Schindler (board member)

3.2 Population of the Research 55

Dr. Arthur Loepfe

• Arbonia (board member)

Dr. h.c. Thomas Schmidheiny

• Holcim (main shareholder, former CEO and chairman)• Swissair (former board member)

Prof. Dr. h.c. Wolfgang Schuerer

• MS Management Service AG (CEO and chairman)• Holcim (board member)• Swiss Re (member of advisory panel)• T-Systems (member of council of European affairs and economy)

Prof. Dr. Rolf Watter

• Syngenta (board member)• Zurich Financial (board member)• Nobel Biocare (board member)

Swissair board members:


• Swissair (board member)

Mr. Matthias Moelleney

• Swissair (former member of the executive board, head of HR)

Mr. Sepp Moser

• Swissair (aviation expert, aviation journalist)

Mr. Walter Vollenweider

• Swissair (former member of the executive board)

Experts (academics, consultants, lawyers and investment bankers)

Ms. Bettina Bornmann

• KPMG (partner, head of corporate finance)

Mr. Peter Dammisch

• BCG (partner)

Dr. Alberto Francheschetti

• Bain & Company (partner)


Mr. Joost Geginat

• Roland Berger (partner)

Prof. Dr. Martin Hilb

• University of St. Gallen (professor of business administration)• Institute for Leadership & Human Resource Management, University of

St. Gallen (managing director)

Mr. Philippe Hofstetter

• PWC (head of corporate finance)

Dr. Stephan Hostettler

• Hostettler & Partner AG (managing partner)

Dr. Marc Macus

• University of St. Gallen (senior research associate)

Prof. Dr. Fredmund Malik

• University of St. Gallen (titular professor)• Malik Management Zentrum, St. Gallen (founder, owner and chairman)

Prof. Dr. Guenter Mueller-Stewens

• University of St. Gallen (professor of management)• Institute for Leadership & Human Resource Management, University of

St. Gallen (managing director)

Mr. Heinz Schaerer

• Homburger (managing partner, head of M&A)

PD Dr. Urs Schenker

• Baker McKenzie Zurich (managing partner)

Mr. Dieter Turovsky

• Morgan Stanley (managing director, head of M&A)

Dr. Felix Wenger

• McKinsey (partner)

3.3 Limitations of Methodology

The present study has a number of limitations which are worth acknowledging.Firstly, the number of case studies was limited at only two due to the extensive

nature of analysis in each case. More case studies could, however, add furtherstrength to the conclusions.

3.3 Limitations of Methodology 57

Secondly, the scope of the approach is limited to two prominent, multinationalcompanies. The results of the research, therefore, might differ in small and medium-sized companies. Furthermore, widening out the focus to companies in differentindustries and different geographical areas would bring a broader scope to theresearch.

Thirdly, the chosen scope is very much a top level one, focussing on the board,the CEO and his top management team. The research is therefore limited by the factthat the board’s impact on lower levels in the corporate hierarchy is not analysed.

Fourthly, the Swissair case study was based largely on secondary informationsince it was difficult to find people willing to be interviewed and interviewees werenot forthcoming with information. Firsthand information could have contributed tothe generation of new knowledge as was the case in the Nestlé case study. It is there-fore important to analyse the E&Y document bearing in mind that it does not fullyrepresent the events, but rather, is one of several illuminating and partial sources.

Fifthly, this study aims to shed light on the personalities involved in both theNestlé and Swissair case studies. Personalities are hard to measure, particularly ina business context, and in retrospect, it is easy to make quick judgements. Nev-ertheless, personalities are a vital factor in discussions about board-managementinteraction and therefore constitute a major element of this research.

Finally, personal board experience would be a desirable precondition to credi-bly treating the subject of boards. For this reason, and because the author does nothave personal board experience, several measure were taken: access was gained toprominent and experienced board members as well as unique, internal documentsources which have never been seen by the public. Privileged with access to theserich resources, it is beneficial not to have ingrained processes or expectations of howboards should be or have worked in the past. This is clearly relevant when consider-ing the prevalent misconception of the role and importance of the board. Ultimately,this lack of pre-conditioning proves crucial to seeing the unvarnished reality of theboard room.

I have never sat on a board. This might imply that it is difficult to really knowwhat happens in board rooms. Conversely, one could argue that this very fact facil-itates an objective view. I do not have ingrained processes or expectations of howboards should be or have worked in the past.

4Empirical Part

Preliminary remarks about the period of focus in the two case studies: the era ofchairmen during the period of acquisitions.

When a board supervises a firm their duties as decision makers are of the highestimportance. Board members act for shareholders as their voted representative. Themore wide-ranging duties frequently assigned to the president or chairperson in firmregulations include the deciding vote in a draw scenario, signing the annual report,and meeting etiquette and conduction. Furthermore, it is considered the norm for thepresident to have a more proactive approach to duties and participation. Althoughthe rest of the members fulfilled their board duties alongside other tasks, in Swissairand Nestlé both made the president’s a full-time job. Moreover, between 1990 and1997, the chairman in Nestlé was at the same time “administrateur délégué” or CEO.

Fundamentally, the chairman ought to guide his board members in terms of busi-ness, leadership, social skills and personality (Hilb 2002b, p. 65). This enlarges thechairman’s responsibilities in terms of the health of the firm for the stakeholders’advantage. Thus, the following two case studies look at their presidents’ periods ofoffice and attempt to derive deductions about their tenure. In the case of Swissair,the periods of office of Goetz-Honegger-Corti are examined (1992–2001), and inthe case of Nestlé, Maucher’s tenure is analysed (1981–1997).1 Both time framesare characterised by the organisations’ implementation of numerous acquisitions.

4.1 Nestlé

This case study investigates the thriving company of Nestlé under Helmut Maucherwhich was also a time in which a great deal of acquisitions were made. Nestlé’shistory is briefly examined and then the way in which the company handledacquisitions is analysed.

1 Helmut Maucher was nominated 1981 as Nestlé’s CEO and from 1990 to 1997 held bothpositions of chairman and CEO. Until 1998 he continued his duties as chairman of the Boardof Nestlé.


60 4 Empirical Part

As a brief note on sources, this case study has been enriched hugely by inter-view material. Unexpectedly, many board members agreed to participate and gavelong and in-depth interviews. An attempt was made to work as closely as possiblewith the original material, as the opinions and insights of these renowned businessleaders have valuable significance. Quotation is used when appropriate to highlightpoints but also to give a flavour of the personalities on the TMT. Important figuressuch as Thomas Schmidheiny, who were not directly involved with Nestlé, were alsointerviewed, including several anonymous leading board members of other multina-tional companies. All of the above gave their approval to publish the interviews;the transcripts if which can be found in their original language in the Appendices.Interestingly, the consistency of their attitudes in the interviews with the CEO andboard’s is highlighted and supported by documents and minutes from the time. In-deed, these important papers constitute one of the unique aspects of this study andhave been integrated into the text.

4.1.1 Description of the Firm

At nearly 150 years old, Nestlé is the largest food corporation on earth in terms ofsales. The company is a leading player in the coffee and pet food industry and one ofthe biggest bottled-water manufacturers. Conducting business in nearly every nationon the globe, Nestlé has almost 280,000 employees. In 2009, Nestlé enjoyed salesof USD 107.6 billion, and a net income of USD 10.4 billion.

Historical Background2

Henri Nestlé, a chemist and business man, experimented with a number of differentmixtures of wheat flour, sugar and cow’s milk during the 1860s in order to create aproduct which would be nutritional for babies whose mothers were unable to breastfeed them. Thus, the Nestlé Corporation was born when the resultant formula wentinto production in Switzerland. A short time later, Mr. Nestlé started generatingsales in several countries in Europe.

At the same time, a milk-based baby food firm was established by two Ameri-cans in competition with Nestlé called the Anglo-Swiss Condensed Milk Company.A little later, Daniel Peter became the globe’s biggest chocolate manufacturerby inventing a milk chocolate product. Both Daniel Peter and the Anglo-SwissCondensed Milk Company eventually merged into the Nestlé brand.

While Nestlé enjoyed expansion during the First World War and the resultantneed for condensed and powdered dairy products, when the war ended problemsemerged when people returned to fresh milk. While this was also partially due toworldwide economic slowdown, Nestlé had its first loss in 1920. A senior banker

2 This historical sketch of Nestlé is based on a business presentation, “Nestlé in 2004” (ECCH2004), and reproduced here below as a summary of the events.

4.1 Nestlé 61

from Switzerland, Louis Dapples, was brought in to decrease the amount of debtand to restructure the corporation.

At the beginning of the 1930s, the Brazilian Coffee Institute asked Louis Dapplesfor a soluble powder which would change coffee drinking around the globe forever.After almost a decade of development, Nescafé was born and was an immediate hit.The Second World War facilitated the success of the product as a popular drink ofthe America soldiers and army employees. With its success, at the end of the warthe firm expanded with acquisitions and enjoyed new growth.

Despite the firm’s speedy growth in emerging markets, growth in industrializedcountries slowed, the cost of oil increased, the cost of cocoa and coffee beans rosedramatically, and the Swiss currency appreciated, so by 1974 Nestlé’s finances wereworsening.

Helmut Maucher as Head of Nestlé (1981–1997): A Time of Multiple,Large-Scale AcquisitionsWhen Maucher became “administrateur délégué” in 1981, his new policies had animportant impact on Nestlé’s modus operandi and his tenure is the focus of thisstudy. He spearheaded two ways to improve the firm’s financial position.

He cut the numbers of employees in the headquarters, giving more power tooperating units, which decreased overheads. Furthermore, he lead a succession oflarge acquisitions and by 1984, he was leading one of its most significant, instigatingthe foundation of the current concentration on organic growth.

In this way, the company had secured a presence in a number of areas in differentgeographical regions, and now Nestlé had less products or nations it wanted. It wasalso getting more expensive to acquire firms and fears of antitrust were increasing.In the late 1990s, therefore, the company’s acquisition speed relented and the firmmoved into organic growth.

Nestlé’s Development After MaucherIn 1997, Mr. Brabeck-Letmathe took over as CEO and in 2000, Maucher ceded hisposition as chairman to Rainer E. Gut, previous chairman of Credit Suisse’s.

At first, the firm was managed much like it had been under Maucher; indeed,they had settled on certain characteristics that were to stay the same under both theirterms of leadership. After a while, however, the firm was becoming less competitive,so Brabeck-Letmathe broke his agreement with Maucher that Nestlé would alwayshave a structure which was not centralized in order to allow for local tastes andstarted to consolidate. For the sake of cohesion, factory management was sectionedinto regions, rather than countries, and products that were alike were merged intostrategic business units.

In order to cut costs, Brabeck-Letmathe initiated programmes to decrease ad-ministrative and production costs, sold or closed over 100 factories which were notperforming well enough, and instigated systems to standardize codes on packagingand to create one technological platform for the whole company, which enabled anincreased quality of data about levels of stock and raw materials to be gleaned.

62 4 Empirical Part

While Maucher spent his 15 years in command striving to acquire new firms,Brabeck-Letmathe focused on internal growth in the initial period of his tenurebefore later going on the acquisition trail. In this phase of acquisition, he tended to-wards the value added, higher markets in nutrition, health and pet care where Nestlésupplemented the products with basic ingredients. The acquisition of Ralston Pu-rina in 2002 catapulted Nestlé to dual global-leader in the pet food world. He thenbought ice-cream maker, Schoeller, and Dreyer’s Grand Ice-Cream.

Significantly, Brabeck-Letmathe laid out a plan to enlarge the company, focusingon growth in sectors to move Nestlé from a firm based only on food, to one whichincorporated wellness and health through nutritional products. This was in contrastto competitors like Unilever and Danone, food conglomerates who were tighteningtheir strategic aim, in an attempt to boost profit margins by getting rid of businesses.

Brabeck-Letmathe was also elected chairman of Nestlé in 2005. The then head ofZone Americas, Paul Bulcke, was elected to the board in 2007, with the purpose ofmaking him CEO in 2008, a position which he currently holds. Brabeck-Letmathenow serves as chairman of the board.

In terms of the latest developments, at the end of 2007, it was agreed betweenNestlé and Pierre Marcolini (Belgian chocolate maker) to enter into a strategy basedco-operation. Furthermore, Nestlé decided to get rid of the controlling part it ownedin Alcon. This was sold to the pharma company Novartis at the beginning of 2010.

4.1.2 Corporate Governance Structure

Management, Board Composition, CommitteesNestlé is examined, with particular attention to the first aspect of Hilb’s approachto integrated board management for international firms, which deals with the boardcomposition and structure, a stakeholder-oriented vision, and a culture which is pro-ductive and open. The elements below have been chosen for analysis: role of theboard in creating a strategic orientation; committees; assessment of performance;role of chairman; structure of the board, such as its composition and number; andelements of board culture. The range of these parameters appear adequate to exam-ine the problems with governance experienced in the firm and it is important to notethat these selected elements are closely connected.

4.1.2.1 The Board Team

The Role of the Chairman-CEOElected by the stakeholders, the board represents them in the company and has avital role in assessing and controlling the firm. The president or chairperson oftenassumes more duties than the rest of the board such as the extensive and regulatedduties of meeting etiquette, signing the annual report, casting the deciding vote in atie-break scenario and conducting meetings. As such, the leader is supposed to havemore proactive input and assume more responsibility on the whole.

4.1 Nestlé 63

Helmut Maucher was nominated in 1981 as Nestlé’s chief executive officer andfrom 1990 to 1997 served as both chairman of the board and CEO. In 1998, he con-tinued his duties in the role as chairman of Nestlé. Maucher was both and CEOduring the majority of his tenure, leading Nestlé’s acquisition wave. The chair-man position was a full-time job in Nestlé, while the rest of the board carried outtheir roles alongside other responsibilities. Fundamentally, the board ought to beguided by the chairperson’s capabilities in terms of business, leadership, social skillsand character (Hilb 2002b, p. 65). This perspective gives the chairperson more re-sponsibility for the health of the firm and, by implication, is advantageous to theshareholders. In the case of Nestlé, as opposed to Swissair, the next case study, thetwo roles were combined.

The reign of Maucher as chairman and CEO is explored in Section 4.1.3 and anattempt is made to assess his success in the position.

Creating Strategic DirectionLiterature generally states that it is the duty of the board of directors to create thestrategic orientation of the firm. In the following, it will be illustrated through em-pirical findings that the strategy was clearly developed by the CEO and his team.This should be kept in mind despite the fusion of the two functions of CEO andchairman during the 1990s. The board had, however, a direct input in this debate,and regularly challenged the CEO and his team with good questions and demandeddetails on the management’s thoughts and plans.

Corporate GovernanceIn order to ensure Nestlé remained competitive worldwide, in the beginning of the1990s Helmut Maucher started to make alterations to the way the company was runand also within the organisation. He launched a pair of “strategic business groups”to guide a number of product group strategies, which were divided into seven units(Maucher, during interview). This was in order to advance on his previous effortsto stop centralization. Senior executives, with similar power to the zone operations’managers, but not the same responsibility, lead these groups. Maucher also createdthe position of COO for Food to assume responsibility for keeping product orien-tation on track and for coordination of operations in terms of general managers. Atheadquarters, Maucher radically reduced the size of the previously influential centraltechnical department and various functional groups (de Weck, during interview).

At TMT level, this restructuring resulted in the formation of a core constitutingone head and ten senior managers working from Vevey. Under Maucher’s watchfulcontrol, they became the most important general management committee in the firm(Maucher, during interview).

Maucher also remoulded the culture of leadership at Nestlé’s and expressed hisinnovative approach as “commitment of management and involvement of staff”(de Kalbermatten, during interview). If the TMT worked less through capabilityand power and more by intentionally generating added value for the firm throughleadership, it would also involve and inspire their employees.

64 4 Empirical Part

Maucher tried to figure out at what point he added value or provided gainfulinput in the debate; otherwise, he handed over matters even when, technically, thefinal choice ought to have been made by him (de Kalbermatten, during interview).

It is enlightening to look at Maucher’s approach to corporate governance as thekey issue, one which “needs more principles and fewer detailed regulations” asthese regulation do not fit every company (Maucher, during interview).

In terms of structure, the function of the CEO and chairman and the eventualfusion of these two roles he considers an “overrated” problem, more dependent onwho is available, and on whether plans and balanced correlations are in place. Thestipulations are that there should be a committee with “independent, strong peoplewho can act if the man in question abuses their trust or does not work out” anda back-up plan in the case of something happening to the leader (Maucher, duringinterview).

Furthermore, in contrast to many other firms, Maucher informed the board an-nually of his long-term succession plans, whom he thought suitable to replace himas CEO (in the long-run or in the case of an incident) and his recommendationsin terms of what needs to be done. If these conditions exist, then “the pulling to-gether of roles is useful and administratively less complicated” (Maucher, duringinterview).

Importantly, this does not mean that a complete concentration of power develops;whether a chairman or delegate, one has to “share power always with the board”and with a duty to report, alongside clear rules as to who decides what, the bal-ance is never lost and “this so-called omnipotence doesn’t exist” (Maucher, duringinterview).

Assessment of PerformanceAssessment and control of the firm’s performance is a vital duty of the board along-side their duty to create a strategic orientation. To do this, the board makes decisionson its own as well as depending on the feedback from auditors and management.

For Nestlé this was done extremely well and eventually institutionalised. As willbe illustrated, the board at Nestlé were extremely good at continuously asking formore detailed information about the progression of projects.

4.1.2.2 The Board Structure

Composition and Size of the BoardThe board was made up of members from very international and diverse back-grounds. While they operated internationally they had a Swiss focus and, crucially,they were bright people, perhaps not with knowledge of the industry, but withcritical brains and independent, entrepreneurial personalities. In spite of the largesize of board, the board was very active through the board committee in terms ofoperational matters.

CommitteesNestlé’s board was structured so that a smaller committee within the board met everymonth to discuss business matters. In his interview, Maucher stated that he believed

4.1 Nestlé 65

in as few committees as possible and was against the “trend” to have two committeeson each board, preferring the structure of: a general committee to make preliminarydecisions; an audit committee, to give the board the opportunity to check every-thing; and a remuneration committee, which was partially the same as the generalcommittee only smaller (Maucher, during interview). As illustrated in the comingchapters, the committee was quite involved in all business aspects and worked inclose cooperation with the CEO, providing support and asking for information.

With regard to the board committee, de Weck further stated in his interview that:

I believe that the board committee was a good way to work. The board of directors’ rolewas less important as they had only six sessions per year and because it had many membersat the time, discussions weren’t as easy.

de Weck, during interview

MeetingsIt is clear that all board members held other time-consuming and demanding offices.Though the wider board met approximately four to five times a year, the committeemet regularly on a monthly basis where matters where discussed intensively and inan effective way.

These meetings were held in a hotel in Vevey. Maucher, as CEO and chairman,insisted the board arrived the previous night to study the documents in detail, asthese were not sent out beforehand. This ensured a level of focus and preparationwhich in turn fed into the meetings. For Maucher, the ability of his board to askdifficult, challenging, and ultimately rewarding questions was vital, and thoroughpreparation was part of this.

4.1.2.3 Board CultureMaucher described a culture in which lively debate and the expression of concerns,in particular, over issues of long-term risk, were promoted (Maucher, during inter-view). He was clearly a hugely respected personality who always brought the wholeboard on side:

The people trusted me more every year because I didn’t deceive them. I never lied to them.I was logical in what I told them. The people knew that I’m not an adventurer because Inever took excessive risks. For this reason, they have always agreed with what I’ve done.


This culture of a proactive interest in the views of all involved even extended toacquisition. When a new firm was acquired, Maucher immediately travelled there totalk with everybody about how they felt good changes could be made and to con-vince them of the integrity of his leadership. An example of this was the emphasishe placed on making opportunities visible for all personnel in the Group.

Moreover, Maucher always prioritised the opinions and expertises of those onhis board above external consultants and analysts, believing that those closest to thecompany had the most specific knowledge. This was a huge vote of confidence forall involved and showed the members that their contributions were respected andhighly valued.

66 4 Empirical Part

4.1.2.4 Integrated Board Management

Member SelectionAuthors like Hilb recommend member screening based on thorough considerationof the individual’s skills. This appears to have been partly the case in Nestlé. Thoughthe profiles of the candidates were all very strong with regards to personalities andbusiness achievements, industry specific knowledge was not present in the board.Maucher prioritised intelligence and the ability (and personality) to ask the rightquestions over having industry specific knowledge.

Member CompensationJudging by the interview with board members, their earnings were realistic as wasthat of the chief executive, which was quantified in several instances as being aboutone to two million CHF per annum (de Kalbermatten & de Weck, during interview).Compared to today’s CEO and chairmen remuneration this amount appears verysmall.

ConclusionThe prerequisites for integrated board management at Nestlé were very strong.

With regard to the first element, an optimally composed board team, we notethat the composition was very diverse, albeit the board consisted of personalitiesthat were not familiar with the nutrition industry, they were strong personalitieswho asked the right questions and actively sought information. Though the broaderboard was large, the committee worked relatively effectively due to the restrictednumber of members. The board culture was very open and constructive and themembers asked many questions and sought information. In this way, Nestlé seemedto have an effective board structure and Hilb’s stakeholder-oriented board visionwas therefore fulfilled in this case.

The second element of integrated board management was also fulfilled: the selec-tion of the board was vision-oriented, because only critical and strong personalitieswere chosen, and therefore feedback within the board was strong. Though the re-muneration of the board seemed to be acceptable, it was difficult to gather detailedinformation on this matter. Lastly, however, it appears that no institutionalised pro-cesses were in place with regard to the development of the board members. As theCEO and the board members were the right people in the right positions, this lastfactor becomes less important in the context.

Finally, in terms of the third element of integrated board management, there wasno periodic evaluation of the board’s work. Again, with the right CEO and the rightboard members, this last point becomes less of a concern.

4.1.3 Maucher’s Reign

In his interview, Maucher pointed out that all of their acquisitions were later success-ful. He thought that this was due to the fact that they had “never entered a venture

4.1 Nestlé 67

by taking a leap of faith, we always knew what we were buying” (Maucher, duringinterview). Moreover, he thought that they had avoided failures by making judge-ments on a realistic and factual basis and by buying firms within their own sector,and only those that they understood well. As proof of the success of this policy headded, “McKinsey claims two thirds of acquisitions go wrong – this wasn’t the casefor us” (Maucher, during interview).

Maucher became involved with Nestlé at a crucial moment. Despite a lengthyprofitable period, Nestlé experienced a decrease in profits around the 1980s. TheArgentinean subsidiary of the firm had unparalleled losses in the early 1980s andit was a shock to the old-fashioned top management that this was a direct result ofbad management. Moreover, they were being boycotted by certain bodies becauseof an outcry over infant formula. It was a mental shock to the firm to have hostilepublic exposure, when they were so used to their image as a smart company makinghealthy products.

When Maucher became chief executive, after almost three decades working forthe Group, he initiated a programme of instant modifications, which were neces-sary given the situation. The Nestlé culture had grown old-fashioned; it was overlybureaucratic, overly structured, and was suffering an excess of systems and rules.While he disposed of most of it, Maucher tried to retain the firm’s culture, valuesand individual style.

Highlighting its redundancy, Maucher threw out the monthly books which consti-tuted the various subsidiaries’ financial reports and replaced them with, essentially,one page. He contended that staff counts, inventories, cash, sales and the mar-ket head’s individual thoughts were the few vital gauges for a smart manager tounderstand the state of the business (Maucher, during interview).

Fundamentally, the bureaucratic systems had created a predicament in which ev-eryone was happily ignorant of what was going on, and were unwilling to change asa consequence.

By reorganising and shifting operations away from the centre, Maucher was mak-ing quite radical changes. Simultaneously, he gave headquarters more responsibilityin terms of research, matters of strategy, financial issues and other matters overwhich headquarters ought to be in control.

When Maucher became involved, the company’s position in terms of workingcapital was bad. Before he got to work, there was an annul cash drain of half abillion CHF, excluding acquisitions. By educating individuals about it and alteringsome fairly straightforward matters, millions in cash was instantly available. Beforelong, he could have several billion readily available in cash and at the same timeacquire new companies. In this way, Maucher succeeded by understanding whatwas vital, and by creating appropriate and exact aims and priorities (de Weck, duringinterview).

Maucher attempted to increase the firm’s competitiveness in terms of productsand geography, on the basis of vastly better cash flow generated by fresh manage-ment policies. Although it had already begun a few years before, the 1990s wasa period of growth by means of strategically minded acquisition (de Weck, duringinterview).

68 4 Empirical Part

The main aims of the acquisitions were to secure the Group as a global leader inparticularly high growth areas such as confectionary, chocolate and mineral water,and to drastically increase the Group’s share in the American market (Maucher,during, interview). They also sent out the vital message that the sleeping giant hadawoken.

4.1.4 Nestlé’s Acquisitions

From the outset in 1905 with its merger with Anglo Swiss Condensed-Milk Nestlé’sgrowth was based on M&A, and they had, therefore, a sharply outlined strategy onit. The final and perhaps most significant wave of global acquisitions began in 1984,after many decades of significant mergers.

4.1.4.1 Historical Acquisition SketchWhen Maucher became “administrateur délégué” at the beginning of the 1980s,his new policies had an important impact on the modus operandi of Nestlé and histenure is therefore the focus of this research. He spearheaded two ways to better thefirm’s financial position.

He cut the numbers of employees in headquarters, giving more power to oper-ating units, which decreased overheads. Furthermore, he lead a succession of largeacquisitions and by 1984, he was leading one of its most significant, instigating thefoundation of the current concentration on organic growth.

Nestlé bought the U.S. producer of culinary, milk and pet good, Carnation, in1985, which then counted among the biggest acquisitions in the food industry ever(USD 3 billion). The same year, they bought Hills Brothers, one of the biggestAmerican coffee companies, expanding Nestlé to include ground roast coffee prod-ucts. As firms around the globe made ready for the European Community in 1992,Nestlé bought Rowntree in 1988 for over USD 4 billion. This acquisition of a majorBritish chocolate maker was the biggest foreign takeover in Britain ever. In the sameyear they acquired the Italian firm Buitoni, which produces pasta.

In 1991, Nestlé set up a factory in China and acquired over 30 firms including:a chocolate producer, Intercsokolade (Hungary); an evaporated milk manufacturer,La Campina (Mexico); a frozen-food producer, Indra (Sweden); and an ice creammaker, Alco Drumstick (U.S.) with several activities in Europe. The Group’s firstforay into Eastern Europe’s recently opened markets was with Intercsokolade.

In order to make and distribute coffee and tea products with the Nescafé-Nesteabrand names, Coca-Cola and Nestlé entered into an even joint venture, the Coca-Cola-Nestlé Refreshment Company, in 1991. These were marketed globally throughCoca-Cola’s business networks, except for in Japan, with a first capital injection ofUSD 100 million.

Furthermore, in 1992, with an offer of approximately USD 2.5 billion, the Groupacquired Source Perrier, the French mineral water manufacturer. Regulations in Eu-rope, however, required Nestlé to sell off a number of brands within Perrier. In the

4.1 Nestlé 69

same year, Nestlé seized almost total control of Vittel, a mineral water maker. Backin the 1960s, Nestlé had made their first venture into mineral water and bought a30% stake in the firm.

In the late 1990s, Nestlé recommitted to core food products and because the firmhad never succeeded in generating much growth in its beauty and health areas, itdivested these interests. Two exceptions were the pharmaceutical company Alcon,and their minority share in L’Oréal, both of which were highly successful.

During this period acquisitions were mainly based on pet food, water and icecream. The Group acquired mineral water companies in 1993 in the U.S. and Italy,and in 1998, they took total control of San Pellegrino. In 1993, they bought icecream firms in the Philippines, South Africa and Italy. In 1994, they purchased theGermany manufacturer of ice creams, Warnke and in 1995 they acquired the biggestice cream company in Egypt, Dolce SAE, the cold milk based products section ofAustralian company, Pacific Dunlop, and the biggest ice cream manufacturers inSpain, Conelsa. In 1997, Nestlé purchased Ault and Dairy World, venturing into themarket in Canada for the first time and earning the company a 40% share in themarket.

In 1994, Nestlé gained a majority holding in Goplana S.A., the Polish choco-late manufacturer, and the U.S. pet food firm, Alpo, was acquired. In addition,the Group bought Ortega, the market leader in Mexican foods in the U.S., and by1998 Nestlé had acquired coffee cream manufacturer, Cremora, from Borden BrandsInternational and milk powder producers, Klim.

That year, Nestlé took second position after Mars on the European market in petfoods through the acquisition of Spillers from Dalgety PLC.

The company had thus secured a presence in a number of areas in different coun-tries, and now had less products it wanted and fewer markets to enter. It was alsogetting more expensive to acquire firms and fears of antitrust were increasing. In thelate 1990s, therefore, the company’s acquisition rate relented and the firm movedinto a period of organic growth.

4.1.4.2 Nestlé’s M&A Strategy: The Relationship Betweenthe CEO and Board

I’ve never come across a company that ran well with a bad CEO because the board wasworking so well. On the other hand there are a number of companies that work where theboard is mediocre but the CEO is very good.


Maucher’s board supported this by saying that, “the best acquisitions we have madeat Nestlé were all done by the CEO as the board can’t do that” (A2, during inter-view) and Philippe de Weck confirmed in interview that “he did everything and wetrusted him, but still everything was discussed” (de Weck, during interview).

Maucher believes that the CEO is the key person in the company because hehas the greatest understanding of the business. To his mind, the board cannot leada company if it only comes to the business every four weeks, especially if theyare specialists like bankers and lawyers with no experience in the company. The

70 4 Empirical Part

CEO, however, possesses all of the relevant information and experience. Maucherconcludes that the board must be informed and approve the CEO’s actions, butultimately “the quality of the CEO is the decisive factor, not only in terms of intelli-gence but character – the role needs both personality and professional intelligence”(Maucher, during interview).

As Bruno de Kalbermatten noted during his interview, this thinking carriesthrough to strategy: “the CEO should be a ‘driving force’ and not an ‘adminis-trating force’”. Maucher also believes that the development of strategy clearly lieswith the CEO who “investigates the potential project with his managers and if hedeems it worthwhile he will present it to the board, which then makes a decision”(Maucher, during interview). The board can ask questions and give opinions but “ifthe board expresses another opinion, and I can’t convince them, then the strategyneeds to be changed accordingly” (Maucher, during interview). Maucher regardsthe board firstly as a contributing body, secondly as a controlling body and finallyas a body for important decisions (Maucher, during interview). It’s important to ac-knowledge, however, that the final power rests with the board. As Maucher revealed,the CEO cannot do certain things without the board, without them a project cannotgo forward.

During his tenure, Maucher’s independent spirit was crucial. He was not inter-ested in appeasing the board, or personal politics; for example, if the board rejectedhis proposals three times, he would resign as “I would assume that they have aproblem with me and not with the projects” (Maucher, during interview). The boardseemed to fully support the idea of the CEO as the driving force. Bruno de Kalber-matten, one of Maucher’s board members, quoted Maucher’s book “Marketing istChefsache”3 concurring with Maucher’s view that marketing, in terms of satisfyingorganisational objectives, should be dealt with by the top leadership level. Moreover,he felt it was “an essential element – there have been some exceptions at Nestlé butwith Helmut Maucher, everything was fine” (Bruno de Kalbermatten, during inter-view). He admitted that there would be complications if the board began wonderingif the CEO was really right for the job, for example, “because he’s sick, because he’son too many boards of directors, because some acquisitions failed etc.” (Bruno deKalbermatten, during interview). Ultimately, in de Kalbermatten’s mind, “there’s noabsolute rule” but at Nestlé a “strong trust” between the board and Maucher meantthere were never any problems (Bruno de Kalbermatten, during interview).

Clearly it worked so well at Nestlé because Maucher was a strong CEO, com-mitted to the long-term well being of Nestlé and its customers and nothing else. Henever had a contract. Everyone’s position was determined annually and Maucherwas happy with this. A sense of mutual respect and trust prevailed. Maucher as-sumed that “even if we have an argument, I will be treated decently, for example, interms of my pension and so on” and found that there were never any problems withthis at the company (Maucher, during interview). Another reason he liked this wasthat he felt “the others have to be free to split from me if they don’t agree with me

3 English title: “Leadership in Action”

4.1 Nestlé 71

anymore” and lastly, it was vital that legal problems did not interfere because his“position as chief executive was too important for the company” (Maucher, duringinterview).

This is quite a different perspective in light of the way other companies bindtheir CEO with many legal contracts. In fact, CEOs often ask for these legal assur-ances, including golden parachutes and so on. Maucher pointed out, however, thatroles were very clearly delineated in Nestlé’s constitution, stipulating the CEO’s re-sponsibilities and in which decisions the committee or the whole board needed tobe involved. It also stated what rights the CEO had to information, that no CEOcould be elected without the consent of the board and that “the whole process ofnomination and dismissal was a board matter” (Maucher, during interview).

Nestlé under Maucher was an exemplary case of effective management. Lookingat other firms’ failure in acquisition, Maucher concluded that the chief executivesoften follow other interests, sometimes their own, which are not in line with thelong-term interests of the company. He stated that while it was preferable to avoidinterfering with the CEO’s plans, “if the CEO has a different agenda and cooks hisown soup all the time, or doesn’t really understand the business, then the board hasto react immediately” (Maucher, during interview).

In terms of the board recognising when a CEO is not behaving properly, Maucherpointed out that at Nestlé the board had the right composition of “clever people” torecognise such problems quickly:

I had a Mr. Gerber, who rescued Zurich and Roche. I had a Mr. Kalbermatten, he runs hisown company, and knew how it worked. I had a Mr. Gut, who was president of CS and I hada Mr. Leutwiler, who was president of National bank. In other words, all of these people hadlife experience, common sense and were independent enough to have reacted immediatelyshould things have gotten out of hand.


Philippe de Weck supported this idea, that personality is more important than spe-cific industrial knowledge for board members: “in certain areas it’s useful to have atechnician, a finance person or a lawyer, but not everybody needs to be a specialist”(de Weck, during interview).

Furthermore, the board also acted through the board committee as an additionalwatch dog of the CEO’s activities; the committee was much closer to the businessthan the board as a whole because they met on almost a monthly basis and re-ceived every report. As Maucher pointed out, they had all of the information andthe support of the audit committee. With continuous access to information on press,investor conferences and reports on profit, turnover and flow of staff, “if they don’trealise when things go wrong then we have the wrong committee” (Maucher, duringinterview).

The advisory committee, as understood through interviews with the board mem-bers, was not only a watch dog but also a body that provided valuable advice andfollowed important business activities closely. In terms of whether Nestlé’s boardhad a monitoring function or an active advising function, Bruno de Kalbermattensaid in interview that it depended on the size of the firm. In Nestlé’s case, he reported

72 4 Empirical Part

that the advisory committee (5–6 people) within the board (15–18 people) fulfilledboth roles of monitoring and advising. The committee (Maucher, de Weck, Gerber,de Kalbermatten, and Leutwyler) were often in touch with regional directors thatcame and reported about their activities, and they had decision making power foracquisitions of up to 500 million, “which is a significant amount” (de Kalbermatten,during interview). In fact, Bruno de Kalbermatten only felt he “started to play apart” when he became a member of the committee, because the board of directorswas “only a recording organ, a guarantee of the company’s seriousness” and it wasthe committee that made decisions, not the board of directors although, of course,their approval was sought (de Kalbermatten, during interview).

The members met 8–10 times a year and were usually external apart fromMaucher. De Kalbermatten said that they had good, trusting relationships as “5 or6 people can have a discussion around a table. At the board, there’s 15 people andthe general directors, so that’s 25 people. You can’t have discussions this way” (deKalbermatten, during interview).

The following source, Fig. 4.1, the minutes of the committee meeting on 7 June,1988, regarding Nestlé’s offer for Rowntree, shows how diligently the board com-mittee was working as well as how involved and informed they were on the matter.All decided points were written down and the documents which served as basis forthe decision were noted. At the same time the document shows how much trust andconfidence the committee had in Maucher in giving him authorization to decide onfuture extensions where necessary. Significantly, the committee also imposed limitsby deciding the maximum amount to be paid for the target company.

In Bruno de Kalbermatten’s interview, he thought that the best way to monitorthe CEO was by focusing on results, because the board is too far away from thedaily business to know what is going on.

As mentioned in the literature review, research talks about “management hubris”where one success after another eventually leads to an overestimation of the man-agement’s capabilities resulting in a deal, in this case, an acquisition, which is toobig. Bruno de Kalbermatten thought there was “no rule” for avoiding this situationbut “at Nestlé, as long as Maucher was there, we never had this kind of problem” (deKalbermatten, during interview). Thomas Schmidheiny, a renowned industrialist,thought more particularly, that:

What distinguishes Mr. Maucher – and I have tried to live up to this – is that he remainsmodest despite all the success. People simply believe him. He has remained credible andmodest. He hasn’t become a megalomaniac.

Schmidheiny, during interview

In terms of how the board recognises if the CEO is informing them in a correct andtransparent manner, Maucher states that his board had the right calibre of personal-ities, it is “a question of judgement, a question of personal experience, it is aboutasking the right questions” (Maucher, during interview). An audit committee alsohad full access to all information. Furthermore, the board received comprehensiveand substantial strategy papers every year in which Maucher presented his reflec-tions as well as a “note confidential” in addition to the business plan, a paper de-scribing the crucial activities of the previous year which was a kind of “photograph

4.1 Nestlé 73

Fig. 4.1 Nestlé committee minutes for the board (Rowntree), 7 June 1988

74 4 Empirical Part

Fig. 4.1 (continued)

that captures all developments in every country, products, revenues, costs etc.”(Maucher, during interview). Everyone was very well informed with these two doc-uments and they were discussed by the board, questions were asked and the “CEOand his director general had to answer” (Maucher, during interview). Maucher fin-ished on this by pointing out the need to be able to “differentiate between delegatinga lot and not being able to run a business” (Maucher, during interview).

The following source, Fig. 4.2, shows both the proactive nature of the boardin seeking information and the responsiveness of the CEO in providing furtherinformation.

Interestingly, in the interviews with other leading CEOs and chairmen as well asmembers of Nestlé’s board at the time, opposing views were aired on this subject.A leading CEO of another Swiss multinational company said:

I don’t know if you know how the board meetings in Nestlé took place, but only when theboard met did members receive their files and then they had to give them back after themeeting.

A1, during interview

Philippe de Weck, a board member who was on the committee during Maucher’sreign concluded differently:

We went to Vevey the day before, usually for one day, or at least half a day, during whichwe only studied the projects, and then there was a session the next day. This way, throughthe project’s study, the session was adequately prepared for.


4.1 Nestlé 75

Fig. 4.2 Correspondence de Weck to Maucher, 1982

76 4 Empirical Part


De Weck did concede, however, that the documents for study were not sentbeforehand to the board committee members but rather:

We had to go and check them on the in situ. They were not going out. And those who didn’tlive in the area even had to stay over night in Vevey.


The rationale would appear to be based on gathering members in a specific place toensure the material was studied properly, despite the fact that this was often incon-venient and, one could argue, a little controlling, but Maucher made the point thatthis was also done for reasons of secrecy.

Nevertheless, another prominent business leader from outside the company, whowas aware of the modus operandi of the committee, was outraged by the extremelylimited preparation time available:

Everyone at Nestlé, according to Swiss law, should withdraw from the board and say, “Ican’t do my job like this!” (. . .) This is a mess from A to Z!


Having met with several of Maucher’s board members, this is, however, not the im-pression they give. The board members were strong personalities, not easily bullied,driven by the interest of Nestlé and willing to oppose the CEO should it be nec-essary. The impression was of a pro-active and intelligent board. It is true that nothaving received the study material well in advance may have hindered their pro-cess of opinion making as they could not have discussions with close colleagues,assistants and advisors, but rather ingested the information in isolation.

On the whole, however, considering the quality of the information provided byMaucher to the board members, it would appear that decisions could be reasonably

4.1 Nestlé 77


78 4 Empirical Part

made based on the material, and within this shorter time period for preparation.Inviting board members the previous night to study the material may therefore bemore a question of Maucher’s style and personal preference, rather than a ploy todestabilise his committee.

The anonymous interviewee had other contentions, however, believing that:

Maucher hadn’t the courage to bring people to the board who knew about Nestlé’s business.Could he have? Yes. But he has not! Consciously, he hasn’t brought in any food specialistsand (. . .) if you don’t understand anything about the business, then you can prepare for themeeting as long as you want, but you won’t be able to talk shop! A board must answerhonestly: do I understand the business or not? It’s fine if not, then focus on the process. Butboth types are needed on the board.


Maucher’s opinion, however, that a board member does not necessarily need to befamiliar with the business but rather be capable of asking the right questions, seemsmore pertinent. Maucher had strong personalities on his board, who were successfulentrepreneurs and business leaders themselves.

The anonymous interviewee also claimed that no one objected to this modusoperandi because “everyone received 500 k, and no one has had the courage” (A1,during interview). It is interesting to note that de Weck also shared the opinion thatmoney is an influencing factor. He once told a head-hunter conducting a study onthe criteria for a director on a board that “they have to be rich” (de Weck, duringinterview). In other words, they must be wealthy enough to be independent and notreliant on the assignment. In the same vein, Hilb says:

Never accept a board seat you can’t afford to lose.


The idea that pay concerns hindered independence on Maucher’s committee isnot valid because most of Maucher’s board members were wealthy and successfulindividuals and did not depend financially on this mandate.

Overall, the impression of the board is one of a strong culture in which memberswere critical and proactive: if the board did not get enough information, they wouldrequest it; if they were unsure, they would ask questions. Mostly significantly, theboard asked the right questions, as described in the next chapters.

4.1.4.3 Acquisitions Within the Bounds of the Set Corporate StrategyAs CEO, Maucher only made acquisitions within the scope of the given strategy.The strategy was discussed in close co-operation with and approved by the board.In this way, the CEO did not make surprise acquisitions and any takeover was in linewith the strategy. The board at Nestlé got involved once an acquisition exceeded agiven amount, or if the acquisition was outside the mainline strategy.

As mentioned above, Maucher decided to impose a limit on his decision makingdiscretion because “the competence of the CEO comes to an end once a certainacquisition size is reached” (Maucher, during interview).

This is exemplary and reveals once again Maucher’s carefully consideredmanagement approach which was a result of putting the interests of the company

4.1 Nestlé 79

first. In spite of his strong personality, he recognised the importance of monitoringand feedback for a CEO and he instigated these additional checks and balances tomake sure that the board agreed with and supported his decisions. Maucher alsosought board approval whenever he wanted to acquire a company that was outsidethe scope of Nestlé’s strategy. Again he imposed limitations on himself and theboard committee, declaring:

The function of the board is to adjourn on important matters and determine a strategy be-forehand. The CEO, or rather the committee, can act within these two parameters. You haveto understand that otherwise you can’t understand the nature of our business.


4.1.4.4 Enhancing Market Presence Through AcquisitionsAnother goal of the company was to make acquisitions which were good prospectsin the long-run and enhanced the Group’s overall market presence within key nationsand regions.

Carnation, an American manufacturer of food products from pet foods to milk,was one of the original takeovers in the sequence of acquisitions begun in 1984. Itwas a huge takeover then, equivalent to a “mega deal” now and it transformed Nestléinto a serious competitor in American, providing a great platform on which to buildin the long-run (de Weck, during interview).

Next came a series of acquisitions in a region where Nestlé had never been strong:Southern Europe was targeted in light of the fact that the European Single Marketwas beginning to form and the area was predicted to experience growth which washigher than average compare to the rest of Europe. This assumption was provedcorrect (de Weck, during interview).

Southern Asia, Egypt, several areas in China, and Eastern and Central Europe inparticular were entered using takeovers by Nestlé. Moreover, Asia, a region whichNestlé felt had good potential in terms of development in the long-run was the focusof acquisition, as was Latin America, in order to consolidate their place in the marketthere.

4.1.4.5 Reinforcing Product Groups Through AcquisitionsNestlé enhanced product groups through acquisitions and made business innova-tions and new business lines available to the Group.

In the majority of cases the form of Nestlé’s acquisitions were horizontal andwithin its own industry. In this way, for example, Buitoni was acquired. It becameobvious during this period, that in the future, people could not eat many kilos ofmeat per head annually, and a considerable portion of people’s food intake wouldneed to be derived from plants (like pasta).

Another canny acquisition was a host of long-standing mineral water firms, likeContrex, along with a robust franchise of springs in the U.S., which were acquiredwith Perrier. As Maucher said, “When I started buying water people laughed atme – today they are not laughing” (Maucher, during interview), and his boardmember, Bruno de Kalbermatten, confirmed Maucher’s insightful thinking, “It wasquite trivial, but perfectly right, very bright!” (de Kalbermatten, during interview).In manufacturing premium water, supported by a global group with a degree of

80 4 Empirical Part

security, Nestlé was concentrating on strategic targets in the long-run. Additionally,soft drinks were beginning to lose popularity for buyers watching their waists innations which were industrialized, and this formed the foundation for the firm’s wa-ter strategy. Nestlé became the number one supplier in the mineral water industrythrough acquiring Perrier.

Since then, Nestlé has sought to consolidate its place in the industry and increasegrowth through branding. Because the leading one or two product brands are morelikely to sell or get innovations into shopping aisles, especially in retail trade’s grow-ing concentration, retaining the top spot in a given market is even more vital now (deWeck, during interview). This same goal informed Nestlé’s determination to makeproducts stronger both in market position and within the Nestlé Group as an entirety,whether within particular regions or nations.

For this reason, the Italian company making speciality confectionery and choco-late, Perugina, was acquired. Similar takeovers based on this principle wereChambourcy and Hirz, producing dairy products; the American firm Baby Ruth andButterfinger; and Dalgety and Alpo, firms producing pet foods (Nestlé’s first forayinto the market was with Carnation) and ice-cream.

4.1.4.6 Creating Product Group Equilibrium Through AcquisitionsWhen Maucher first came to the company, half of its profit was derived fromNescafé. He diagnosed this as “nice but dangerous in the long-term”, recommendingexpansion of their product groups (Maucher, during interview).

Maucher also set about diversifying in terms of markets. As Maucher said, “Wecan’t make 50 percent of our profit in Europe in the long-term, if the world growsin other places” (Maucher, during interview). He therefore instigated a policy ofinvestment in various countries including America and Asia.

Furthermore, he wanted these to be discussed and agreed on as the overall strat-egy together with the board, revealing how acquisitions solved these problems.Maucher began as he was set to continue, and the board’s “feedback was positive”(Maucher, during interview).

Maucher clearly had a very firm grasp of the psychology of setting long- andshort-term goals in profit and how they would be processed by interested parties.He persuaded the board to approve and invest in long-term goals because he madeshort-term profits:

If I only promise long-term profits and make no profit in the short-term then the public, theshareholders and the board become nervous. But people were satisfied with my work as theshare value and profits kept on growing and with it productivity.


4.1.4.7 Reducing the Timeframe for Top Market Positions ThroughAcquisition

In several instances, as well as the need to ensure the business risk remained withincontrollable limits, the goal was to reduce the time needed to gain a top place in avital segment of the market.

4.1 Nestlé 81

Rowntree, for instance, taken over in 1988 and headquartered in the U.K., con-tributed contemporary American-British concepts in confectionary and chocolate,especially Kit Kat. Without these takeovers, it would have been quite a high riskactivity in a quickly changing market and, moreover, it would have taken years toreach this place in the market.

A shared venture with General Mills for breakfast cereals was embarked uponfor similar reasons, to cut down the time necessary to ensure a powerful place inthe market. Nestlé had a wary attitude to this, as with any fashionable movement.The Group tried to reach business goals through its own efforts, where feasible(Maucher, during interview), but on certain occasions, like in breakfast cereals,when the corporate culture was akin to their own, Nestlé did not dismiss sharedventures.

4.1.4.8 Financial Matters Related to AcquisitionsThe importance of getting the correct price when acquiring companies, in terms ofthe firm’s value as a whole, is another precondition for success.

Maucher’s exceptional long-term vision is evident in his approach to the price ofacquisitions. In his experience, “the most expensive acquisitions were the best andthe cheapest often the worst” (Maucher, during interview). Maucher distinguishedand was prepared to pay for what he felt had real value over the long-term: “Oneoften pays far beyond the book value, this is goodwill, but it is returned with long-term profitability” (Maucher, during interview).

One of Nestlé’s board members, Bruno de Kalbermatten, elaborated on the dif-ference between price and value. If the acquisition does not work out well, it is notso much a question of price as subsequent handling: “we need to know which partsto sell off and how to work with unions – redundancies, delocalisation of the pro-duction, etc.” (de Kalbermatten, during interview). Even Maucher’s financial expert,Philippe de Weck, recognised this distinction: “I am a finance person myself, but thefinancial aspect comes last!” (de Weck, during interview).

At Nestlé, strategic considerations like brands or the value of distribution organ-isations and possible synergies (for example by marketing corresponding productsthrough similar channels of distribution) are more important than the paper sums,when attempting to value a firm.

Moreover, when Maucher looked to the long-term, he was not fazed by the fi-nancial analyst’s dissuasions because an acquisition had a profit limitation of threeyears. In this instance Maucher would say to them:

Despite the fact that we only make a profit of X, it is a decision for a century. If we don’twant to do that then we won’t lead Nestlé, in the long-term, to where we want to go.


Rowntree is a good example of this. The company paid more than CHF 6 billion forit. Maucher made sure that the additional interest was met by the additional prof-its, and that in terms of revenue, they would not be making a loss in the coming2–3 years. Again he reiterated, “that was a decision for the century” (Maucher,during interview). In terms of the confectionary industry, there were only two

82 4 Empirical Part

companies, Rowntree and Mars and “if we wanted to stay in chocolate, we hadto do these acquisitions, and it proved worthwhile” (Maucher, during interview).Again, however, Maucher did not operate alone and asserted that:

The question of whether to operate in the long-term or short-term is very important and onethat has to be discussed with the board as this is about strategy.


Clearly return in the long-run is beneficial for the recently acquired firm and-or thegroup through the strategic benefits of acquiring the firm or the resultant synergies.

The initial year’s profits, which ought at the very least to pay the interest on thesupplementary loans needed, is a baseline condition.

As a result of changing competition or consumer attitudes, predictions are, inthe longer term, frequently incorrect about the market economy. When a strategythat looks forward is used, there is increased time to make ready for integrationas a whole and costs and the price of acquiring companies are usually not as big(Maucher, during interview).

When acquiring a firm, instigating a sequence of connected measures is anotherprecondition for success. These involve putting businesses that make a loss up forsale in the case where losses, even in the long-run, cannot be corrected, and gettingrid of marginal activities to facilitate the focus on the core strengths and abilities ofthe group.

In line with the later policy, Nestlé got rid of the following, some of them ofconsiderable size: hotel chains, the production of materials for packaging, Libby’spreserves, Eurest, and several activities that were not, or were no longer in sync withtheir business strategy.

Taking on several fronts simultaneously was not an attractive prospect to Nestlé.Thus, other parts of the divestment plan included scrupulous cutbacks in over-heads and costs that were fixed, streamlining production and product ranges, andflat organisations.

Stock Markets and Acquisitions

I’m not against shareholder value but I’m against the powerful influence that it exerts,creating short-term thinking.


The subject of financial markets and investor relations is something Maucher neededto consider in his position. He felt, however, that is was an aspect that was gener-ally given too much weight. While admitting that it is particularly important forcompanies that are interested in returning to the capital market in terms of their cap-ital costs and the exchange rate, his principle of prioritising the long-term over theshort-still held.

In this sense, Maucher criticised financial analysts: “I don’t see how such a youngfinancial analyst who just left university and has never seen a factory, can give megood advice!” (Maucher, during interview). He conceded that “in the short-termtheir opinions are important, but over the long-term it’s facts that matter” because

4.1 Nestlé 83

in his experience, “a couple of years later the share price would increase becausethe market realised that the decision was right” (Maucher, during interview). Andindeed, his views were vindicated; during his headship, the market cap rose to overCHF 100 billion.

He was never concerned with what others feared in terms of diluted profits pershare. While he took capital market reactions into account, he was not concerned byshare price decreases because the company very rarely needed capital from the cap-ital market. He felt that this was bad thinking, and if the “board only thinks of theirstock options they aren’t acting in the interests of the company” (Maucher, duringinterview). He knew anyway that the exchange rate, in the mid-term, would remainstable and that if revenue and business experienced growth, it would be reflected inthe market.

He did consider the capital market, however, in that he needed to be aware ofthe consequences and justify his longer-term strategies not only to himself and theboard, but in an investor relations committee or conference. He thought he suc-ceeded in bringing people around because “in general (. . .) the share price alwaysrose” (Maucher, during interview).

He noted that he still had a duty to report on the markets to the board. The boardregularly received information on the share price in comparison to competitors, andthe Swiss Market Index. Furthermore, he would always report back on his visits toother markets when he went to investor relations conferences or came in contact withfinance people and state representatives. Again, it was important to Maucher that“the board is able to react” and was “completely informed of what was happeningand also how the share capital was divided between the Americans and the Swiss”(Maucher, during interview).

4.1.4.9 Soft Factors Contributing to the Nestlé Acquisitions Process

Effective Communication Throughout an AcquisitionThe communication and interaction between Maucher and the board was highlyprofessional and intensive. Maucher ensured “full transparency” and that the boardknew that it would be consulted about all major decisions “anytime, immediately, thecommittee always knew what was happening” (Maucher, during interview). He feltit vital to reach agreement between the board and committee on all fronts, however,“one doesn’t have to present the board with every little detail” (Maucher, duringinterview).

Maucher’s board members, such as Bruno de Kalbermatten confirmed this:

We were always very informed. It was Maucher’s idea to enter the chocolate market withRowntree. I hesitated on this decision, but I understood that Nestlé wanted to get back intochocolate. Rowntree had a good image in England, so I said why not.

de Kalbermatten, during interview

The following source, Fig. 4.3, “Decision regarding Offer for Rowntree” of 6 June1988, illustrates Maucher’s meticulous and effective communication with the boardby immediately reporting to the board regarding Nestlé’s offer for Rowntree:

84 4 Empirical Part

Fig. 4.3 Maucher’s communication with the board (“Decision regarding Offer for Rowntree”),6 June 1988

4.1 Nestlé 85


According to Maucher too much information is produced which is often irrelevantand inaccurate. That which is pertinent is surprisingly little, for example, whenNestlé bought Carnation, it was the first big European acquisition of an Americancompany. The deal was USD 3.5 billion, which was a huge amount of money 20

86 4 Empirical Part


years ago. Maucher “handed exactly 13 pages to the board. These pages containedeverything they needed to know and based on these thirteen pages, the board madeits decision” (Maucher, during interview).

This is how Maucher preferred to communicate with the board. It was notpossible to get hold of any sources related to the Carnation acquisition, however,

4.1 Nestlé 87

the following source shows the accuracy of Maucher’s statement: a position paperaddressed to the board from Maucher for the acquisition of Buitoni, constitutingthe same number of pages, thirteen in all. It reflects again Maucher’s precise andeffective provision of relevant information for the board which ultimately allowedthe board to make a decision based on sound information. Due to the many pages inthis document, this source is included in the appendix of this book.4

Maucher had this policy of brevity because he felt as a rule, details were not onlyirrelevant but often incorrect: “the world moves differently to how people believeand an exaggerated, high number of studies feign a degree of exactness that doesn’texist at all” (Maucher, during interview). His thirteen pages contained everythinghe considered “essential fundamentals” which answered big questions like:

Why are we going ahead with this acquisition? Are we making America stronger? Are wemaking pet food stronger? How much does it cost and how will we finance the project?That’s all.


By empowering the board with all of this information, he was also empoweringhimself: “the position of the CEO is pretty strong. As long as he is successful theboard will find it difficult to say ‘no’” (Maucher, during interview). In this way healways obtained 100% agreement and had he “misused their trust, they would havehad the opportunity to react” (Maucher, during interview).

Maucher’s communication with the board was not only transparent, direct andpertinent but continued throughout the acquisition process as part of his reportingduty. Everything was reported: “How will the project continue? How is the newacquisition going? Is it going well? Is it going badly? Does it comply with ourplans? Are there problems?” (Maucher, during interview). Furthermore, becausedecisions regarding acquisitions were not only about whether to buy or not, but alsoabout ways of financing, other questions involved in the decision-making included:“Do we take on new shares or are we doing it through commercial papers andtrying to self-finance? Or do we take up a large, long-term loan?” (Maucher, duringinterview).

The following source, Fig. 4.4, “Dernier Developpements des Affaires Buitoni etRowntree” of 3 May 1988, confirms this:

4 See APPENDIX A: Maucher’s “13-page Acquisition Memorandum to the Board”

88 4 Empirical Part

Fig. 4.4 Maucher’s communication with the board (“Developments regarding Buitoni and Rown-tree”), 3 May 1988

4.1 Nestlé 89


90 4 Empirical Part


The following source, Fig. 4.5, “Rowntree – Actionnariat de Jacobs Suchard” of24 June 1988, is also proof of Maucher’s continuous communication with the boardin a brief, precise and effective manner. The document also reveals that Maucherknew that the board trusted him.

Effective Management of Social Aspects Which Result from AcquisitionsMoving to a new place, getting accustomed to another structure at their office, per-haps taking retirement or being made redundant are the consequences which M&Aand restructuring processes have on individuals. It is important to remember the in-dividual’s experience, despite the fact that many of the measures protect jobs in thelong-run.

Alleviating the effects of a restructuring process, through a successful series ofsocial measures, is clearly beneficial to a firm. According to Maucher, a programmelike this is a fundamental precondition for an effective acquisition policy in the long-run (Maucher, during interview). Perception, drive and credibility are enforced bythis means, according to Maucher, and money spent on this is just as vital as thatspent on research or marketing.

The longevity of Nestlé’s success is founded on trust, and in order to keep it,Nestlé must supply enough assistance to its personnel to adjust to new systems orsecure alternative employment. From the outset, this has been a foundation stone ofNestlé’s approach.

4.1 Nestlé 91

Fig. 4.5 Maucher communication to board (“Rowntree”), 24 June 1988

92 4 Empirical Part

These days, when acquisitions or mergers are declared, executives tend to conveyan attitude which is not balanced and sometimes, apparently, not very sophisticated:“many people who carry out an acquisition, believe that they are the clever onesand the others are stupid” (Maucher, during interview).

It was Maucher’s policy, however, to listen because he did not believe that thesepeople were stupid. He believed quite the opposite in fact. When Maucher boughtthe company Stouffer, its head became the head in America for a period. Later, whenhe bought Carnation and had to tell the head who was over seventy that he neededto leave, his successor not only became the head of Carnation but also the head inAmerica. Maucher claimed that:

I always made use of the most hard-working, able people. I’ve always told them: ‘Youbelong to Nestlé, now you have the same opportunities as everyone else in our company!’ Ididn’t only say it but also demonstrated it.


Indeed, these psychological questions were critical to Maucher as he felt that theyplayed a “very crucial role regarding the eventual success of an acquisition” throughthe “leadership, motivation, and involvement of these people” (Maucher, duringinterview).

It is interesting to note that Maucher changed his mind about hostile takeovers.At first, he was against them, but eventually came around to the idea that theywere sometimes necessary; for example, Rowntree was a semi-hostile takeover. Inthis instance, Maucher revealed his skill with people by going to the company im-mediately, by persuading them with sense, by motivating them and giving themopportunities. In this way they accepted the situation because Maucher “operatedclean policies and also created opportunities for new people. If it works out likethat, people realise immediately that the takeover is a good thing” (Maucher, duringinterview).

The need for transparency and communication grows gradually, particularly inlarger firms, and communication on M&A ought to be perceived as a part of it.Maucher felt that a lot of acquisitions fail because of psychological mistakes, forinstance, “often whole ‘field forces’, are sent to the bought company, who think theyknow everything and cause frustration throughout the whole company” (Maucher,during interview). Similarly, problems arise if the entire management are let goor the acquiring company’s management are not involved enough. In this case, hefelt “a climate is created that leads to the situation where people are no longermotivated” and this ultimately leads to failure (Maucher, during interview).

Maucher was very proud of the fact that Nestlé had “never made any mistakes”in this regard. He made sure to talk with the staff as well as the management, and“kept managers who were capable in their positions or gave them the opportunityto find a new place within Nestlé”. He dealt with the key players very carefully,however, because “if they affected Nestlé in a bad way, then the company could fail”(Maucher, during interview).

Another consideration is that of the long- and short-term view; when merging,companies frequently put too much emphasis on an immediate and positive stock

4.1 Nestlé 93

market response. Thus, Maucher reported, some companies that Nestlé took onwere “allowed to operate cautiously for a while with the aim of integrating themgradually” (Maucher, during interview). Synergies were something Nestlé was aim-ing for from the very beginning, but integration took place step-by-step: “all theseare steps where one can make mistakes or actually get it right” (Maucher, duringinterview).

As an example of this, for a long time Maucher had two heads in America whoreported to him directly. While they worked together, synergies were always slowin coming. So when a financial analyst asked Maucher why he didn’t merge the twoposts, he said, “because I’m cleverer than you” (Maucher, during interview). Byoperating like this, the firms functioned well and made profits. Then later, once theyhad become used to each other, having only one head became possible (Maucher,during interview).

Maucher cited several releases in the press, which, after a merger or acquisi-tion, were connecting increased profits in the billions, to decreased staff numbers.That profits would increase and more jobs would be ensured in the long-run wouldperhaps have been a more constructive way of conveying these mergers, as a vitalstrategic move for the firm.

Sourcing outside the firm might also be considered in this matter since, in prac-tice, a lot of immediate cutbacks in employment are, in fact, only transference ofthese jobs to smaller firms. Shareholders are not the only party with interest inlarge mergers and acquisitions, it is vital to develop an appropriate and balancedcommunication between all the parties concerned.

One way of looking at it is that in order to ensure the long-lasting life of a firm,the pain of a merger must be endured. Furthermore, rise in profits will mean moneycan be spent in greater development of the business and assist alleviation of thesocial impact of mergers and acquisitions (in Europe and Switzerland the payoutratio in companies is normally extremely low).

The enhanced effectiveness of the company in the long-run rather than the short-was the aim of an acquisition or merger for Nestlé.

Communication with Stakeholders During an AcquisitionMaucher strongly believed that the board has nothing to do with the duty to com-municate with the target company during the acquisition process or more broadlywith shareholders, press, analysts, interest groups and other stakeholders. This isthe CEO’s role as he is closest to the business, runs it and has an advantage in termsof information and experience. The board, however, must be informed and supportdecisions and their communication.

4.1.4.10 Nestlé’s Attention to Post Merger IntegrationAwareness of the importance of the integration process was not only present at man-agement level under Maucher, but at the same time at board level. According toBruno de Kalbermatten, the board were always asking questions related to the sub-ject of integration and if it “was happening harmoniously, or if there was somethingblocking it” (de Kalbermatten, during interview). Rowntree, for example, “was afamily business, they were all rich, there wasn’t much happening in the company

94 4 Empirical Part

anymore. . . that’s when they started to be afraid. When we arrived, I think it madethem happy” (de Kalbermatten, during interview).

In terms of coping with the integration of a newly acquired firm, Nestlé fullyrespected Drucker’s principles. Furthermore, besides providing equal opportuni-ties to all personnel, Nestlé stressed the importance of working alongside theacquired firm’s management. They were also extremely cautious of implementingthe Group’s approach harshly.

4.1.4.11 Conclusion on Nestlé’s Strategy in Acquisition

We’ve always said that we want to run businesses that we understand. So we want to practiceauthentic business leadership. Therefore it is forbidden to acquire things that don’t suit us.


Indeed, his board members reiterated this fact in several interviews:

My policy has always been, even in my own company, to do what we can do best, to improveit, and not to go into something else; don’t enter a technology field you don’t understand.

de Kalbermatten, during interview

A clearly outlined merger and acquisition policy was created and install by Nestlé;the acquired firms needed to fall inside Nestlé’s own industry experience and be ofsignificance to the Group. The new companies should also be reciprocally improv-ing and promote synergies through new activities. The Group’s enhanced productrange or presence in certain nations was a vital part of the mergers and acquisitions.

Favouring mutual consent and discussion, the Group did not deem hostile bids ac-ceptable. The firm mostly chose innovative companies with expertise that the Groupdid not have which were small or medium in size.

Though market share did affect Nestlé’s choice of acquisitions in several in-stances it was not the sole consideration. Particularly when Nestlé aimed to becomethe leader in the market, costs were a vital consideration when acquiring companies.

Essentially, five principles provided the basis for the Group’s strategy on M&A:

Firstly, a readiness to benefit from each other’s knowledge was necessary. TheGroup understood that the mixture of personnel’s experience and knowledgewas one of the main reasons for the effectiveness of their M&A. Consequently,a readiness to impart knowledge was also essential in personnel.

Secondly, the Group brought its strengths to all of its acquisitions, enhancingaspects such as their place in the market, product range, and structure ofmanagement.

Thirdly, on the whole, firms where the basic elements were not strong werenot acquired by the Group. Those that were taken over needed to have goodprospects for growth in the longer-run as well as technology and marketingexpertise.

Fourthly, in terms of processes and market, the Group limited M&A to areaswhich were connected to their current or recently acquired experience or rangeof products.

4.1 Nestlé 95

Finally, the Group did not want to end up as a widely diversified corporation nordid it reach towards acquisition of Nestlé’s supply chain or the expansion ofproducts, for example, in the manufacturing of raw materials, and/or servicesto related areas in order to more directly fulfil customer’s needs.

In the interviews with Nestlé board members and the chief executive, it was clearthat Nestlé followed long-term strategies.

Maucher explained that most discussions on the topic of shareholder value wereabout short-term or long-term aspects (Maucher, during interview). But “as soona shareholder is willing to think like me about what is good for the long-term I’mlikely to agree with him 95–100 percent.” (Maucher, during interview).

Maucher further explained that in social policies too the management can solvealmost anything if it thinks in the long-term:

In the long-term we’re all in the same boat. If you want to maximize in the short-term thenyou let 6000 people go and as a result don’t have an optimized business and no motivation.Therefore I’m all for investing with the social factor in mind in order to avoid much biggerdamage.


Maucher believed that if the management thinks longer-term and is more inter-ested in staff motivation, company image, longer-term revenue security, “then manyconflicts disappear that emerge in the short-term” (Maucher, during interview).

For such a long-term view a true leader needs strength and the nerve to withstandcriticism, two characteristics that Maucher clearly conveyed:

I always say personality is almost more important than anything else. Bosses who don’thave character, who don’t have a brass neck and who don’t possess communication skills topersuade others will have a hard time.


Maucher was convinced that the main cause of failure was a bad CEO:

You can’t have people in this position who are too vain, get carried away, or become ob-sessed with power. They need to exercise their power because that is part of their job but ifthese people become irrational then they are in the wrong place.


Maucher believed that for an acquisition to be a success, the board’s crucial role wasnot increased involvement, but simply hiring the right CEO. Maucher continued:

Saying ‘that’s a nice guy, I’ll let him get on with things and give him an efficient assistant’.Wrong. You never can solve a problem from the bottom up. A bad CEO needs to go. Thehigher the position the more important the change.


Further to this, Maucher felt that while officially, the board would always havegreater power, in reality, the board relied much more on the CEO. For this rea-son he was against the expression “ultimate responsibility” (“Oberleitung”), whichwas brought into Switzerland by Mr. Boeckli:

96 4 Empirical Part

Even today no one really knows what that means. I don’t care about this term as long as theboard has the opportunity to delegate its main leadership 90 percent to the CEO.


It is also important to note that while external growth through acquisitions was keyto the developments that Maucher led, he was always aware of the importance oforganic growth: “the latter needs to be a given, otherwise the company loses itsdynamic” (Maucher, during interview).

Maucher made two-thirds of Nestlé’s profit through acquisitions and one thirdthrough internal growth and in this way he put the company, in a short period oftime, into a new position. Indeed, he was ahead of his contemporaries: “I had to dothat before everyone else realised what globalization meant or what water meant,or what pet food meant. I shortened the process. Ten years later everything wouldhave become much more expensive” (Maucher, during interview).

Thus, a powerful, original mind was at work, capable of measuring the needsof different parties, exploiting their strengths in an incisive and effective man-ner, creating systems that were new and inventive, and perhaps, most significantlyrecognising the need for constructive relationships without ego.

4.2 Swissair

I wasn’t on the Swissair board. I have talked to people from an outside point of view andsaw more than the board members. That’s what I really felt. It’s a tragedy that one cantrace back to human mistakes. It is regrettable and it hurt me for Switzerland. (. . .) I believethey were partly befuddled and partly Mr.. Bruggisser didn’t inform them accurately. Forme it’s hardly comprehensible how sensible and reasonable people, who are in fact good,could watch for such a long time. This can only be board befuddlement (. . .) and weakness(. . .) I still don’t understand it (. . .) For me it’s a phenomenon. But I can’t explain it anydifferently.


In the Nestlé case, many key players on the board were willing to provide rich anddetailed information on the interaction of the board and management during acquisi-tions. Documentation was necessary only to confirm the facts, which were all agreedupon amongst the members, and were further augmented with observation. Individ-ual exploration of the acquisition cases was therefore not considered particularlyfruitful or necessary. For Swissair, however, interviews were difficult to organizeand many requests for meetings were declined, to a large degree because of ongoinglegal claims against board members. Those that did agree to meet were reluctant togive information, or not close enough to the TMT to have insight into the relation-ship between the board and management. As a result, there is greater emphasis inthe following on the hard facts of the individual acquisitions, in an attempt to deducemotives and relationships.

As a note on terminology: SAirlines refers to the airline section of Swissair whichwas itself one part of Swissair Group which became SAirGroup in 1997.

4.2 Swissair 97

It is important to bear in mind that it is hard to maintain total impartiality whendealing with a large amount of narrative based sources as was the situation with theSwissair case study. Throughout the study an attempt was made to steer clear ofconjecture, despite the fact that, frequently, the indisputable facts were inaccessible.It this way, the study was based on numerous features which were not hard butsoft facts and these formed the primary reasons for problems in the company. Thisstudy concurs with Macus’ (2002) perspective, that the board as a collective didnot succeed in amalgamating and applying the wide-ranging experience, skills andabilities they held as individuals.

This study also examines and develops Ernst & Young’s (E&Y) discoveriesin their report on the company. The report functions as a vital source of facts indeciding if particular organisational parties, like the board of directors, precipitatedthe decline of the firm. All of the important materials were not at their disposal andE&Y are open about the fact, but despite this, they posit that the documents that wereaccessible were enough to work with in terms of their report. Several thousand pagesmade up their document, which examined a huge quantity of material accessible tothe audit and consulting firm such as invoices, reports, documents to do with theorganisation, etiquette for meetings etc. In their introduction, E&Y are insistent thatit was not their place to make judgements with regards to blame (E&Y 2003/1, p. 1).

Reasons for the collapse of the firm can be discovered in the very complicatedcircumstances of the company and soft factors. Clearly, the TMT of the companywere significantly affected emotionally through processes of denial, the desire tohold on, identification and attachment. The case continues to have an important em-blematic significance. An in-depth examination of the social relations that occurredinside the top leadership parties, along with gaining complete knowledge of meetingetiquette and so on, would be the only method of carrying out an absolutely scien-tific examination of the firm’s top leadership and how they precipitated the declineof the firm.

The time frame 1992–2001 is examined as this accounts for the period whenthe company’s worsening situation began spiralling towards its end in 2001. In thisthesis, a carefully examination is made of chosen texts on the case and conclusionsare based on material like the annual reports.

4.2.1 Introduction to the Ernst & Young Report

Historical BackgroundSo that the significance of the conclusions of the E&Y report is fully appreciated, itis vital to understand its context. In October 2001, Swissair entered into receivershipand the chosen liquidator ordered a report. While it was not Ernest & Young’s place,as previously noted, to make calls on blame, that being the court’s duty, the reportoperated for both the liquidator and judge as a significant source of knowledge onthe collapse of the company and the degree of input from various parties in theorganisation such as the board of directors. In April 2001, the general conventionasked for a special enquiry into the top management employee shuffles, the HunterStrategy and the resultant and unprecedented loss of almost CHF 3 billion in the

98 4 Empirical Part

2000 business year. This happened previous to receivership. E&Y was brought into conduct a special examination of the case during the summer of 2001, and inparticular to answer a host of queries generated by the judge and shareholders whichwould be used in deciding degrees of responsibility in the eyes of the law.

Critical Remarks on the E&Y ReportIt is important to mention several aspects of the report prior to moving into a fullscale discussion with the aid of the qualitative information sourced. The report at-tempts to be both accessible and detailed, and achieves this through a systematicapproach to the questions and a willingness to retrace steps to aid comprehension.It should be noted, however, that E&Y inevitably examined the information and itscontext from a particular perspective: “That this does not contain the declarationsand opinions of the relevant individuals is the most negative aspect of the document”(Vollenweider, during interview). Indeed, this misgiving was mentioned by other in-terviewees as well. The value of one-on-one discussion was revealed by conductinginterviews. Thus the document would have been improved by adding a sizable andbroad portion of the views and elucidations of the various individuals. It is thereforeimportant to look at the document bearing in mind that it does not fully representthe events but rather is one of several illuminating and partial sources.

It is also important to note that, as a result of the examination’s remit, the docu-ment focused mainly on negative aspects. Though the document attests to portrayingevents with a factual objectivity, it clearly does not live up to this by virtue of its dis-tinctly negative flavour. Once more, the temptation to see events in a negative light isstrong. In fact, other European carriers aspired to being like Swissair for a long timeas it had many successes to its name, not least in terms of its place in the nationalidentity (Probst & Mercier 1992). It is worth remembering this.

4.2.2 Description of Swissair

The pamphlet on the story of the company was an addition to the annual report in1992 and forms the basis of the following outline of the company’s history. In theearly 1930s, the company was formed through the merger of Ad Astra and Balair(Probst & Mercier 1992). Over the following seventy years, within a market whichbecame progressively tougher, the company grew with ground-breaking courage anddetermination. At its inception, Swissair quickly purchased new passenger aircraftand increased its number of destinations in Europe. Straight after World War Two,despite laying off employees as a result of the conflict, the company began buildingup its aircraft numbers again, incorporating the new technological advances gleanedfrom the conflict. In 1968, propellers gave way to jets.

The company got bigger through keeping up with the forefront of aircraft equip-ment advances and by constantly offering top-class services and products. In thisway, the airline always aimed to operate in a global market. This would have beenenough to get on in prosperous periods and subsist in downturns, as the governmenttook care of landing rights, ensured prices were high and constant and the marketwas controlled by inhibiting competitors. In an uncontrolled market, coupled with

4.2 Swissair 99

very strong competitors, however, the company had to discover new competitivemeans, as discussed in the following chapter.

As an emblem of promptness, dependability, top-end service and financial suc-cess, Swissair was, for Switzerland, a part of the cultural identity and a secure staple.This is a vital to understand.

Until the beginning of the liberalisation of the airlines in Europe in the late 1980sand the global cessation of nations’ sole control, rights to land had been regulated byagreements between nations which limited capacities and rights. Particularly for theairlines which were not as big and operated in a domestic context, things alteredsignificantly at the start of the 1990s as they began to take effect. This time ofderegulation resulted in loss of profits for numerous airline companies in Europe(E&Y 2003/1, p. 1).

When Switzerland voted no in 1992 to the referendum on joining the EU,Swissair was at a strategic disadvantage because the company would still have tonegotiate European landing rights where its EU counterparts could enjoy an openmarket (NZZ 2001/6). Furthermore, to avoid losing its licence to operate, the com-pany was only permitted to take shares of less than 50% in airlines in Europe (E&Y2003/1, p. 2)

Strategically, the firm could go forward through the formation of partnerships inEurope (whether based on buying shares or not) in order to become a good partnerchoice for a bigger firm (e.g. Delta-Airlines), or Swissair could become part of abigger system (e.g. British Airways) (E&Y 2003/1, p. 2).

The Hunter Strategy was put in place in reaction to Switzerland’s vote on theEU agreements so as to bypass discussions with every single EU member on rightsto land.

Between 1992 and 2001, the years of serious decline, many attempts were madeto save the company: the Alcazar Project did not succeed in conjoining the firm withAustrian Airlines, Royal Dutch Airlines and Scandinavian Airlines; and similarly,the Hunter Strategy did not succeed in installing Swissair as leader of a group ofstate flag airlines because it was, strategically, too risky and costly. These failedattempts were a result of a multitude of different causes where no single event orindividual was solely responsible.

In this corporate governance examination there is particular focus on the acqui-sition period of the Hunter Strategy covering 1997–2001. Various sources, alongwith E&Y, report in detail on the many companies acquired including the interac-tions and dealings of the top management during this period. Actions during theHunter Strategy period give a very good idea of the wider top management andboard team’s modus operandi (or lack thereof) at the time, although there are anumber of contributing causes in the collapse of the company.

4.2.3 Corporate Governance Structure

As with the Nestlé case, Hilb’s integrated board management model is applied toSwissair focusing again on the following: role of the board in creating a strategicorientation; committees; assessment of performance; role of chairman; structure ofthe board, such as its composition and number; and elements of board culture.

100 4 Empirical Part

4.2.3.1 Board Team

The Chairman’s RoleThe chairman was a full time job in Swissair, where the rest of the board carried outtheir particular jobs alongside other responsibilities. As described in the sectionscovering their respective reigns in Section 4.2.4, it is interesting to note that none ofthem had previous airline experience.

Creating Strategic OrientationAs mentioned in the theoretical part of this study, literature generally states that itis the duty of the board of directors to create the strategic orientation of the firm.As it will be shown, because of industrial deregulations and the resultant increasein competition, this was a difficult task in Swissair. As it will be discussed, thecompany attempted to deal these new challenges in a newly opened market by meansof several strategies involving acquisitions.

As will be seen, there was a dramatic swing from a scenario in which the boardcompletely dominated the CEO to one in which the CEO acted without meaningfulor effective board involvement. In both instances there was a lack of cooperation interms of the strategic orientation.

Assessment of PerformanceThe board of Swissair did not request more detailed information with regard toperformance assessment. Assessment and control of the firm’s performance is a vitalduty of the board alongside their duty to create a strategic orientation. To do this,the board makes decisions on its own as well as depending on the feedback fromauditors and management. For Swissair this was an extremely complicated task dueto an ever more complex group structure based on a two-pronged strategy involvingairlines as well as firms connected to airlines, as well as the numerous acquisitionsthey had made.

This was compounded by the terrible financial circumstances a number of theGroup’s acquired partners revealed themselves to be experiencing. In a press arti-cle, Honegger revealed that Swissair’s board directors themselves were not able tocheck the financial situation of all the targets before they were acquired. Honeggerreported that instead the board had to rely on the due diligence conducted by theCEO, its team and different consultancy firms (NZZ 2001/2). This is a valid point,but after perusing in detail the due diligence reports, the board’s duty was to pose vi-tal, effective questions. Rather than doing this, the Swissair board assumed withoutquestion that Bruggisser and Schorderet, his CFO, were reliable in terms of both thefirms acquired and the Group’s financial reports. In 1998, the Group showed decentfinancial statements to the public which did not suggest signs of problems. Later, theissues were clear but only to an expert in accounting. Complex agreements involvingvarious options accompanied many of the acquisitions, and in spite of the quantityof information made available to the public, the fact that these partner firms were introuble was not apparent. The Group did not own more than 50% in the majority ofthese firms, and full consolidation was unnecessary (NZZ 2001/3).

4.2 Swissair 101

Indeed, Hofstetter, a consultant in HR management and remuneration, confirmedthis in his interview:

I think we’ve measured performance incorrectly for a long time. I’ve no idea why the shareprice continues to go up. I think had the participations been properly consolidated at anearlier stage, if EVA had been measured, etc, if you really pulled through the economicperspective and were not so concerned with revenues and turn over, then it probably wouldhave been recognised earlier what was going on.

Hofstetter, during interview

Malik states that a firm’s position in terms of strategy is not apparent in accountingnumbers, as the intermittently healthy financial figures reveal (Malik 2001, p. 27). Itshould be noted here that PWC, Swissair’s auditor, attested to the accuracy of theirbookkeeping (NZZ 2001/4). The board ought to have assessed and controlled thefinances more closely particularly in light of the complexities of the Group and thevarious financial and strategic warnings should have instigated greater involvementfrom the Swissair board of directors in terms of assessment and control of the per-formance. An obvious signal, for instance, that the board’s strategy was not alignedto the market was the fact that crucial partners like Austrian Airline, Singapore andDelta dropped out.

4.2.3.2 Structure of the Board

Composition and Size of the BoardFor the analysed period, an examination of annual reports was made as a generalindication of the board. In all, there were approximately sixty members during thisperiod, a comparatively large number of people. Only around seven members madeup the committee of the board. It is pertinent to note the quantity of individuals onthe board, regular members, who did not have a direct role.

In terms of the background of individual board members, there was an appre-ciably high volume of individuals from political circles in Switzerland and thosebelonging to important Swiss businesses. Influential foreign members also beganappearing in the 1999 annual report. Furthermore, state representatives from federaland local levels as well as representatives from regions and major cities were in-volved at all times as were individuals from large-scale Swiss industrial firms andfinancial services. Clearly the health of the Swiss flag bearer was important to all ofthese members and those they represented.

The Swiss have a comparatively small network of businesses because of themilitia-system in which Swiss individuals are allowed to stand in several military,political and business positions at once, creating small business circles and net-works. Numerous people contend that new executives are difficult to source as it isa small nation and this is the reason for the leaders holding several roles simultane-ously. It is worth noting, however, that legally a stock firm’s board of directors mustconstitute a majority Swiss membership (Art. 708 OR).

CommitteesA board committee comprising vice-presidents, a few other members and apresident was created because of Swissair’s large board of directors. In 1999, the


committee was made the “nucleus” board of directors. Three committees whichwere not as big were also created in this new structure, covering compensation, fi-nances and organisational matters (Swissair 2000, p. 52). No sources are accessiblein terms of the exact duties and modus operandi of these committees.

It is important to note that an advisory boardwas also created in the same yearduring this restructuring of the board, comprising several new and old players. Im-portant figures like the ex-financial minister of Germany, Mr. Waigel, were involvedin this board. As far as can be ascertained, there are no sources of information on theefficacy of this advising body, and it must be presumed that they had very little or noinfluence on the choices made subsequently. Again, it would appear that member-ship of the Group’s board was more of an honorific title than a position associatedwith significant duties.

MeetingsIt is certain that all board members held at least one other time-consuming anddemanding office; for instance, Honegger, as full-time head of the Group was on theNZZ and UBS board of directors as well. It is unclear, however, with what regularityor effectiveness they met, despite Luechinger’s papers from 2001 which state thatthey met every month (Luechinger 2001). It is stated in the annual report from 1993that the committee, pre-restructuring, met twelve times at frequent intervals thatyear (Swissair 1994, p. 9).

This same report alludes to the board’s work regarding the Alcazar talks. Fourextra meetings were needed alongside the usual gatherings. It is quite clear in thereport that individuals were shown detailed papers, necessitating thorough perusal,alongside the meetings on this issue (Swissair 1994, p. 9).

4.2.3.3 Culture of the BoardTo some extent the Group’s culture was characteristic of corporate culture inSwitzerland, in that it was based on a community in which those coming from theexterior are initiated into the “circle” previous to being given responsibilities. Thispattern can be seen as representative of the Group’s board behaviour previous to thebig changes after 2000. The board was fairly fixed during this earlier period, with anucleus of prominent individuals.

It would appear that the Group’s board culture was perceptibly influenced bythe composition and structure of the board of directors, in that it was mainly basedon the influence and reputation of national and business concerns in Switzerland.In the Swissair Group, the division of supervisory duties and those of managementwas not appropriately maintained as is recommended in a firm’s structure. It is safeto presume further that there were various types of board culture in Swissair dueto the large numbers on the board. There was also a variety of skills and back-grounds present. Furthermore, members who were younger and more active, likeMr. Muehlemann, were assumed more crucial than others and even the president.

Bruggisser and Loepfe’s inclination to evolve controversial strategies covertly,away from the board from the outset and without their vital input, must be viewedas a result of there being a big board in terms of numbers whose prestigious political

4.2 Swissair 103

and business members had their own concerns. This behaviour betrays a seriousproblem in the culture, generated by the very large board of director body.

A widespread issue in the literature is a board’s closely knit business circles. It isa good thing in that such small business circles lead to greater efficacy in a businessenvironment which is progressively more cooperative; however, it is a bad thingwhen the interest of an individual leads to differences between members. Thesebusiness networks become bad things when the open culture, within and without, islost. In other words, a mentality is created within the group which rejects objectionsfrom within the group and defends against those from the exterior, thus disablingexternal collaboration (NZZ 2002).

Another cause of cultural insufficiency may be that the directors endorsed man-agement’s strategic plans. It is worth bearing in mind that strategic matters andsurrounding factors were becoming more complicated. It is unlikely that boarddirectors would confess that their comprehension was incomplete, that they haddrifted from being able to see the bigger perspective, or that they no longer agreedwith a strategy that they had previously endorsed. It would appear that a constructiveand open culture is necessary when adaptability is needed in the face of complica-tions. In this case, the board was unable to bring together its collective knowledgeand experience to operate as a strong unit because the team was constituted forreasons of reputation and operated to avoid intervention. Thus, its power seemedto have been diminished to the lowest common denominator and the board’s in-efficiency was largely a result of the lack of communication between membersand between top management and the board. Macus’ suggestion that the board’slack of success was a result of inefficient board interactions rather than poor boardcomposition or structure, is borne out under this analysis (Macus 2002).

4.2.3.4 Integrated Board Management

Member SelectionAuthors like Hilb recommend composition based on thorough consideration of theindividual’s skills. This does not appear to be the case in Swissair. Rather, it wouldappear from the documents examined, that the hiring process, under the chairpersonand current members, was used to induct important political or business people inSwitzerland. Until 2000, the “old” committee did not seem to have a structure withpositions that required particular skills, but when the new structure was ushered in,it is likely that some sort of underlying principles based on contemporary businesspractices were used for choosing new members.

Member CompensationFor many years in Switzerland, talking about compensation was considered veryawkward and so what the board or top management were making was not knowngenerally or discussed. This has changed in recent times, to a degree, by thechanges in regulation at the Swiss-Stock-Exchange. As a result, information aboutthe board’s compensation is scarce. The shareholders only desired this infor-mation as a consequence of new awareness of the emerging disaster. President


Honegger was paid approximately CHF 500,000 annually (A4, during interview).This compensation seems realistic as was that of the chief executive.

It is also worth considering the fact that remuneration in terms of money was notnecessarily the leading motive for these individuals but rather the substantial socialsignificance of holding highly reputable positions in such a reputable company.

Other ConsiderationsBased on the examination, it is presumed that detailed schemes for other elementslike development and feedback within integrated board management were not inoperation.

ConclusionIn the case of SAirGroup, weak preconditions existed for integrated board manage-ment.

In terms of the best possible board composition, it is clear that despite the manyprestigious individuals present, the team was not the best it could be. It was alsotoo big and its members had too many other commitments. Indeed, there was plentyof business experience present in prominent leaders, successful entrepreneurs andpersonalities in Swiss politics. Crucially, however, not one of them came from the airtravel business. Furthermore, the Group did not possess an efficient board structure.Thus Swissair’s board did not fulfil the requirements of the first aspect of Hilb’sintegrated board management model. Further to this, the culture was neither opennor constructive.

While board compensation appeared to be reasonable, the board compositionbased on vision was inadequate, as was internal feedback. Moreover, in terms of thedevelopment of individuals, there were no processes which were institutionalised.This would indicate that the second aspect of Hilb’s model was inadequately met.

Lastly, there was no regular assessment of the board’s efforts, and consequentlythe third aspect of integrated board management was unfulfilled.

4.2.4 Goetz, Honegger & Corti’s Reigns

Hannes Goetz’s ReignOver his seven years as president, there were many prestigious business and politicalmembers on Goetz’s rather big board, and his tenure was eventful and in lots of wayscrucial to the firm’s later development. Goetz’s reign is characterized, in terms ofstrategy, by the following key schemes: the Alcazar-project, taking part in Sabena,and the latterly named, Hunter Strategy. The belief that change was necessary sothat the Group remained a strong competitor was the compelling force in all ofthese schemes, as will be observed. These efforts were typified by a continual battlebetween the realities of an extremely competitive market and the inherent sense ofsuperiority of the SAirGroup as a great symbol of identity in Switzerland.

In business circles in Switzerland, Goetz was a famous figure. Armin Bal-tensweiler had been with the firm for almost fifty years and was a key player in itsdevelopment (Swissair 1992) and Goetz was chosen by Baltensweiler to replace him

4.2 Swissair 105

as chairman in April1992. Goetz had previously read chemistry and had effectivelysaved several industrial companies (Swissair 1992).

As chairman, Goetz’s value in terms of making judgements can only be guessedat and is almost impossible to ascertain. There are suggestions, in spite of this, thathe was not an appropriate chairman at this time, lacking the vital, proactive qualitiesnecessary to the firm’s survival. Certainly, at the start of his tenure he was keen toinstigate changes in the firm and he was naturally a gregarious man with a great rep-utation which lent him public approval (Luechinger 2001, p. 120). From within thefirm, however, individuals criticised the fact that he did not have enough knowledgeabout the current problems facing the company and about the industry in general(Luechinger 2001, p. 121). It seems reasonable to presume that he was well paid aschairman as he could afford to hold mandates in different Swiss firms. Significantly,under Goetz’s reign, the chief executive, Otto Loepfe, worked covertly on schemes,presenting his ideas to the board and Goetz only when he had worked them outseparately.

In the end, during Goetz’s reign, all of the strategic implementations were un-successful and it is clear that he was not the compelling force behind them. PhilippeBruggisser and Loepfe, were both eager chief executives with big ideas under hisreign. Goetz appeared to be neither enthused nor proactive about their ideas norparticularly against them. He was clearly not claiming the strategies as his own, be-cause when Schmidheiny, Muehlemann and Hentsch, members of his committee,asked him to let Loepfe go, he did not object to losing his chief executive who hadalways been a source of difficulty for him (Luechinger 2001, p. 160).

Mr. R. E. Gut, often referred to as a key business mind in Switzerland, relin-quished his office on the committee and the board in 1995 (Swissair 1995, p. 10).Indeed, it was a time of big board changes, as the previous chief executive of McK-insey and then chief executive of Swiss Re, L. Muehlemann, was brought into theboard and instantly procured a committee mandate. Bruggisser, who had solidifiedthe Group’s holdings in other businesses with great success became the main figurein terms of management.

The hard-line expansion scheme, instigated by the firm and realised under Brug-gisser’s leadership, appeared very suitable to him. Thus, by the end of 1996, Loepfewas replaced by Bruggisser as COO, under Goetz’s orders (Swissair 1997, p. 27). Itcould also be argued, that Bruggisser’s fierce character was the reason that Goetzwas assumed to be less active than he ought to have been in terms of creatingstrategic orientation.

Along with a thorough knowledge of the air travel industry, great vision and ahard working ethic, Bruggisser had an exceptional reputation. He also had, to acertain extent, a large ego, and whatever the consequences, attempted to realise hisschemes.

As a result, he had a reputation for making choices alone. Indeed, Mauchersaid “Bruggisser wanted to force through his strategy and then only informed oth-ers selectively” (Maucher, during interview). In this way, he created an infamousinformation policy.


The majority of staff liked Bruggisser as a leader and his lucid, if inflexible,methods, and all had a high opinion of him. In person, he appeared to be humble andpersonable, but in a way, staff gave up arguing with him, because he was perceivedas more incisive and knowledgeable. In terms of perception, he was seen as a shyman within in the firm, but according to the press in Switzerland, he was a heroicindividual, an attribute he appeared to like.

Up to the crash of Swissair flight 111, he had appeared a man with a cool-head atall times, but as a result of this incident and the moving and professional manner inwhich he coped with it, the public saw Bruggisser’s emotional side. He was clearlynot an uncaring manager in his career apex.

Bruggisser’s downfall was that he was no longer capable of judging himself ob-jectively or really hearing what other people were recommending. Indeed, the moredisapproval he received, the more single-minded he became in his attempts to realisehis ideas. Interestingly, managers very often exhibit this type of behaviour.

There are a variety of perceptions in the debate as to the overall character of themanagement team under Bruggisser. He appeared to create a humorous environmentin which staff got on well. Schorderet, the CFO, was a great addition as a temperateand funny man; he was hardworking, extremely loyal to his leader, and had integrityand high hopes. Other people thought that Bruggisser and Schorderet supported eachother very much in the politics surrounding the team.

By the end of his tenure, the sheer speed and scale of the difficulties that werecoming up was too much, and Goetz frequently gave in to the more powerful andvocal board members.

Eric Honegger’s ReignIn 1993, Honegger became part of the Group’s board of directors in an “ex-officio”capacity, as a political figure for the Zurich region. When he gave up this post,he was officially voted into the board six years later. It is clear that stakeholderswere confident in his abilities then as it was agreed that he would replace Goetz thefollowing year (NZZ 1998). Until he had been elected in 2000, no one had asked ifhe had the appropriate background for the job.

Various answers were elicited from those interviewed as to Honegger’s character.Honegger’s academic background lay in historical science and he became the FDPsecretary after about a decade in the graphic companies’ federation. In the late 1980she was voted into Zurich’s governmental body. He had no background in business atall and as a result some suggest that he grossly overrated his own abilities and wasemployed because of the chaotic aftermath of Bruggisser’s removal from office.

Others suggest that he did what he could but the board ignored his ideas. Hisstaff found him personable and considerate. Initially, he mostly enjoyed the publicrecognition, but in the end he had to relinquish his office due mostly to pressurefrom the public. Overall, Honegger appeared not to be a very strong man but onewith good sense.

Honegger wanted to follow Goetz’s example by not partaking in business opera-tions but rather concentrating on performance assessment and control, and strategy(NZZ 1998). From a corporate governance perspective, having a strong division

4.2 Swissair 107

between business operation and the board’s responsibilities is considered the correctapproach.

Events did not unfold as would have been presumed. When Bruggisser was let goat the start of 2001, the only way forward seemed to be for Honegger to take chargeof business operations. His lack of business background was quickly revealed whenHonegger dismissed Bruggisser without any idea of a replacement, necessitating thereplacement of the chief executive with only three days notice (Luechinger 2001,p. 261). The public was told of it on 21 January, 2001 along with a seemingly coher-ent structure to cover the interim with Honegger as chief executive of the Group andMoritz Suter taking over as Airlines Chief. As the subsequent months would show,there was no vision or strategy behind it; the new heads were not coordinating butrather diverging in a variety of directions. As a result, important staff were leavingthe firm and eventually, because of public pressure, in March Honegger resigned too(Swissair 2001, p. 9). Despite the fact that Honegger had acquired a valuable expertin the airline business in Suter, Honegger was obviously not strong enough to headthe firm once Bruggisser was gone, as witnessed by the chaos.

There is very little in the sources about how the board and Honegger operatedtogether. Certainly in the initial months, being fresh to the job, it seems unlikelythat Honegger would have diverged from what the board or Bruggisser suggested.Moreover, it must be a given that Honegger did not have strong leadership skillsbecause, despite the fact that the Hunter Strategy was unsuccessful, it was nearlya year before this became evident under his headship. Furthermore, this highlightsthe lack of strength within the entire board if strategic orientation was so heavilydependent for so long on Bruggisser’s guidance.

Mario Corti’s ReignIn April 2001, Corti was officially voted president. He had been doing the job forabout four weeks and was in the difficult position of having to publicly declarenearly CHF 3 billion loss in 2000 at this meeting. Corti appeared eminently suitablefor the job as he had been Nestlé’s CFO, a very financially successful Swiss firm.Moreover, it was seen as a benefit that he had held political offices in the past (NZZ2001/5).

It is not easy to depict Corti’s character; he made huge efforts to restructure thefirm and was clearly diligent. On the one hand, he was a “champion” to most of thestaff at the company, his career was going really well and he was very confident.Most likely he enjoyed the huge challenge and personal risk of being the saviourof the company. On the other, according to those who worked closely with him, heappeared self-important as he did not trust his co-workers and kept himself at armsreach from the team. As such, he was a lone decision-maker.

Corti’s great personability eclipsed debates about his lack of background in turn-ing around firms in the airline business. Furthermore, he appeared to be, currently,the only person obtainable and suitable for the position as he had held, for a yearnow, a position on the board of the company and therefore understood at leasta portion of its background. Moreover, he was not perceived as accountable forthe previous disasters. The greater part of the board resigned at that shareholder


meeting in 2001, leaving only Muehlemann, Leuenberger and Hentsch (Swissair2001, p. 9).

In an ordinary situation, a board of directors consisting of only four people wouldbe seriously small for a firm as large as Swissair. But given the circumstances, a newset of rules were necessary in a vital time of turn-around; quick responses could becritical. As a result, in this instance, it seems fair that Corti assumed both roles ofchairman and chief executive. Corti was clearly a great leader – when he took upthese offices a new direction was plotted, and the Swissair Group management weredirected with clarity. All of the board realised the seriousness of the circumstancesand that there would be no room for error.

4.2.4.1 Based on the E&Y Report: Perceptions of Key FiguresWhen consulted, the ex-managers of the Group revealed little about sensitive issues,and interviews were not easy to obtain with key figures in the company. Thus,perceptions are especially informative. Moreover, because the final collapse of thecompany relied on a complicated series of events and people, it is fitting to examinequite a number of individuals. Where appropriate, quotations from the interviewsaugment much of what follows.

A Sense of the Overall ReportWhile the individuals in the Group were not depicted in the E&Y report, variousstatements were suggestive of their character. The report revealed that Bruggisser-regularly attended and was outspoken at meetings of the board, and thus was clearlya vital player. He appeared to possess great self-assurance and a forthright character.Indeed, in the final stages, he seemingly disobeyed the board’s directives, suggestingan ambitious, unbending and perhaps a rather egotistical personality. As Mauchercommented during interview, he was forceful in pushing his strategy through andwould only share his plans when it suited him (Maucher, during interview).

George Schorderet, the CFO, was usually quiet at these meetings, but he wasoutspoken at the meetings of the financial commission, at which Bruggisser wasnot attendant. This suggests loyalty to his superior, Bruggisser, and unwillingnessto conflict with his opinions.

Honegger was fairly damned in the E&Y report. There was a great sense, how-ever, that Honegger was out of his depth and took a long time to make choicesbecause he was waiting for Bruggisser to go. A suggestion of his doubt liesin the fact that he did not insist that the board’s directives given to Bruggisserwere followed, and it seems beyond question that Bruggisser had the strongercharacter.

In the end, Corti became head and in this capacity made a great deal of choicesand resolved many crises. As a result, it can be assumed that he was not afraidto make difficult choices and had a forceful character. Interestingly, he requestedvery high remuneration to be paid in advance, thus suggesting an opportunism andhard-hitting attitude to business.

4.2 Swissair 109

4.2.5 Swissair’s Acquisitions

4.2.5.1 Overview of Strategies: Alcazar, Sabena and HunterIt is the duty of the board of directors to create the strategic orientation of the firm.Due to industrial deregulations and the consequent strengthening of competitors,this was a complicated task in Swissair. The company instigated several strategiesin this period designed to alleviate the problems experienced in a newly openedmarket. Whether the company should remain independent or join with others in theindustry were options debated from the beginning. Assuming a role in the marketas a small, but top-class, specialist airline was never a practical solution and it wasobvious from the beginning that Swissair would not survive on its own. To managethis would have resulted in significant downsizing and relegation of the company toone with very little clout in the market. Whether the company wanted to become theleader or only a member of an international group was the key point of discussion.

The board was part of this debate, but regularly placed itself in opposition tothe chief executive who wanted to alter and improve the firm. Because of the basicbelief that Swissair was a more distinguished firm than others and was thereforenot a “follower”, numerous choices were made with this in mind. That this ideawas broadly subscribed to is proved by the actions of the top board members in thecompany.

As outlined below, and in line with the Hunter Strategy, the company made eightacquisitions of airlines in Europe in 1995 and the period 1998–2000. The expansionwas hindered by the fact that the majority of the acquisitions were in financial dif-ficulties. Thus, quite apart from the cost of acquiring the airlines, means had to bemade available to restructure them.

These transactions happened very quickly without due consideration of their fi-nancing. A coherent vision was not in place as the board’s finance committee didnot agree with these purchases. If due diligences were made, their suggestions wereignored during the discussion and by the board. Founded mostly on the overly confi-dent projections with regard to resultant synergies, more money was spent on theseacquisitions than they were actually worth. The practices of the financial manualwere not adhered to in terms of the proposals made to the board and companieswere acquired without any consideration for the warnings of the due diligence orthe lack of financial awareness about the companies.

Furthermore, frequently, the expected investment figure was hugely overreachedresulting in an overall spend of almost CHF 6 billion on the acquired firms, loan andguarantee claims, and share firms. The consequence of this dearth in assessment andcontrol of finances was a loss of liquidity, worsened by their ignorance or decisionto ignore the difficult dynamics outside the firm which were beyond its control.Eventually, by way of a chain of events, different choices were made on variousoccasions which were incorrect as well as dynamics which could not have beenpredicted outside the firm resulted in insolvency.

The Alcazar, Sabena and Hunter Strategy constitute three eras of key directionalchanges in the Group’s corporate journey.


An Opportunity Not Seized: The Alcazar ProjectThe Alcazar Project was a key scheme of the early 1990s propelled by the ener-gies of Loepfe, the chief executive, as were numerous strategies. Its ultimate aimwas to merge Royal Dutch Airlines, Scandinavian Airlines, Austrian Airlines andSAirGroup. The chief executives wanted to create a group that would be a pow-erful body in Europe’s airline industry alongside Lufthansa, Air France and BA.Growing difficulties with the ever bigger numbers of stakeholders stunted the initialoptimism in the talks. A bad result from these discussions, and the final disaster ofthe scheme, were a consequence of several things: firstly, the talks caused antag-onism in the relevant firms’ own nations as it was impossible to keep them underwraps; and secondly, their stakeholders’ interests were of primary concern to theindividual firms.

Similarly, SAirGroup was unwilling to concede in terms of its own stakeholders’interests or indeed, those of the firm, according to their 1993 annual report (Swis-sair 1994, p. 4). Since SAirGroup was considered the most powerful of all the firms,it was thought in the national press that they would lose out in the end by merg-ing (Luechinger 2001). Because of this, the negotiating team from Swissair werealienated due to a growing sense of self-importance. The record reports that lack ofagreement from the U.S. partner caused the failure of the talks. Whatever the case,the top management at SAirGroup were stranded with no direction.

The talks included the boards of directors from the outset. As part of the negoti-ations, the president, Goetz, as well as the managers in the company had demandedwell-paid offices in the new Group. Indeed, Goetz was ear-marked for presidentof the Group due to his high rank and Swissair’s clout in the talks (Luechinger2001, p. 138). It could be contended that the board were too subjective to graspthe significance of the transaction for Swissair, in the sense that they were defend-ing their own business and political interests in the national carrier. Without doubt,Alcazar was not a success in the end because of unwillingness to compromise andhot-headedness.

A Portentous Project: Sabena AirlinesTalks with Sabena Airlines, the Belgian flag bearer, began not long after the unsuc-cessful Alcazar talks. An letter of intent was signed with Sabena during the summerof 1994 and Swissair finally bought a 49% share in the company in the follow-ing year (Swissair 1996, p. 5). In the same year, McKinsey & Company suggestedthree possible courses of action after the assessment of the value of the stake inSabena: they could merge with a large airline, create a network through an assertiveacquisition policy, or remain independent. Bruggisser, Muehlemann and McKinseydeveloped as influential players the more complicated the circumstances and strat-egy became. The board turned into a less influential force. The board’s supposedexperience was greatly overshadowed by that of extremely skilled global managersunder Bruggisser.

At the outset, Bruggisser was very suspicious of the Sabena Project, and thechoice to invest was made by Goetz and Loepfe, the previous chief executive (NZZ2001/7). Indeed, as Swissair’s head of HR, Moelleney, reported that “the board

4.2 Swissair 111

viewed themselves as the strategy-makers and insisted the CEO carried them out,or he would be replaced” (Moelleney, during interview). Subsequently, accordingto Moelleney:

Bruggisser then implemented the strategy – growth through acquisition deals – and cameinto his own. He took charge and said ‘ok then, I’ll do that, but now I make the strategy andI take matters into my own hands and I don’t let the board dictate to me what to do’.

Moelleney, during interview

Other interviewees, including, a Swissair board member, confirmed the above view(Anonymous, during interview).

In spite of the disaster in terms of finances that the project ended up being, theboard, and in particular Muehlemann, made a strong stance on it (Luechinger 2001,p. 171). The investment was bound up in an agreement with the government ofBelgium who, in the interests of the country, were to retain a call-option to buy backthe stakes from Swissair (NZZ 2001/7).

Overly Ambitious: Hunter StrategyThe Hunter Strategy, as touched on in the introduction, was a result of Switzerland’srefusal to partake in the European Economic Community’s agreement opening upaccess to the markets of Europe in 1992. The strategy aimed to bypass individualbilateral talks with each European Economic Community member on rights to land.

Through fairly small share acquisition in partners, in the region of up to 30% andup to an amount of CHF 300 million, the strategy aimed to form a coalition betweennations with prospective growth, thus redirecting routes to Zurich, its main airport,and ensuring maximum usage of the firm’s long distance planes. In acquiring carri-ers in the leisure market and the mature markets, the scheme had been significantlychanged.

Moreover, the company frequently bought just below 50% (their EU stakeholdquota), and on occasion, by way of complicated and precarious financial agree-ments, got round this EU Ordinance. In spite of the fact that the airlines were notconsolidated, the firm sometimes ended up with total responsibility, financially.

All of these purchases were condoned by the board of directors, however, theydid not use risk management professionals to assess or control the scheme or havea vision in terms of the personnel or financial resources necessary. Unnecessarilyhigh sums were paid for the acquisitions and spending plans were exceeded. Thecompany ceased operations in the beginning of October 2001 as a consequence ofthis spending. According to one anonymous interviewee:

The Swissair board could have asked during the Hunter Strategy, ‘What is this? Stop!’ Theboard should have said ‘stop’, purely as an observer. Of course Swissair can’t afford to keep49 percent of a subsidiary which goes bankrupt.


But they were “observers” and Bruggisser was the primary force behind the HunterStrategy. There were three phases to this straightforward scheme: in the first phase,stock would be acquired in the big flag bearers in Europe, like Sabena; in the secondphase, an “Airline Management Partnership” was to be created to absorb all of their


overhead operations and back-office duties; and in the third phase, the fourth powerin Europe’s air travel market would be born through the homogenization of thevisual appearance of the Group (Luechinger 2001, p. 181).

There was a great deal of disapproval when this aggressive formation of part-nerships with carriers like Air Littoral, AOM, Turkish Airlines and Air Portugaldeveloped. Goetz defended this scheme and asserted the great value of thesealliances (Swissair 1999).

Despite the fact that a few acquisitions such as LTU were by now experiencingserious difficulties in terms of finances, the Hunter Strategy was followed whenHonegger became president. Apparently, the board had faith in Bruggisser and heapproved of the scheme.

The acquisitions’ difficulties, in terms of finance, were starting to show moreclearly as a result of the strong USD and kerosene’s growing cost. At the start ofthe summer in 2000, the board started querying whether the firm had the financialcapability to realise this scheme. In order to ascertain the real finances of the Group,the McKinsey consultants were brought in again.

In October 2000, the board revealed that the Group were obliged for as much asCHF 3 billion and blamed the project as the source of the problems, deeming thisevidence of the strategy’s failure and of the necessity for instant reconsideration.The temporary decommissioning, if not the complete abandonment of the scheme,was agreed on at the meeting of the board at the end of 2000.

Bruggisser was charged with sorting out the difficult areas. The board understoodthat the Hunter Strategy had failed, but because Bruggisser was such a big figurein the firm, they resolved to keep to the middle ground. Further to this, he waswell-liked by the Swiss and was perhaps the only individual who had a degree ofunderstanding of all of the alliances (Luechinger 2001, p. 230).

Reversal, But Not Soon EnoughAt this stage, entering into an alliance appeared to be the only viable alternative,however, it would be a difficult one. While in the past Swissair would have beena very appealing partner, now they had lost much of their appeal to big alliances.In early 2001, Bruggisser was dismissed as chief executive because Honegger re-alised that with him in power, pushing in a new strategic direction was impossible(Luechinger 2001, p. 257).

Over the next couple of months, no suggestions in terms of direction or strategywere made by the board. Presumably this was because the board could not arrive ata decent new strategy and Honegger had his hands full with juggling both positionsof chief executive and president. Thus, becoming a member of an alliance appearedto be the only option available. Nevertheless, they had to implement many changesin order to do so: the finances needed serious attention, the majority of their partner-ships were worthless, and the fleet needed downsizing. Furthermore, the idea had tobe surrendered that the company was an international leader in air travel. A hastyfresh start was vital in the circumstances, especially when the extent of the troubleswere revealing themselves daily. Rather than doing this, and despite the fact thatits members had been on governing boards for years, the board appeared frozen or

4.2 Swissair 113

perhaps they just did not understand enough about the firm and the conditions inwhich it operated. By the end, apart from Mario Corti, everyone had resigned (NZZ2001/2).

Corti came into power after a couple of months of no important changes. Cortideclared the year’s outcomes, in terms of finances, in April 2000 along with the ini-tial strategic concerns he had for the company. In terms of economics, in order tobalance out issues related to changing business cycles, the board settled on carryingon with the two-pronged strategy comprising airlines and connected firms. Simul-taneously, the firm’s structure would be pared down and, as much as was feasible,sending money out to several partner firms would decreased or cease altogether.Thus, it would appear the board who was left at that stage, along with Corti, hadreally become aware of what was going on. Since the banks made CHF 1 billionavailable in a credit line, these strategic choices were made with the presumptionthat the Group had the necessary cash. Thus, the structure of finances, rather thancash availability, appeared to be the concern and so work centred on that. But, liq-uidity was diminishing along with the slowing of the economy. Their efforts to savethe Group eventually came to nothing with the events of 9/11, a disaster which hadhuge global impact, not least on the air travel industry.

In the following months, the consultants E&Y decided that there was a realpossibility that the Group would be in excessive debt and this necessitated the in-tervention of a court. Furthermore, there were losses of about CHF 500 million asa result of swap transactions within the company’s shares, which had been commu-nicated incorrectly to the judge. A sudden increase in the firm’s cash needs resultedfrom the declaration on October 1, 2001, that the firm was entering receivership. Onthe 2 October 2001, as a result of this, the firm ceased operations. The consultantsfound, nevertheless, that at this point in time, Swissair had sufficient cash to keepoperating.

Right up to the final moment, rather than taking control of the situation by makingthe required changes and preparing for possible problems, the top management andboard depended on consultants, banks and the government to sort out their reversalof fortune. The board, however, did not have the required efficacy despite carryingout the essential official duties of efficient corporate governance.

4.2.5.2 Swissair’s M&A Governance: A Focus on the Hunter StrategyThe board’s role in the strategy, and the power relations in place between the CEOand the board, are not clear cut matters. One anonymous interviewee claimed theboard were merely incompetent “observers”, who did not understand the financialimplications of the strategy:

An airline is always capital-hungry, like a hotel. To understand this, you don’t need to bean expert on airplanes. You don’t need to understand anything about flying or be able tofly a plane. However you must know how the financing is carried out. Also, every boardmust be familiar with its political environment, with international business, and know howinternational mechanisms function, etc.



Another anonymous interviewee saw the board’s relationship with the CEO in acompletely different light and at least one significant reason for the strategy’s failureas beyond the board and Bruggisser’s ability to predict:

Yes, of course, the board has carried out its role! It was 100 percent behind the HunterStrategy. The board even looked into the strategy; the board was informed, in great detaileven. Anyhow, the Hunter Strategy assumed that the winner takes all, as in, we have to havea sound strategy within Europe. And if we implement Hunter at the right time, then it’llwork. And why has this failed? One reason is 2001. Without 2001, perhaps it wouldn’t havebeen such a disaster.


Further discussion is taken up in the conclusion once more detailed information isexplored in the following chapters.

Historical InformationIn the wider exploration of Swissair’s acquired companies there is particular con-centration on the Hunter Strategy. The reason for this is that E&Y supply in-depthinformation on this period. They also depict the interactions between the board andmanagement and this is useful, because in comparison to the Nestlé case study, theempirical interview material is limited for Swissair.

The Hunter Strategy is the focus of the next section along with E&Y’s exam-ination of it in their report (E&Y 2003/1). The context in which the strategy wasformed, its execution, and the board’s eventual recognition that it was not a success,are all elucidated further.

A brief look at the Dual Strategy, a scheme created as an alternative to the HunterStrategy, but in opposition to it, will be enlightening.

The Dual StrategyThe condensation of the airline (SAirServices and SAirLines) and airline connectedfirms within the Group (SAirRelations and SAirLogistics) was the focus of the DualStrategy. This scheme was created before the Hunter Strategy. In it, sections weredesigned to be more resilient and flexible in terms of the economy where they hadpreviously been more focused on fixed cost and repetitive phases.

Previous to late 1999, the Dual Strategy does not appear on the board’s protocol.In spite of this, the board had talked about and endorsed a structure two years before,at the beginning of 1997, involving the partitioning of divisions by law, and indeed,it must have been a consideration of the entire SAirGroup as well as the board, whenthey began partitioning the organisation (E&Y 2003/1, p. 108).

Despite the fact that it was not a main issue previous to 1999, it is logical toassume that while the Hunter Strategy dealt with aspects of the airline industry, theDual Strategy was the overarching strategic focus at this time and both were aimedat creating growth (E&Y 2003/1, p. 114).

Hunter Strategy: The Model, its Execution & ResultsThe following had an effect on the Group’s strategy: due to space restrictions andthe projected capacity thresholds in Central and Northern Europe, there were more

4.2 Swissair 115

Fig. 4.6 SAirGroup structure (E&Y 2003/1)

opportunities for greater capacity of the main airports of Eastern and Southern Eu-rope; the potential to bring customers to SAirGroup by way of partnerships; theprojected benefits in terms of competition and synergies as a result of the part-nerships; and the possibility of Europe having greater transcontinental air travelalongside Germany, Britain and France (E&Y 2003/1, p. 12).

The Hunter Strategy was founded on these projections of how the business mightevolve. The second part of the strategy, that they could become part of an inter-national carrier alliance, was based on the first step, to work with local airlines.These were the vital components in becoming a viable partner to an internationalgroup.

The primary aim was to enlarge and control the Swiss market by way of cleverpartnerships with home airlines whose economies were developing. By way of smarttiming of flights and airport connections, business could be expanded at a numberof airports which had possibilities for growth. The goal was the eventual alliancewith a larger company, thereby retaining autonomy. In order to achieve this, in early1998 the firm’s board decided to make their position in the Swiss market stronger.

The secondary aim was to make greater forays into the mature (or “third”) mar-kets, whose national flag bearers were powerful players but were restricted in thelonger term by capacity, such as the French, Italian, German, and British carri-ers, and thereby reap the benefits of synergies within the expanded Swissair Group(E&Y 2003/1, pp. 13–15).

In this way, they could redirect customers through the company’s centre oftranscontinental travel, Zurich (E&Y 2003/1, p. 52).

In spite of initial plans, the strategy changed. The aim of expanding their ownmarket was only fulfilled when the firm acquired the national carrier of Poland,


Existing alliances

Delta

Sabena

Austrian Airlines

Acquired shares

AOM

Air Liberté

Air Littoral

LTU

Volare Group

SAA

LOT

Failed acquisitions

Aer Lingus

Malev

Finnair

Iberia

Turkish Airlines

TAP

Access to hubs and destinations

Expansionof the home market

Penetration of third markets

Of other strategic value

Exploitation of synergies in the group

Fig. 4.7 Hunter strategy (E&Y 2003/1, p. 53)

LOT. The firm made acquisitions in mature markets in every instance besides this,which was not in line with the initial plan (E&Y 2003/1, p. 53).

Furthermore, with an estimated capital outlay of approximately CHF 300 million,gaining less than 50% of shares in chosen partner carriers was part of the originalHunter Strategy. In fact, against people’s predictions, and expanding greatly on thisplan, the maximum amount of shares (49% permitted by EU regulation) was fre-quently acquired. At times, these were risky acquisitions, with a value of up toCHF 4.2 billion, which involved placing options on purchases in the future (E&Y2003/1, p. 54). These actions resulted in a fourth European alliance in 1998 called

4.2 Swissair 117

Qualiflyer, but Delta, Austrian and Singapore Airlines, the major players in it, leftdue to strategic reasons.

The Respective Involvement of the CEO and of the BoardThe creation, approval and execution of the Hunter Strategy and its lack of resul-tant success are considered in the next section with a view to the board and topmanagement’s input.

Engineering and Approval of the StrategyIn the final months of 1997, Bruggisser, the chief executive of the firm, broughtin the consulting experts McKinsey & Company in order to help evolve the HunterStrategy. In the following months, because of the contentious circumstances, a groupwas created to evolve and frame the strategy to address the difficult issues. It con-sisted of a few high level managers, consulting experts from outside the firm andBruggisser (E&Y 2003/1, p. 18).

As a result of the first and a second meeting, and with great speed, the strategywas approved on January 16, 1998 by the TMT and three days later by the boardcommittee.

The grounds that formed the foundation of their approval included the following:firstly, on the same day, the consulting experts made a presentation to the TMTconcentrating mostly on the advantages of the scheme (E&Y 2003/1, pp. 20, 122);and secondly, while there is no proof that the consultants were in attendance, threedays later, Bruggisser gave this presentation to the board’s committee (E&Y 2003/1,p. 126). Luechinger claims in his book that, to the contrary, McKinsey & Company’srepresentative, Nils Hagander, gave the presentation on the Hunter Strategy in thismeeting (Luechinger 2001, p. 176).

Furthermore, in terms of the committee of the board and management team ap-proval, there is no proof that the financial overview documents, or even the strategydocument on the risks of synergies and the potential financial consequences, weresupplied to them. Both of these overviews revealed that as the strategy unfolded,there would be unavoidable increase in the costs in terms of capital, and also thatthe acquisition airlines which Swissair aimed at had experienced, in the period1988–1997, an almost CHF 2.5 billion loss (E&Y 2003/1, p. 20).

Despite the fact that the board did not have proven participation in the project orits operations as per procedure, they ought to have been monitoring its evolution.It also appears that, previous to the mentioned approval date, several individuals onthe board had not seen any paper to do with the strategy. Furthermore, no proof ex-ists to confirm that there had been consideration of the Hunter Strategy during eitherthe meeting of the board in the previous year, on 2 December 1997 in which busi-ness schemes were to be modified and the project team member’s planned financialschemes were to be delineated, or in the intended outlays of the year’s financingscheme. A protocol of a session on 20 January 1998 is the single piece of hard evi-dence as to the occurrence of the initial meeting four days previous. Those presentwere told by the chief executive Bruggisser at the meeting on the 20th about theboard committee team’s approval of the Hunter Strategy and that the basic personneland financial resources needed assessment (E&Y 2003/1, p. 28).


That Bruggisser was the driving force during the creation of the project andits approval is the deduction made in the E&Y report section on the TMT (E&Y2003/1, p. 19).

In spite of the regulations and principles surrounding strategy as outlined in thelaws of Switzerland and the board team’s role (see Section 2.3.4), and the fact thatthe firm had a full time president, no proof exists that the board team took part inthese events during this period.

Furthermore, on 19 January 1998, consent was officially granted for the strategyby the committee of the board, who did not have a role in its preparation; in fact,they approved it on the same day as they first come across it. Despite never officiallygranting consent, on 26 March of the same year, the entire board, while not directlyconsenting to the project, were convinced of the need to sustain it to create a strongerDelta alliance (E&Y 2003/1, p. 25).

Furthermore, despite the fact that Bruggisser’s announcements on 19 Januarywere contrary to the strategy as originally created which aimed to take relativelysmall, minority participations, the board did not respond negatively. According toE&Y, Bruggisser emphasised that it could not be assumed that their partner firmswould relinquish their autonomy as long as the Group procured a relatively smallnumber of shares in them, and also that the amalgamation needed to proceed inphases (E&Y 2003/1, p. 54). The greater aim, as far as Bruggisser was concerned,was to totally merge the firms’ sales and marketing, networks, management and pro-cesses as well as assessing the creation of an overarching brand by making necessarychanges to the products.

Execution of the StrategyOn three separate occasions throughout the execution of the Hunter Strategy, McK-insey had told George Schorderet, the chief financial officer, and Bruggisser of thepotential dangers of it.

Firstly, the consultants wrote a letter on 11 February 1998, outlining the compli-cations of the execution and the great business and financial dangers involved. Theletter suggested paying attention to finances and risks, to assessment of the valueof deals, and to harmonisation of compensation with the scheme and its aims. Theysuggested the following in terms of the Dual Strategy: implementing a plan to pre-vent the current business process difficulties in the Hunter Strategy, and prioritisingeither the further evolution of the Group or the Hunter Strategy (E&Y 2003/1, p. 62).

Secondly, the consultants highlighted, from a portfolio-perspective, the neces-sity for the entire Group to consider the risks in their statement of 2 March 1998with regard to financial matters. They also recommended pursuing a policy oftreating participations that were not the majority depending on their significancein economic terms, and using this in all of the firm’s ruling mechanisms (E&Y2003/1, p. 64).

Thirdly, the consultants pointed out in a meeting with Schoderet on 7 December1998 that the amount of trade and debt had increased hugely. They also included itin a presentation (E&Y 2003/1, p. 66).

4.2 Swissair 119

In contradiction to the fact that the board approved of the use of a tool that helpedto manage business risks and opportunities in October 1999, they failed to use it inthe largest and most precarious section of Swissair. In fact, Bruggisser emphasisedthe necessity of steering away from a tendency to avoid risk at this meeting (E&Y2003/1, pp. 60, 77).

By way of the means below, the directors of the board might have ensured theywere up to date with information.

In the annual business strategy document, the co-dependencies within the groupwere not sufficiently demarcated as this document reviews all levels of the sectionswithin a timeframe of three years. They also failed to quantify the extra funds andmanagement resources necessary or to consider the minority shares’ economic sig-nificance (E&Y 2003/1, pp. 58, 73). According to Moelleney, the head of HR inSwissair, no real consideration was made in respect of management resources. Thisis a hugely important concern in terms of integrating a new acquisition companybecause, as Moelleney said:

The stronger they are and the better the cultural fit, the less I have to do. The Swissair boardnot only neglected this question but were completely uninterested in the HR concerns ofacquisition. When I spoke at meetings, board members began to make phone calls, or towalk out.


In requesting a coherent overview of the SAirGroup including indicators of costs,profitability, staff and so on, the relevant database, the MIS (Swissair’s ManagementInformation System), was not accessible in a consistent and easily compared format.From December 1999 forward, capital, profit and revenue were the only numberssupplied and so the system did not contain all of the pertinent information. Despitethis, if one was willing to face up to the truth, the pending catastrophe of financeswas clearly visible (E&Y 2003/1, pp. 59, 76).

The relevant dangers of the project had been pointed out to the directors at var-ious meetings about strategy. Furthermore, on a number of occasions, the boardhad asked the TMT to delineate the funding of acquisitions, the structure of man-agement, and the resources necessary in terms of management. In spite of this, atsubsequent meetings, the board did not monitor the implementation of the strategy.The declared circumstances, in terms of finances, were deteriorating, particularlyfrom the second half of 1999 forwards and, a few months later, there was a finan-cial gap of over CHF 3 billion. This was the result of the strategy’s implementationwhich involved uncertain management resources and overdue reorganisation (E&Y2003/1, pp. 60, 80).

Cessation of the StrategyMcKinsey & Company’s introduction on 17 August 2000, to the first phase of theShield Scheme was the first occasion on which the board responded to the worseningcircumstances. The company’s financial condition was assessed, revealing a pendingcatastrophe, and instant measures were outlined in order to rescue the firm. Moreinvestment was halted and it was requested that opportunities to release cash werefound, however, the Dual and Hunter Strategies were retained.


Bruggisser suggested a potential merge with Alitalia Airlines at the next meetingon 21 December of the same year. Interestingly, the decision to go ahead with thescheme was taken despite insufficient attendance at the meeting to take this step.The action was totally incongruous with the last meeting’s choices and appeared toignore the general circumstances of the company. The Roland Berger’s consultingexperts were conferred with at the 22 November meeting on the subject of possiblewithdrawal strategies. Once more, in contradiction to this, Bruggisser proposed theAlitalia Airlines merger again.

At last, the board confessed, but not explicitly, that the Hunter Strategy was un-successful on 14 December of the same year by stating that a fourth alliance couldnot be created due to resource limits that the company was experiencing. The boardconceded that changes to the strategy were necessary (NZZ 2001/1). As a result,Bruggisser was forced to resign the following January (E&Y 2003/1, pp. 61, 90).

It is very interesting to note that Bruggisser said to Moelleney a few months afterhe was dismissed that “he was still of the opinion that his strategy was correct, andthat he should have been allowed to continue” (Moelleney, during interview). Hismistake, as he saw it, was that he had not made sufficient provision in terms of HR:

What he underestimated, he admitted, was the management resources you need for inte-gration, quantitatively and qualitatively – many people, that means, first, you must increasemanagement! The Swissair Group grossly underrated that. Sabena might have been pos-sible, but then came AOM, Air Littoral, LTU and so on, and eventually no good humanresources remained.


Airline Acquisitions

Everyone who understands something of board management knows that the board shouldnot buy third and fourth class companies. You dos not even have to be on the board to beable to see that. Also, a phenomenon that no one realised was that during these events theyalso had to cover for some of the targets’ liabilities – and look at the trade unions in France.

Loepfe, during interview

A broad outline of the board’s acquisition monitoring and decisions are of-fered below. After that, the various acquired companies become the key topic ofdiscussion.

Board’s Monitoring and Decision Making ProcessesA number of things that the board overlooked when making decisions and con-ducting duties of governance are highlighted in the report by E&Y. In terms of thedisaster, these mistakes constituted a crucial part and perhaps even instigated it. Asmall number of individuals in the TMT, including Bruggisser, played a role in theacquisition processes and making decisions. In spite of this, the rest of the team hadto deal with the results and amalgamate the firms with the entire Group with regardsto support of the management and operations.

The board could not carry out this task completely, as revealed by E&Y, as thepapers supplied did not conform to normal protocol as per the Group’s book on

4.2 Swissair 121

regulations, and these formed the basis of the decisions they needed to make. Fre-quently, the directors did not get the papers in time to be sufficiently ready forthe meetings. In several instances, like that of Air Liberté and Lufttransport Un-ternehmen (LTU), decisions were taken but the due diligence was not referred to atall. Other times, the acquisition agreements were not affected by the outcomes ofthe due diligence.

One anonymous interviewee claimed that this was not significant and not a basison which one should judge the competence of a board:

One must be very careful when making such black and white judgements because whetherthe board goes along with it, may or may not be a good thing. Acquisitions are much moredifficult situations than many believe, and they depend on many parameters and the resultcan’t simply be reduced to whether or not the board studied the documents and if so, how.


One wonders on what criteria the interviewee would judge a board’s competence.While review of pertinent documents should perhaps not constitute the only evi-dence on which to base judgement, it certainly seems a very significant place tostart.

Furthermore, lacking the advantage of plans for investment because of the pre-dominantly inefficient financial committee, the board was left on its own to makedecisions on presentations. Planning in terms of strategy was not possible withoutan overarching directional concept for the company. In not involving itself in thefiner points of acquisition funding, the board seemed be neglecting its duties. Acatastrophe resulted, therefore, from the firm’s diminished resources due to the ex-cessive employment of leveraged purchases reliant on loans made against currentequity capital.

In terms of the enormously precarious acquisitions that the Group made, it isunclear if the board comprehended or was fully aware of the dangers of them and thefinancially complex structure which underpinned them (E&Y 2003/2, pp. 8, 272).

Frequently, exaggerated estimations of value as well as overly enthusiastic pro-jections of profits to come were portrayed in complicated schemes representingestimations of the value of airlines and various other acquired companies. Inflatedprices reflected the presumed synergies; however, in reality, projected financial ben-efits were normally passed on, through the high sums spent on the acquired firm, tothe vendor. Because lots of the acquired firms needed extra capital injection, a care-ful acquisition policy would have cautiously weighed up the potential profits (E&Y2003/2, pp. 9, 144).

The participation was not sufficiently monitored by the board and eventuallythey were not supplied with enough pertinent information or tools to successfullysupervise the acquisition process.

The E&Y report serves as the primary basis for the outline of the followingacquisitions:

(1) Acquiring a stake in the Belgian carrier, Sabena Airlines

As Moelleney, the then head of HR reported in his interview, the board were thedriving force in the acquisition of Sabena: “the CEO was against it, ‘but if you want


to stay’ said the board, ‘you have to do what we ask, we make the strategies’”. Itwas a different situation for subsequent acquisitions, however, wherein the “CEObecame the instigator, discussed matters with the board, got their approval and putit into action” (Moelleney, during interview).

Sequence of events

The board approved the management’s acquisition of shares in the Belgian airline,Sabena to the value of BEF 12 billion in the period after the unsuccessful AlcazarProject in 1995. Despite being officially endorsed, no documentation was drawn upwhen the amount was spent. In anticipation of Swiss and EU bilateral agreementswhich would allow it, the firm procured options to buy the greater part of the shares.Making provision for the situation in which Belgium’s interests were at stake, thegovernment retained the ability to buy back the firm’s shares in the airline (E&Y2003/2, pp. 12, 19).

Bringing the full amount to 85%, the board endorsed another acquisition ofshares in Sabena in April 2000. Despite the detrimental financial consequences forSwissair due to the fact that Sabena Airlines did not have a positive equity-to-debtratio, and once more, with no papers on it, this was carried out. Furthermore, thiswas implemented contrary to the firm’s overarching strategic view of the moment(E&Y 2003/2, p. 21). Resulting in bad media attention in Belgium, the SAirGroupwithdrew from its agreements with Sabena Airlines at a later point.

Despite being terminated before it was owed in October, another CHF 200 mil-lion purchase was arranged in August 2001. Up until its own failure, Sabena Airlinespursued the SAirGroup, afterwards claiming against Swiss International Airlines,the subsequent incarnation of the firm.

Criticism of the acquisition process

The beginning of the creation of a carrier group headed by Swissair was embarkedupon with the acquisition. There were no written resources but rather a slide showformed the basis of the decision making process for the board of directors along-side an oral proposal. As a result, there was little comprehension and they grosslyundervalued the finances necessary to sustain Sabena. There was apparently no vi-sion, in terms of strategy, during this process of acquisition which was carried out inthe interval between the Alcazar Project and the Hunter Strategy. Buying long haulplanes and maintaining journeys that were not helping to develop the firm was oneof the major mistakes. Throughout, the firm appeared to have a muddled approachto Sabena: Sabena might have evolved to relate as a feeder to Swissair and mighthave operated successfully as a regional airline.

(2) Acquiring a stake in the German firm, LTU International

Sequence of events

From autumn 1998 to the following year, there were two phases in the finalisationof the purchase of Lufttransport Unternehmen (LTU). In the primary phase, usingthe LTG firm share and thereby various vendors, Swissair purchased stocks in LTU

4.2 Swissair 123

and connected firms to the amount of 49%. At the same time, LTG and the vendorsplaced a call-put option on the residual 51%. This happened in September 1999 aspart of the secondary phase, and simultaneously, so as to adhere to EU regulations,the vendors bought DEM 200 million worth (51%) of the LTG shares. At the sametime, Swissair agreed to increase the LTG firm capital by twice this amount. LTGprocured loans from banks and Swissair to fund the purchase of LTU. All of LTU’splanes were put up for sale and afterwards hired from the buyers in order to payback their borrowings (E&Y 2003/2, p. 30).

A revision of finances was needed in the following year and in part, as a result ofneeding to supply the LTU with CHF 250 million (the firm’s deteriorating chartersubsidiary in Germany) the firm finished with CHF 2.4 billion in losses in the firsthalf of 2001. LTU’s division, which dealt with tourism, needed a partner in strategyas a consequence of the revision of finances. REWE were brought on board purchas-ing 100% of LTG in December 2000 and recreating it as NewCo. By increasing thefirm’s capital, Swissair invested in NewCo stocks to the amount of 49% in the fol-lowing year 2001. Simultaneously, in the circumstances where NewCo’s capital wasbelow EUR 200 million, Swissair agreed that it would protect the collective loss.The Group permitted NewCo to purchase stocks of 49% for EUR 1 in November2001 (E&Y 2003/2, p. 33).


The great opportunity to enter the leisure market in Germany would have been at-tained through an LTU International participation, the firm being among the biggestcarriers in Germany. A Europe wide carrier alliance was the ultimate goal. In termsof opportunities for making profit, the firm’s carrier extension was sensible, despitethe fact that the Hunter Strategy had not predicted it. Despite the potential neces-sity for injection of funds, Air France and BA were attracted to an LTU acquisition(E&Y 2003/2, p. 37). The future looked good before the 9/11 disaster.

The total investment necessary, as was figured in the proposal given to the direc-tors, which in itself was not totally comprehensive, was unclear. DEM 2.2 billionwas the final figure of the various contractual agreements. The whole liability, interms of finances, for LTU was assumed by Swissair through a put-option. Swis-sair’s book of financial regulations was not fully complied with during the proposalin the area of information providing duties. In particular, information related to thefinances as per the obligation for executive care was not available. It is hard to un-derstand why the directors endorsed the proposal, considering the money involvedand the lack of documentation on the finances (E&Y 2003/2, p. 48).

During the board’s presentation, a total contrast was present when measuring theacquisition agreement against the information relating to the October 1998 stockacquisition of 49%. The real responsibility amounted to a stock value of DEM 2.2billion, that is 100%, due to the put-options. Nevertheless, the proposal was made atthe value of DEM 1.048 billion, or 49%. Furthermore, there was no suggestion of aguarantee in terms of loss coverage or a call and put option. In fact, the cost of thestock of 49% was DEM 49 million more than what the board had endorsed. The di-rectors did not acknowledge this as they were not told of it (E&Y 2003/2, pp. 48, 53).


The directors of the board knew that Swissair would have access to a fresh busi-ness field through the LTU International purchase. That it was very dangerous toembark on chartering, lacking agreements with a tour operator, was clearly outlinedin the report they received from the management. With minimal background in thatbusiness field, no doubts were voiced, however, as to whether it made good sensefor the Group to make a large track into it. Furthermore, compliance with the HunterStrategy was not adhered to with this purchase (E&Y 2003/2, p. 46).

(3) Acquiring a stake in Air Outre-Mer French Airlines (AOM)

Sequence of events

Swissair purchased a share of 49% in Air Outre-Mer French Airlines in February1999. AOM was part of Qualiflyer already. The point of this purchase was to get slotopportunities at Orly to make the company’s French competitive placement strongerand to complement Air Liberté, a previous acquisition (E&Y 2003/2, p. 76).


Through more effective managerial measures, a management vision which aimedhigh, and a total reorganisation of the firm’s structure, AOM made plans to coun-teract the meagre profits it was heading into. The whole firm was assessed to beworth around CHF 300 million according to analysis. As a result, CHF 150 millionin exchange for stocks amounting to 49% were agreed by the directors.

It is important to note that a previous declaration, that labour unions were againstthe proposed reorganisation of the firm in terms of structure, was in complete con-flict with what the presentation had outlined to the directors, that the labour unionswould not hinder their plans. This was, however, not topic of discussion during theboard meeting (E&Y 2003/2, p. 76). It was noted that attempts to diffuse a workstoppage were being made during the acquisition talks in the analysis of the man-agement. Further to this, it was likely that staff would ask for improved conditionsin terms of work. No mention of the firm’s condition in terms of finances, no reportsfrom the analysis document and no consideration of the way the purchase might befunded were mentioned in the presentation. The board was not told about the com-plex reorganisation in terms of structure that was planned or the agreements betweenthe firm and Air Outre-Mer French Airlines, and furthermore, the costs suggestedappeared inflated (E&Y 2003/2, p. 200). Despite this, and the fact that three indi-viduals cast their vote by facsimile without even seeing the papers involved, theproposed purchase was endorsed by the board.

(4) Acquiring a stake in the French firm, Air Liberté

Sequence of events

France’s carrier, Air Liberté, did not have a good track record in terms of its finances.BA acquired this insolvent carrier in 1996. Despite starting to produce better per-formance, British Airways put the firm up for sale in 2000 because they couldnot restructure the firm as was necessary. Air Liberté, along with Participations

4.2 Swissair 125

Aeronautiques, its holding firm, were completely bought by Taibout for FRF 500million, 49.5% of which was owned by Swissair. Swissair fully guaranteed Taibout’sloan for this.

Air Liberté was owned jointly by the Group and Taibout. Air Outre-Mer FrenchAirlines bought the Air Liberté in May 2000, but they required further funds to doso. Abiding by their takeover contract in terms of AOM, Taibout and the Group paidin this capital. A subsidiary of the Group put the money up for Taibout’s capital,which, in turn, increased Air Outre-Mer French Airlines’ capital. The Group gavethe bankers assurances of AOM’s increased capital through complex agreements.This was necessary for the eventual purchase of the French airline.

Taibout and the Group organised a call option and a put option to Taibout’s ad-vantage in April 2000. Afterwards, the Group agreed to assume control of Taibout’sstocks. The Group took on all of the risk relating to the purchase of the French air-line and Air Outre-Mer French Airlines due to the put option in which Taibout hadthe most stock.

The Holco SAS, including Air Liberté and AOM, were told to stop operations bythe Court of Business in the summer of 2001, thereby enabling Swissair to bypass itsresponsibilities and, at the same time, be involved in the Holco SAS’s reorganisationof the French airline’s finances (E&Y 2003/2, p. 98).


Bruggisser referred to the supplementary nature of AirLittoral, Air Outre-MerFrench Airlines and Air Liberté’s flight networks in his presentation to his directors.He cited synergy arguments that might be created by amalgamating these carri-ers and making these flight networks tighter. The Group might make its positionstronger, and gain the opportunity to hold second place to Air France in the marketin France by acquiring Air Liberté.

It is important to realise that Air Liberté needed 80% of its gains to come topay back the loan of FRF 1.5 billion taken by previous shareholders. The boardof directors, however, was not informed of this. They agreed to the presentationunconditionally prior to any in-depth analysis and despite the fact that a strat-egy paper including details of the deals was lacking and the company’s profitsthroughout their financial history quite obviously displayed Air Liberté’s fraughtcondition.

The projected synergy that might be gained by merging with Air Outre-MerFrench Airlines (estimated by way of overly positive targets) constituted Air Lib-erté’s primary worth for the Group. The presentation had not predicted the Group’stotal assumption of business risk by way of the put and call option to Taibout’s ad-vantage (E&Y 2003/2, p. 205). The investment figure which the board endorsed wassurpassed by almost CHF 1 billion in the process of acquiring Liberté-AOM and AirLittoral (E&Y 2003/2, p. 274).

The work needed to reverse Air Liberté’s fortunes was not examined in the duediligence according to E&Y. More money was necessary and a greater amount ofthe management’s time was required than was predicted.


(5) Acquiring a stake in the French firm, Air Littoral

Sequence of events

Air Littoral stocks to the amount of 49% were gained by Swissair from MSC inSeptember 1998. Simultaneously, MSC and Sabena agreed a call and put option onthe residual 51%. The EU, however, made it clear that it was not a valid purchase asSabena and the Group would have total power over the firm. As a result, Swissairhanded over most of their 46% in the firm’s portage to CA’s Doumer Marine andthe remainder to Taibout in June of the following year. When bilateral arrangementsbetween the EU and the Swiss were agreed, the shares would go back to being Swis-sair’s. At the same time, the transaction prevented the breach of EU laws. Swissairwas effectively in possession of all of Air Littoral when it acquired a further 46% ofthe firm’s stock from MSC.

The suggestion of recapitalizing Air-Littoral was approved in September 1999 bythe directors. That fact that the alternative predictions of the strategic analysis paperwere right and that Bruggisser’s sums in the September 1998 presentation were not,was borne out in the necessity of following this course of action.

Doumer Marine took a put option on the Air Littoral shares in March 2000,which were to move to Swissair. It was neither proposed nor endorsed at the meet-ing of the directors. Dufour acquired the Group’s own 49% in Air Littoral in June2001 for FRF 1. Furthermore, the Group took the responsibility of giving FRF 500million to enlarge the firm’s capital, and putting FRF 300 million towards a schemeto reorganise the structure.


Qualifier’s meaningful enlargement in key markets was the reason for acquiringthe firm. In this way, it was deemed a suitable counterpart to their intended futureinvolvement with Air Outre-Mer French Airlines. Without relevant paperwork beingviewed prior to the meeting, the board was proposed the acquisition by way of anoral presentation. Further to this, no important business challenges were outlined.

Elevating Nice to a key air traffic centre was seriously risky, as was the financialcommitment for such a small earning carrier and the analysis reported as much.Every potential efficiency gain was already wrapped up in the top figure of FRF 200million and further to this, in order to enable the carrier to function, another FRF200 million was necessary in liquidity. Despite this, Bruggisser reported that merelyFRF 120 million was necessary to the enable the carrier to function, and that Nicewas going to be an air traffic centre in the European South.

Because of this, nearly CHF 300 million was an excessive price and not a validfigure according to E&Y. The real sums spent on Air Littoral were, in fact, more thanhad been approved according to an internal review in 2001 (E&Y 2003/2, p. 216).

(6) Acquiring stakes in the Italian firms: AirOne, AirEurope & VolaireGroup

Sequence of events

The Group bought 35% of Volaire in July 1998, a newly created carrier, operat-ing short to medium range flights, which was not very big. Given the fact that the

4.2 Swissair 127

spending of CHF 5 million or under was at the discretion of Bruggisser, the purchasewas carried out with no official approval from the board. Through the acquisitionof Air One and its consequent amalgamation with Air Europe and Volaire, a newcommon holding firm was in preparation. The scheme’s goal was to secure a pow-erful position using the Malpensa-airport as a centre of operations and to create thesecond biggest Italian carrier. The risks were deemed excessive and involvement inAir One never came to pass.

The acquisition, to the value of CHF 150 million (49% of shares) in the predom-inantly long-distance carrier, Air Europe, was made in September 1998. A boardcommittee was entrusted with the approval of this.

The Volaire Group was the new holding born of the amalgamation of Air Europeand Volaire in December 2000 (E&Y 2003/2, p. 115).


Despite the fact that in May 1998 acquiring Air One was deemed by the board com-mittee to be too risky, six months on they endorsed the purchase of Air Europe andthe VolaireGroup so that Air One could be taken over. The committee was convincedthat the required reorganisation of Air One’s structure could be ably realised by AirEurope. Air One, however, was not bought. The estimated value was founded onoverly positive assumptions and did not make recourse to those of the underlyinganalysis papers (E&Y 2003/2, p. 230).

(7) Acquiring a stake in the Polish firm, LOT

Sequence of events

As one of the few purchases within the Hunter Strategy remit, in November 1999almost 40% of Poland’s flag bearer, LOT, was bought by Swissair.


Despite the fact that the board was presented with no resources about the oppor-tunities or risks of acquiring the firm, and the due diligence report was as thenunfinished, the directors approved the purchase unconditionally. LOT’s capital wassuggested to be CHF 170 million shy of that given in the presentation accordingto the analysis paper report regarding finances. Furthermore, the report revealedpartially incorrect and exaggerated valuation estimates had been made. The price,nevertheless, was unaffected, and the sum finally handed over exceeded the board’sconsent by almost CHF 50 million (E&Y 2003/2, p. 131).

(8) Acquiring a stake in the South African firm, SAA

Sequence of events

The firm bought 20% of South–African Airlines (SAA) in June 1999. They ex-panded but never fulfilled the call option they laid down on stock to the amount of10% that November. In the instance of the Group being dropped by its partners inthe alliance, this purchase would, it was presumed, secure the international scope ofthe Group’s operations (E&Y 2003/2, p. 135).



Despite the fact that it was not validated by the due diligence report on the finances,Bruggisser informed the board that there had by then been a fruitful reversal of SouthAfrican Airlines’ finances. In contrast, operations were still experiencing losses,according the report. That Bruggisser was aware of this and had deliberately giventhe board false facts was subsequently confirmed.

Dangers relating to social discord and politics were outlined in the analysis paperbut they were not factored into the inflated cost. Although it was acknowledged inthe review, the final figure was USD 30 million above that endorsed by the board(E&Y 2003/2, p. 255).

(9) Acquiring stakes in firms connected to carriers

The Group owned Gate Gourmet which, for the price of almost USD 800 million,made the acquisition of the British company Dobbs International and the Americancompany Dobbs International Services in 1999.

Acquiring these firms was an opportunity for Bruggisser to establish the biggestglobal catering service. It allowed access to the US market and due to the firm’sinternational network, it brought with it the chance to win big deals. It was deemedvital to establish, as a secondary mainstay of the business, a catering service as a wayto find equilibrium in the business cycles of the carrier industry. This was deemedimportant despite the fact that the board of directors accepted that no more profitwould be gained because of the outlays in terms of financing. Simultaneously, tomake the Group’s balance sheet healthier, it was deemed vital to sell different parts.

The methods of structuring and financing the purchase were analysed by E&Y,however, they did not look at the procedure of the due diligence. The firm tookconvertible credit from conditional capital as well as shares and obtained preferredcapital in order to pay for the transaction. So that money spent on tax was reducedas much as possible, the purchase was carried out using a complex arrangement ofnewly established American firms (E&Y 2003/2, p. 230).

Conclusion on Swissair’s Strategy in AcquisitionsOn 1 October 2001, the firm declared that it was entering into receivership and fi-nally ceased operations on the 2 October. Lambert, a lawyer in a major law firm,thought that the board’s role in this was not a matter to be judged by the law,however, because diligence was too difficult to prove in an entrepreneurial decision:

The Hunter Strategy, in hindsight, was bad. But I don’t think that a judge should decidein hindsight whether the strategy was diligently prepared or not. The law suit investigates:how did the company arrive in this place, how much information did the board have, howmany hours did they expend, how many times did they meet, how much paper was there,which risks were presented? If these can be proved sufficient, that they all knew what therewas to know, then they made an entrepreneurial decision.

Lambert, during interview

The criminal trial in Buelach, Switzerland, started on 16 January 2007.SAirGroup’s whole board were facing charges of “mismanagement”, “false state-

ments”, and “forgery of documents”. The key players accused included Corti,

4.2 Swissair 129

Bruggisser, Schorderet, Fouse, Honegger and Spoerry. Several of them declared tothe court that they are not guilty (IHT 2007). On 7 June 2007 the Buelach courtdischarged them all with regard to the original charges relating to the downfall ofSwissair (BBC 2007).

Whatever the legal aspects, clearly at a board-management level, malfunctionswere evident. While the E&Y report deemed the Hunter Strategy neither correctnor incorrect, it does voice serious doubts, however, about the realisation of it andparticularly its financial requirements. It is clear, however, that the problems weremore endemic.

Bruggisser, the CEO, had too much responsibility, the consequence of whichwas that the board did not have enough influence because there was no effectivecommunication with the management.

Only when the signals of disaster became apparent, did the compliant ethos ofthe board reveal itself through a lack of plans and ability to reverse the situation. AsWenger, a McKinley consultant, pointed out during interview:

The Swissair board had delegated a lot to the management. Accordingly, the board no longerhad a clear understanding of how the business ran. And that’s why every member of theboard ended up with a liability lawsuit on their hands.

Wenger, during interview

The Group’s board possessed a broad array of experience, skills and abilities, but asa team they were incapable of harnessing them, to the extent that not one of them,even if they had understood that there was a serious problem, could relate it to thewhole team, according to Macus (2002).

Each individual on the board, with exception of the chairman, had other commit-ments in the world of politics and/or business. Despite this wealth of experience,no one had a background in the carrier industry and they possessed no efficientrisk management. Sufficient schemes in terms of finance and liquidity did not existand resources on financial aspects were not adequate to make informed choices. Inseveral cases, the board did not intercede if the approved financial plans were sur-passed significantly, and they effectively allowed the bypassing of EU law and theinstigation of the strategy.

According to the findings of the E&Y report, the process of making decisionsin the Group was typically chaotic and their consequent realisation was slapdash.Fundamentally, they lacked enough information to make the majority of these deci-sions. On the whole, the report makes rather strong accusations and one is left witha rather sour taste.

After this, a similarly significant matter was that of how the board was man-aged. Because up-to-the-minute, integrated management was not used, the team wasnot especially engaged and did not possess the required mechanisms to control andmonitor to the extent that was necessary to fulfil their responsibilities.

The various characters who were influential players in the final collapse of thecompany were also a significant aspect. Bruggisser, for example, was one of severalforceful characters who had a big influence on the course of actions.5

5 Not only Brugisser; mistakes were being made elsewhere in the firm which speak volumes aboutthe prevailing culture. For example, to name one of many examples as to how the company was not


Furthermore, the public were a major influencing factor since each person inSwitzerland effectively held a stake in this Swiss emblem. Indeed, the magnitude ofthe influence of the shareholders or citizens is, as yet, not elucidated as the E&Yreport did not look at this wider aspect.

Looking at the broader picture, as Malik (2002) stated, the top priority of corpo-rate governance should be the strength of the company rather than serving interestgroups such as shareholders and other stakeholders. In this way, a company shouldfocus primarily on its customers in terms of delivering better products and services,which in turn enhances the company’s competitiveness and market position throughhealthy growth.

It appears that Swissair management failed to understand the vital importanceof healthy growth. Ultimately, the management focused on a combination of otherfactors such as management’s own interest, the fulfilment of the media and pub-lic’s expectations of this national emblem as well as Swiss business and politicalinterests. In this way, they created an expansion strategy which further compoundedweaknesses, leading to decreased transparency, an exponential increase in structuralcomplexity, the dispersion of managerial resources, and subsequently the inevitableloss of management control of the company.

4.3 General Conclusion on the Case Studies and TheirSignificance for Acquisition

The two preceding studies, Nestlé and Swissair, have generated broader insights.A firm’s competitive aspect in the market is increased if the acquisitions, which

are vital as a tool of strategy fulfilment, are correctly conducted. Acquisitions aidthe creation of more effective operations, better deployment of funds and the cre-ation of “critical-mass”. Good acquisitions also allow contact with innovations andspeed up advances in terms of market place. In the end, the firm’s effectiveness isincreased and the clients reap the advantages as long as the acquisitions are correctlyimplemented. Nestlé’s acquired firms are the foundation of the company’s accom-plishments and successful expansion to date and are evidence of M&A success. Asoutlined above, this was not the case for Swissair.

As witnessed, results are not necessarily generated by M&A. Rather, it is vitalthat a sound, underlying strategy guides the choice and implementation of M&Ainstead of a short-term financial strategy. This is explored further under Drucker’sfirst acquisition principle.

run by market rules, a further anonymous source claimed that “the route Zurich-Shanghai, whichwas a loss making service, and subsidised by other domestic routes, was continued by Swissairbecause prominent Swiss industrialists (who cannot be named here) wished to arrive in Swissairplanes when he went to China to conduct his business. Indeed, it is not a secret that Swissair’sboard was part of a Swiss business ‘old boys club’ and that prominent business people would satisfytheir personal business interests through their connections to the board” (A4, during interview).

4.3 General Conclusion on the Case Studies and Their Significance for Acquisition 131

Moreover, when the finances and agreements have been discussed, the CEO andhis team ought to focus entirely on ensuring a smooth assimilation of the acquisi-tion. While Nestlé strongly focused on this aspect, Swissair completely neglected it.To summarise, these aspects include, amongst others, ensuring a mutual exchangeof skills and information, providing the same job prospects and possibilities to allpersonnel, and encouraging the personnel who have just joined the new firm. Theseare all elements which are considerably trickier to manage than, for instance, dealingwith a new building. It is important to make efforts to minimise the psycho-socialimpacts of mergers and acquisitions, just like any plan in which there is major re-organisation of structure. The Swissair study reveals, for example, that it is easy tomanage communication badly during acquisitions. Even at the initial stages, a greatdeal of damage is inflicted as a result of general declarations of change coming fromthe acquiring company in order to quickly satisfy the stock market.

Looking at the broader economy, in order to realise industry’s necessary restruc-turing in response to market changes, M&A are efficient and relatively moderateinstruments. These requirements are fulfilled through measures like enhancing thespeed of innovation implementation, the amalgamation of dual businesses to cre-ate synergy, and the consequent reorganisation of production. Acquisitions permitfruitful change to face the challenges of fresh environments. It is thus vital thatan unemotional discussion is conducted relating to acquisitions and market share,influence, mass and so on.

While being big is not necessarily a benefit, it is certainly not inherently intim-idating for clients, businesses or other firms. Furthermore, it does not make senseto avoid “bigness” if positive results are deduced from a company’s expansion. Anyexpansion can be handled, as long as those in control remain aware that differentinstruments are called for as well as, potentially, structural change.

From a consumer point of view, a positive aspect of M&A is that the competi-tive advantages gained as a result of structural reorganisation are passed on to thecustomer.

5Analysis of Results

5.1 A Comparative Analysis of the Nestlé and SwissairAcquisitions Based on Drucker’s Framework

Drucker’s Six Acquisition Principles, as a normative requirement of suc-cessful acquisitions, are used to illuminate and explore board-managementrelationships and interactions in the two case studies.

Instead of presenting each case individually under the principles, a comparativeanalysis was made. The case studies are largely composed of qualitative data butan attempt was made to remain as objective as possible. Where relevant, individualacquisitions are explored, but rather than going into the detail given in the case stud-ies a more general impression across the various acquisitions is aimed at. Finally,the degree to which each principle was fulfilled is evaluated on a scale of fulfilment(not, partially, largely, and fully).

All six of Drucker’s principles are vital to the success of a business and failure toprovide for any of the elements can lead to the company’s eventual collapse. The firstprinciple, that acquisition should be based on sound business strategy, is perhaps themost important as it contains aspects of the other principles and is therefore giventhe most consideration below. If this not in place, no matter how well the other re-quirements are fulfilled, success will ultimately elude the company. As Malik (1999,p. 252) states:

If the logic of a merger is not right, nothing will help.

Principle (1) For an acquisition to be successful it has to be founded on businessstrategy rather than financial strategy.

It is important to understand that acquisition in itself is not a strategy but the resultof either a business strategy, which is looking to strengthen a company’s position in


134 5 Analysis of Results

the market, its costumer base, its brand and create synergies and so on, or a financialstrategy in which the firm’s relationship with the target company operates more likethat between a venture capitalist and the acquired shares.

Timing and the timeline in acquisitionsTiming is a key consideration. Acquisitions need to be both brave and well timed,and not just simply a way of getting out of a difficult situation. Further to this, CarlH. Hahn, an industrialist from Germany, said: “He who restructures first flourishes;he who restructures too late threatens or destroys jobs”. Swissair, due to a defen-sive, reactive strategy (discussed below), could not develop timing that pre-emptedmarket growth.

A strong emphasis on timing, in other words, having a long view was anotheressential ingredient to long-term success. As Maucher pointed out:

The question of whether to operate in the long-term or short-term is very important and onethat has to be discussed with the board as this is about strategy.


Companies need a long-term vision, and in order to fulfil it, they need a well-developed strategy. When acquisitions are involved, they need to be made forreasons of furthering this strategy rather than simply as a method of expansion or toincrease profits quickly in the short-term. Nestlé played the long game, Maucheroften infuriating financial analysts looking at the next three years because hisstrategy was for a “century” (Maucher, during interview). His thinking was thatpredictions about the market economy are often incorrect in the long-term as a re-sult of changing competition or consumer attitude, but when a long-term businessstrategy is used, there is more time to make ready for integration as a whole, andcosts and the price of acquiring companies are usually not as big. This was in starkcontrast to Swissair’s reactive policies as outlined below.

Planning or reacting when making an acquisitionMaking an acquisition because it is part of a business plan, as opposed to a reac-tion to events, is crucial. If the “century” approach is in place, the company willpre-empt and plan for eventualities such as changes in the law, in currencies andmarkets, in politics and so on. As an instance of this, in anticipation of Europeandevelopments in 1992, and their impact on Switzerland and Nestlé’s position in Eu-rope, they moved to buy Rowntree in 1988. Nestlé took the long view, acquiringcompanies in high growth markets in order to remain competitive worldwide, andto increase their position in markets they understood, such as confectionary andmineral water. When acquisitions were made, they were made with a view to theseclear business goals.

Conversely, Swissair was a company which developed a strategy largely as areaction to events in the market. When the European markets changed in 1992,industrial deregulations, new rules governing landing rights and the consequentstrengthening of competitors, became a huge problem for Swissair. The companyreacted with several strategies in this period designed to alleviate the problems

5.1 A Comparative Analysis of the Nestlé and Swissair Acquisitions Based . . . 135

experienced in a newly opened market. It was obvious from the beginning thatSwissair would not survive on its own, so the question was whether the companywanted to become the leader or only a member of an international group. Ratherthen basing acquisition on sound strategy, the TMT of Swissair were significantlyaffected emotionally through a processes of denial, the desire to hold on, identifica-tion and attachment and therefore they could never arrive at an objective strategy.Their efforts were typified by a continual battle between the realities of an extremelycompetitive market and the inherent sense of superiority of the SAirGroup as a greatsymbol of identity in Switzerland.

Emotional subjectivity and lack of planning resulted in acquisitions based onfinancial strategy. They wanted simply to retain status and become bigger byacquiring firms. A hard-line expansion scheme was instigated by the firm and re-alised under Bruggisser’s headship. By the time he was dismissed, entering into analliance appeared to be the only viable option. Again, they were forced to react be-cause they were not positioned well in terms of business strategy. On Bruggisser’sdeparture the board did not, or could not, develop a direction or a strategy. Fur-thermore, Honegger was clearly overwhelmed with fulfilling both roles of chiefexecutive and president. An alliance seemed to be the only way forward.

Swissair’s strategy was, therefore, reactive rather than pre-emptive, defensiverather than vision-based, which created a precarious acquisition policy. When asense of urgency guides decisions, acquisitions are made in order to stabilise, tocompensate for unpredicted market changes, to shore up debts and so on and whilethis can lead to short-term profits (but often not even this), it does not result increating a strong company in the long-run.

Developing strategy for acquisitions: from the inside outBasing an acquisition on a business strategy is not enough; it must be a well-developed strategy based on good information and the input and approval of allinvolved. As such, it should develop from the inside out, using external specialistswhere necessary, but not relying on them exclusively.

At Nestlé, when Maucher took over he implemented an internal restructuringin order to decentralise the firm’s operations. He empowered local managers, lis-tened to them, retrieved accurate information about what was really going on andthen involved the board in the process of making strategy. Advice and informationcame largely from within, from those “at the coalface”, and while he took on boardthe financial advice of outside consultants, acquisitions were based on a businessstrategy built on the experience and advice of his local managers and intensive dis-cussion with his board members. In this way too, his strategy was broadly supportedand this laid the ground for success.

At Swissair, conversely, throughout the various changes in dynamics betweenthe board and CEO, the strategy was never based on wide discussion of goodinformation.

When Swissair tried to expand into a carrier group through the acquisition ofSabena, there was a complete lack of information and resources to make a good,business strategy based acquisition. Indeed, it could barely have been classed as a


financial strategy based one either. There were no documents, instead a slide showand verbal presentation formed the basis of the board of director’s decision makingprocess. As a result, there was a great lack of comprehension and they grosslyundervalued the finances necessary to sustain Sabena. It had no strategic basis beingcarried out in the interval between the Alcazar Project and the Hunter Strategy andit occurred because an opportunity arose. Buying long-haul planes and maintainingjourneys that were not helping to develop the firm was one major mistake amongstothers. Throughout, Swissair had a muddled approach to Sabena and it resulted indisaster.

During Goetz reign as chairman, individuals from within the firm criticised thefact that he did not have enough knowledge about the current problems facingthe company and about the industry in general. Tellingly, his CEO, Otto Loepfe,worked covertly on schemes, presenting his ideas to the board and Goetz only whenhe had worked them out separately. Later, Bruggisser, not only developed strategyon his own, but effectively made decisions alone. When people work in isolation,an environment cannot develop in which acquisitions can be made based on good,sustainable business strategy.

In order to develop and frame the Hunter Strategy, for example, Bruggisser, cre-ated a small expert group consisting of a few high level managers, consultants fromoutside the firm and himself. As a result of merely two meetings, and with greatspeed, the strategy was approved by the TMT and three days later by the boardcommittee. The TMT based their approval on the consultants’ presentation whichconcentrated mostly on the advantages of the scheme. And three days later, Brug-gisser gave this presentation to the board’s committee (there is no proof that theconsultants were even there). There was a clear lack of information and involvementwithin the Swissair culture as information did not readily flow between parties, andthis is in direct contrast to Maucher’s policy of staff involvement and managementcommitment, particularly in making acquisitions.

Where Maucher insisted on frank, open discussion and real agreement based onpertinent information, the E&Y report found that in Swissair they lacked enoughinformation to make the majority of decisions, there was insufficient schemes interms of finance and liquidity and no efficient risk management. They also reportedthat the process of decision making was typically chaotic and the consequent re-alisation slapdash, and in several cases, the board did not intercede if the approvedfinancial plans and business strategy were significantly redirected. The team was notespecially engaged, as they were in Nestlé’s case, and did not possess the requiredinformation or mechanisms to fulfil their role in acquisition.

Thus we can see the vastly different approaches to creating strategy in the firstplace at both companies. It will be revealed later that while Nestlé stuck to itsbusiness strategy when making acquisitions, Swissair did not and their strategyeventually ended up as purely financial based when dealing with acquisitions.

StrategiesThe next consideration is the actual shape of the strategies developed at Nestlé andSwissair. Nestlé did not want to end up as a widely diversified corporation nor did


it reach towards acquisition of Nestlé’s supply chain or the expansion of products.Rather, when Nestlé made acquisitions, they were guided by their own four, self-developed business rules.

Acquisitions must:1. Enhance Market Presence: Making acquisitions which enhanced the Group’s

overall market presence within key nations and regions and were good prospectsin the long-run.

2. Reinforce Product Groups: Nestlé enhanced product groups through acquisitionsand made business innovations and new business lines available to the Group.

3. Create Product Group Equilibrium: This policy was created in order to diminishrisk through diversification in both products and markets.

4. Reduce the timeframe in achieving a top market position: In several instances, aswell as the need to ensure the business risk remained within controllable limits,the goal was to reduce the time needed to gain a top place in a vital segment ofthe market.

On the whole, Nestlé did not acquire firms where the basic elements were not strong.Those that were taken over needed to have good prospects for growth in the longerrun as well as technology and marketing expertise. For example, they acquired KitKat, a confectionary company with innovative marketing strategy, to enhance theirexisting market presence. Notably, Nestlé did make two exceptional participations(Alcan and L’Oréal) purely based on financial considerations.

Conversely, when formulating their business strategy in terms of acquisitions,Swissair did not have underlying principles, and therefore targets did not have thesame specificity. Frequently, their acquisitions did not strengthen their businesses,did not supply them with more expertise or innovation, did not create new clients,offer them any more protection, or less risk in business and often, even involvedinvesting a great deal more money.

Often, synergies were not considered and the only thing Swissair had in commonwith the targets was the same industry. Furthermore, their acquisitions had weakcommercial added value because they were based on exaggerated estimations ofvalue as well as overly positive projections of profits to come which were portrayedin complicated schemes representing estimations of the value of airlines and variousother acquired companies.

When synergies were considered, inflated prices reflected their presumed finan-cial benefits and so, the advantages were passed on to the vendor through the highsums spent on the acquired firm. Because lots of the acquired firms needed ex-tra capital injection, a careful business acquisition policy would have cautiouslyweighed up the potential profits. Swissair’s was not.

Strategy was not followed in acquisitionsThe Hunter Strategy aimed to bypass individual bilateral talks with each EEC mem-ber on rights to land (as a result of market changes after 1992 as the EEC openedup). Through fairly small share acquisition in partners, of up to 30% / CHF 300million, the strategy aimed to form a coalition between nations with prospective


growth, thus redirecting routes to Zurich, its main airport, and ensuring maximumusage of the firm’s long distance planes.

The Group’s business strategy appeared to be a fairly good one initially in thatit was founded on how the business might evolve. It took into account the poten-tial significant increases in the main airports of Eastern and Southern Europe. It alsoconsidered the possibilities of gaining customers through partnerships. Furthermore,it looked at the competitive advantages and synergies that would result from partner-ships, as well as the possibility of more transcontinental flights in Europe alongsideGermany, France and Britain (E&Y 2003/1, p. 12).

They did not follow this strategy however. The aim of expanding their own mar-ket through partnerships with national airlines whose economies were developingwas only fulfilled when the firm acquired the Polish national carrier, LOT. The firmmade acquisitions in mature markets in every instance besides this.

Moreover, the company frequently bought just below 50% (their EU stakeholdquota) rather than the 30% stipulated in the original strategy. But in the case ofSabena, however, they ended up by buying 85% of the airline even though it madebad financial sense because Sabena did not have a positive equity-to-debt-ratio. An-other instance of this was that the firm sometimes ended up with total financialresponsibility, creating an open invitation for the acquired companies to increasetheir debt with no direct liability.

All of these purchases were endorsed by the board of directors, however, ratherthan looking at the acquisition strategy, they focused on the financial aspects. Eventhis was badly handled, however, as unnecessarily large figures were paid for theparticipations and acquisitions, spending plans were exceeded, and, by the end, themajority of their partnerships were worthless.

Financial aspects of acquisitionsAs outlined, Swissair deviated from their acquisition strategy in favour of finan-cial considerations. Nestlé, in contrast, is an exemplary case in following Drucker’sPrinciples in that strategic considerations like brands or the value of distributionorganisations and possible synergies were more important than the paper sums,when attempting to value a firm.

Maucher distinguished and was prepared to pay more than the book value forwhat he felt had real value over the long-term. According to Maucher, the best acqui-sitions made at Nestlé were actually the most expensive. Moreover, when Maucherlooked to the long-term, he was not concerned by the financial analysts’ fears thatan acquisition had a profit limitation of three years.

In the Rowntree acquisition, for example, Nestlé paid more than CHF 6 billion,an astronomic amount at the time. But Rowntree was what Maucher called a “cen-tury” buy, and was crucial to remaining competitive in the confectionary industry.This illustrates the way Nestlé put strategy at the forefront rather than financialaspects.


Monitoring acquisitionsMoreover, while at Nestlé, the board would monitor the developments of theacquisitions as to its continued fulfilment of the business strategy through thoroughand detailed interaction with those who were implementing them. In Swissair, de-spite the fact that the board did not have proven participation in even creating theHunter Strategy or its acquisitions, they ought to have been monitoring its evolution.According to the E&Y report, it appeared that, previous to January 1998, several in-dividuals on the board had not even seen any paper to do with the strategy. It is quiteclear they did not have a grasp on it.

Adapting the strategy when making acquisitionsAdaptability was another key issue. When an aspect of the strategy did not work,Nestlé would take immediate measures; for example, because they never succeededin generating much growth in their beauty and health areas, Nestlé sold a few ofthese interests, and returned to its core food products.

In Swissair, however, despite the fact that a few acquisitions such as LTU wereexperiencing serious financial difficulties, the Hunter Strategy was continued. Theboard only started asking whether the firm had the financial capability to realisethis scheme when kerosene’s growing cost and the strong USD exacerbated theproblems. When the McKinsey consultants recommended the temporary decom-missioning, if not the complete abandonment of the Hunter Strategy, Bruggisserwas charged with the task. The board understood that the strategy had failed, butbecause Bruggisser was such a big figure in the firm, they did not have the strengthor the sufficient understanding of the situation to abandon or adapt the strategy.

ConclusionTo summarize, a clearly outlined acquisition policy was created and installed byNestlé; the acquired firms needed to fall inside Nestlé’s own industry experienceand be of significance to the Group. The organisation wanted the new companies ac-quired to be reciprocally improving and to promote synergies through new activities.The Group’s enhanced product range or presence in certain nations was a vital partof the mergers and acquisitions. As such, Nestlé mostly chose innovative companieswith expertise that the Group did not have which were small or medium in size.

In terms of processes and market, the Group limited acquisitions to areas whichwere connected to their current or recently acquired experience or range of products.The Group did not want to end up as a widely diversified corporation nor did it reachtowards acquisition of Nestlé’s supply chain or the expansion of products.

Maucher only made acquisitions within the scope of the given business strategy.The strategy was discussed in close co-operation with and approved by the board.There were no surprise acquisitions by the CEO, as any takeover was in line with thestrategy. The board at Nestlé got involved once an acquisition exceeded an agreedgiven amount. This limit on his decision making discretion was created because “thecompetence of the CEO comes to an end once a certain acquisition size is reached”and Maucher requested that board approval be sought whenever the acquisition


exceeded CHF 500 million, and the board committee’s whenever it exceeded CHF150 million (Maucher, during interview).

At Swissair, however, the ultimate goal was to purchase companies as a defenceand to protect what was considered to be the true strength of the company: a trulyindependent Swiss brand with quality. The cost of acquisition, one might say, wasthe price of a defence against the “takeover of the brand” rather than a soundinvestment to boost a healthy growth, strengthening the competitiveness of the com-pany based on a pertinent strategy and accurate management corresponding to thechallenges.

Thus, to conclude, in terms of the above mentioned scale pertaining to the degreeof fulfilment of the principles (not at all, partially, largely, fully), it is deemed thatNestlé fully fulfilled the first principle by only acquiring firms which served thebusiness strategy. Contrary to this, Swissair, more often than not made reactivechoices based on the outlined inadequacies of the board culture and board-management relationship, and therefore, only very partially fulfilled this principle.

Principle (2) A fruitful acquisition has to be based on what the acquirer bringsto the acquisition.

That the acquirer brings something to the acquisition is important no matter howattractive the expected synergy may look. The acquiring firm’s contribution to thetarget can vary; for example, it could be technology, management, or even strengthin distribution. Drucker specifies that this contribution must be based on somethingother than pure monetary investments.

The Nestlé Group brought its strong points to all of its acquisitions, enhancingaspects such as their place in the market, product range, structure of managementand experience.

As an example of this, Nestlé brought their experience to the acquisition whenthey chose not to merge the newly taken over and up and running companies imme-diately (see when they first acquired Carnation). Instead, they focused on makingthe businesses separately successful, and only introducing collaboration betweenthe different divisions step by step.

It was only after a few years that Nestlé installed a single management structurewith a homogeneous organisational structure and a holding firm, so that syner-gies were maximised both within the company and with clients outside, helpingto cement the perception of Nestlé as a corporate brand.

In order that the maximum amount of Carnation’s (and those of other acqui-sitions’) skills and knowledge were merged with those of Nestlé, certain aspectsof merging were included, despite the fact that Carnation had been taken over byNestlé. In this way, Nestlé brought their knowledge and experience of effectivemerging to the acquisition.

Conversely, at Swissair, no plan (and certainly not an intelligent, incremental onelike Nestlé’s) was made in terms of restructuring the unhealthy airline businessesthey acquired. They did not restructure the acquisition’s management sufficiently,


largely because they did not have interest or understanding of the vital nature ofdoing this (Moelleney, during interview).

A major obstacle for Swissair in bringing something to the acquisition was thatthat did not know what the health of the target companies were. As the E&Y reportclaimed, these transactions happened very quickly without due consideration oftheir financing. A coherent vision was not in place as the board’s finance committeedid not agree with these purchases. Without understanding of the target company, itwas thus impossible for Swissair to know where they could contribute.

Furthermore, as discussed in the first principle, Swissair’s primary aim in acqui-sition was not to integrate or develop synergies with the target companies; rather thetarget was seen as an addition.

As a result, Swissair made no real effort to rationalize, unlike at Nestlé wherethe target company was incrementally absorbed into the brand. Swissair gave theimpression to the customer that there were still different companies. The obses-sion with preserving the elitist Swissair brand of such high quality meant they didnot want to bring that to the acquisition. Swissair invested in shares rather than incompanies.

Furthermore, Swissair did not rationalised the network, for example, by harmon-ising routes, impressing on the target firm all the more that Swissair was more likea bank or a financer who had purchased shares rather than an airline which wouldabsorb them. The management was dealing with acquisitions more like a holdingrather than like an industrial group.

At Nestlé, contrary to this, it was vital to understand the target company, becauseonly then would they know what they could bring to the acquisition. As Mauchersaid, it was important for Nestlé to “run businesses that we understand” (Maucher,during interview) and so he never acquired unsuitable companies.

A clearly outlined merger and acquisition policy was created and installed byNestlé; the organisation wanted the new companies acquired to be reciprocallyimproving and to promote synergies through new activities.

Even the efforts to transfer competences from Swissair to the target companywere undermined by the absence of consideration for the obstacles to this trans-fer such as those created by the socially different cultures of Belgium and France.Instead, Swissair dealt with the target company as they would a Swiss one. As anexample of this, in France, their 35 hour week influences the work mentality, as doestheir RTT (reduction du temps de travail), which means that if you work for morethan 35 hours in a week you get holidays. These are used to make bridges over offi-cial holidays resulting in very long bank holidays. This culture of “working to live”,along with the strong syndicates to protect their rights, resulted in an inflexibilitywhich was difficult for Swissair to handle.

Furthermore, Bruggisser used outside consultants to reproduce his own manage-ment style and did not adapt it to, for example, the French or Belgian contexts. ThatSwissair’s board, who were experienced in the international scene, did not warntheir management with regard to such difficulties compounded the problem further.

Favouring mutual consent and discussion, the Nestlé Group did not deem hos-tile bids acceptable, but when necessary, as mentioned above, Maucher would go


directly to the companies and by bringing his knowledge and understanding, wouldpersuade the personnel that the merger was for the best.

By managing their finances intelligently, Nestlé were able to make further invest-ment in the company, which brought great business benefits to the acquired companyand enabled the further alleviation of the social impact of the merger.

At Swissair, however, they often choose companies whose finances were in dif-ficulty. Thus, when investment was made, money was used to repay the targetcompany’s debt, and little remained to develop the target firm from a strategic pointof view.

Nestlé always operated the policy that a readiness to benefit from each other’sknowledge was vital. The Group understood that fruitful combination of personnel’sexperience and knowledge was one of the major reasons for the effectiveness of theirM&A. Thus, a readiness to impart knowledge was an essential aspect of Nestlé’sacquisition policy in terms of developing the target.

In terms of processes and market, the Nestlé Group limited M&A to areas whichwere connected to their current or recently acquired experience or range of products.As such, they did not want to end up as a widely diversified corporation. In thisway, they could be sure that they had knowledge, resources, technology, marketingcapabilities and so on to bring to the new acquisition.

As mentioned in Principle 1, the fact that the ultimate goal for Swissair was topurchase companies as a defence to protect what they considered to be the truestrength of the company: its truly independent, quality Swiss brand. The acquisitionwas the price of a defence against the “takeover of the brand” rather than a soundmeans of boosting healthy growth, or strengthening the competitiveness of the com-pany based on a pertinent strategy. Hence, coming from this fundamental mindset,Swissair did not really consider the importance of contributing to the targets.

Principle (3) At the core of a successful acquisition there must be a commonunity, for example marketing, the market, technology or core competencies.

The companies which Nestlé acquired were in its own industry and mostly occurredin a horizontal form. Maucher said this was due to the fact that they had “neverentered a venture by taking a leap of faith, we always knew what we were buying”(Maucher, during interview). Moreover, he thought that they had avoided failuresby amongst other things, buying firms within their own sector, and only those thatthey understood well.

Similarly, Swissair stuck to common unities in terms of keeping within the sameindustry (airlines), however, these were not truly pragmatic unities. Though theindustry was in line with the “unity principle” the companies were not: Swissairdid not make detailed enough examination of their potential acquisitions to see ifthere were technological synergies, marketing unities and so on. As explored previ-ously, their investment logic was simply to become bigger and cultural differences,management differences, marketing differences were not considered pertinent todecision making.


Though the firm mostly chose innovative companies with expertise that theGroup did not already have, these were not the only consideration, and a commoncore unity was always present.

When this unity existed, the Nestlé Group could bring its strong points to itsacquisitions, enhancing aspects such as their place in the market, product range, andstructure of management. This was a fundamental rule of their own making. Wherethis unity did not exist, the firms were not acquired by the Group.

Principle (4) The acquirer must have respect for the target business, product,the customers of the acquired company as well as its values.

A serious risk is present when there is variance in both the management qualityand corporate cultures of the acquired and acquirer’s companies. Nestlé had bothsituations, where the companies were at odds, like Perrier, and very similar, likeCarnation.

The choices made and the actions taken after acquiring a company frequentlyaffect the outcome of how well the firm manages these risks and realises a successfulacquisition.

At Nestlé, a shared venture with General Mills for breakfast cereals wasembarked upon because their corporate culture was akin to their own, in order tocut down the time necessary to ensure a powerful place in the market (see Prin-ciple 1). Good communication between entities was enabled by similar corporatecultures and helped to create a foundation of trust.

At Swissair, however, apart from a shared industry, the culture and values of thetarget acquisitions were not seriously considered. As an example of this, the CEOimposed his own methods on the target’s management and modus operandi and didnot ask for expertise on the particular system he was getting involved in, as observedabove in the French and Belgian examples. Nothing about Bruggisser’s behaviourat Swissair spoke of his respect of the target companies’ business or values and, asan inevitably consequence, their products or costumers.

Where Maucher was keen to be challenged and advised by his board, Brug-gisser actively avoided it by limiting the information they received. In the case ofunderstanding and respecting international acquisitions, this appears to be particu-larly short-sighted as his board was made up of experts who had experience in thismarket. They should have been a great source of information and a guide for Brug-gisser in how to respect and deal with the potentially alien values, business, productsand costumers of the new acquisition. In this way, respect was not somethingprioritised by the driving powers in Swissair. For Nestlé, it was fundamental.


Principle (5) The acquirer has to be ready to provide senior management tothe acquired business within a reasonably short period, maybe 12 monthsmaximum.

It is very important that the human resources necessary are prepared before a givenacquisition. If a company is acquired and there are problems within the manage-ment, it is often a complex matter and it is imperative that it is fixed quickly in orderto ensure the target acquisition’s survival. This is a particularly serious risk if thereis variance in both the management quality and corporate cultures of the companiesof the acquired and acquirer. Restructuring becomes essential, and good timing,founded on a well outlined corporate vision is a critical aspect of handling this. Thatthe restructuring, especially restructuring associated with acquiring a company, bedone swiftly is vital. In order to handle this situation, the acquirer sends its bestpeople in and then, if inadequate human resources exist there is a consequent dearthof good people in the acquirer’s core business.

Though Nestlé always tried to work together with the target’s management, asoutlined in the sixth principle, they were always well prepared and able to providemanagement to augment the target’s personnel where necessary, and this was keyaccording to Maucher.

Contrary to this, Swissair did not understand the nature of a management transfer(as outlined under the sixth principle); furthermore they de-motivated their targetmanagement by not providing them with visible opportunities for advancementwithin the company (also outlined under the sixth principle); they also grossly un-derestimated the resources necessary and so the quick and effective transfer of seniormanagement within a 12 month period was never realised.

The E&Y report reiterates this. It found that Swissair failed to consider the extrafunds and management resources necessary and as a result, they ran out of goodhuman resources.

Bruggisser even said to Moelleney a few months after he was dismissed thatwhat he had underestimated, was the management capacity needed for integration,quantitatively and qualitatively. Bruggisser learned the hard way. It may have beenpossible to cope with Sabena, but the successive acquisition of AOM, Air Littoral,LTU and so on made more demands on the human resources of Swissair than theycould sustain and they could certainly not fulfil the fifth principle’s short timelinerequirements.

Moelleney reiterated this himself by pointing out that:

Important questions that a board has to ask are “How much of my own human resourcecapacity do I need to build in order to be able to integrate the new company? The strongerthe target acquisition, the better the cultural fit, and the less I have to do (. . .)” But theSwissair board neglected this question. What is important in relation to this (in addition tothe financial and legal due diligence) is a HR due diligence where one can study the partnerfirm in detail.



The problems at Swissair were further compounded by the fact that they did nottake human resources seriously. That the board hugely undervalued his input wasillustrated by Moelleney in the way that the board walked out or made phone callswhen it was his turn to speak in meetings. It is difficult to see a well prepared strategyfor providing senior management to the target company in a short period evolvingfrom this attitude.

Furthermore, Bruggisser’s policy of enforcing his own management methods onthe target acquisition, as in the case of Sabena for example, and refusing to acknowl-edge local specificities, would have created a very slow and inefficient integrationof the inadequate amount of senior management provided.

Lastly, at Swissair, the board did not monitor the strong management person-alities in the subsidiaries, but limited its scope to the top management of the corecompany. Their attitude as “venture capitalists” meant that they considered the sub-sidiary management as already integrated, which is not the case, as explored underthe next principle. At Nestlé, as Philippe de Weck pointed out in interview, theboard would fire difficult questions on every aspect of the provision of senior man-agement for the target acquisition: did they have the right people? did they have theresources? and so on. A clear disparity of approach is evident once again betweenthe two companies.

Principle (6) In a successful acquisition clear opportunities for advancementmust be visible in both the acquired and the acquiring business.

Despite the fact that many of the measures involved in restructuring protect jobsin the long-run, it is important to remember the individual’s experience and thepersonal upheaval that M&A entail.

Alleviating the effects of a restructuring process, through a successful series ofsocial measures, is obviously beneficial to the firm. Nestlé’s TMT understood thatthis is a fundamental precondition for an effective acquisition policy in the long-run.

The longevity of Nestlé’s success was founded on trust, and in order to keepit, Nestlé had to supply enough assistance to its personnel, and make opportunitiesfor advancement visible, in order that they could adjust to new systems or securealternative employment. From the outset, this was a foundation stone of Nestlé’sapproach.

Along with making sure promises were realised and, as a vital psychologicalelement, overall integration happened swiftly, Nestlé focused especially on equalopportunities and motivation of the acquired firm’s executives. Vital functions inNestlé were given to many executives from firms acquired by the Group.

In contrast, Swissair was not looking to highlight new opportunities available tomanagement of new companies. As size was the main justification for the acqui-sition in the first place, they were not looking for a sustainable growth in whichmanagement and industrial structures were in sync with the extension of the com-pany. Target companies were made to feel like they were bought by a venturecapitalist.


According to Maucher in interview, when acquisitions or mergers are declaredthese days many executives of firms “who carry out an acquisition, believe that theyare the clever ones and the others are stupid”. Indeed, in a way this could be saidabout Swissair. As mentioned above, they tried to shoe-horn in their own modusoperandi, irrespective of cultures and current system. Often they got rid of staffwithout even having sufficient replacements.

Furthermore, even the reporting tools used by TMT at Swissair took too long toestablish and were, as demonstrated, hugely inadequate. The board simply did notreally understand what was happening in these companies such as Sabena or LTUand they did not object to this. They were not interested in the experience of thetarget companies management, never mind visible opportunities for advancement.Indeed Moelleney’s experience as head of HR during board meetings is a very aptdemonstration of the lack of importance placed on the experience of the acquiredcompany’s personnel. Advancement never even made it on to the agenda.

In stark contrast to Swissair, Maucher, prioritised visible opportunities foradvancement. For example, when Stouffer and Carnation were acquired, their headseventually became the heads in America. He also understood the important psycho-logical motivations associated with this and their critical role in acquisition success.He considered “leadership, motivation, and involvement of these people” (Maucher,during interview) instrumental in this success. Nestlé, under Maucher, avoided psy-chological mistakes such as imposing management on targets, creating frustrationand resulting in the eventual departure of good people. Nestlé also avoided lettingtarget management go or creating an atmosphere in which they were demotivatedthrough being side-lined.

Even in hostile takeovers Maucher did not veer from this principle. In the caseof the semi-hostile takeover of Rowntree, for instance, Maucher went to the com-pany the next day to personally assure the employees that they would have manyopportunities for advancement being part of a bigger company. In this way, a frame-work was created in which the abilities of the acquired company’s personnel wererespected and recognised and gradually they were absorbed into new opportunitieswithin the Group. Hence, intrigues and power struggles which typically follow anacquisition were prevented or a least minimised.

Once again, Nestlé made every effort to fulfil the sixth principle resulting insuccessful acquisitions which were integrated and mutually enriching. Swissair,however, set the visibility of opportunities for advancement as a very low prior-ity, lost a lot of excellent personnel in the target company as a consequence, and didnot realise successful acquisitions.

ConclusionFigure 5.1 constitutes a summary of the analysis, which reveals the polar nature ofthese case studies. With the notable exception of Principle 3, which on closer ex-amination proved to be merely a superficial fulfilment, Swissair did not fulfil any ofDrucker’s principles. Nestlé, in contrast, had a very successful acquisition strategy,

5.2 Creating an Environment that Enables the Acquisition Principles . . . 147

Not fulfiled

Partially fulfiled

Strongly fulfiled

Fulfiled

P2) Acquirer’s contribution to target

P3) Common core of unity

P4) Acquirer’s respect for target

P5) Capabilities to provide management

P6) Creating visible opportunities for target employees

P1) Business strategy

Fig. 5.1 Fulfilment of Drucker’s principles at Nestlé and Swissair (author’s creation)

which from an external point of view, which was implemented with no mistakes. Asdemonstrated, Nestlé fulfilled all six of Drucker’s principles entirely.

5.2 Creating an Environment that Enables the AcquisitionPrinciples to Be Successfully Implemented: A ComparativeAnalysis of Nestlé and Swissair’s Boards

The question addressed in this chapter is: How did the board of directors contributeto creating an environment that enabled the acquisition principles to be implementedsuccessfully? Having used Drucker’s six principles to examine Nestlé and Swissair’sacquisition success, the underlying or more fundamental conditions that enabled this


fulfilment, the environments, are now explored. The environment (the company’sorientation, the board-management structure, its functions, power relations andinteractions) in the two case studies were clearly different because in Nestlé’s case,the six principles were fulfilled and in Swissair’s they were not.

An examination of the Swissair and Nestlé boards’ respective contributions tothis environment follows below.

RecruitmentSwissair’s board did not always recruit internally, as was consistently the case atNestlé. In fact it was almost a doctrine to do so at Nestlé, in order that poten-tial CEOs were tested and knew the culture and the business very well, from itsstrategic to its industrial specificity. More importantly, they are a known quality interms of their reactions, strengths and weakness and there is no room for excellentself-marketers who give good interviews. But by recruiting outside the company,the board at Swissair were losing both the valuable specificity of insiders and theopportunity to test a potential CEO in the longer-run.

Another way in which the Swissair board did not take due consideration, wasthat they did not adapt themselves to the change initiated by the CEO selection; forexample, the internationally experienced board members did not educate Bruggisseron integration matters and cultural differences in France and Belgium. Furthermore,they did not re-engineer their procedures to bring these cultural and internal exper-tises to the CEO. A change of recruitment method could have instigated a change inboard influence so that it could provide more input to the CEO.

Board’s Relationship with the CEOAt Nestlé, the board’s relationship with the CEO was one in which the board sharedthe vision of the CEO who was also chairman. The CEO gained the board’s ap-proval through rigorous discussion, questioning and communication. At Swissair,however, the board had an almost passive relationship with the CEO. As discussedbelow, they did not question his decisions and policies, they did not insist on ac-cess to relevant information or time to digest it, and they did not monitor theimplementation of a strategy in which they had little involvement. In contrast, atNestlé, Maucher had a very inclusive attitude to the board despite the fact thathe was the driving force in the company and it was not a requirement. He wasattentive to the valuable input from the board, he actively sought advice and eveninsisted the board committee travel the night before a meeting in order to ensurethey had studied the relevant documents. In this way, the CEO and board werepulling in the same direction at Nestlé, and the board approval and their power-ful support created a constructive environment in which the six principles could befulfilled.

The Board’s Role in Terms of Leadership and StrategyIn terms of the board’s role, at Nestlé they did not solicit to have a managing rolein the company but rather to support the management. They acted as guardian ofthe global vision of the firm by looking for acquisitions which would create real


synergies with the existing firm, synergies which were enjoyed by both companies.This was reflected in the fact that the board had to be solicited to approve strategicextensions related to a specific M&A. This meant no acquisition was made withoutbeing of strategic significance. The board was therefore able to veto any acquisitionswhich were not justified by a business strategy and this meant that the board had thejob of ensuring the business coherency of acquisitions.

The board at Nestlé functioned in a controlling, analytical and advisory capac-ity rather than looking for operational involvement. This gave a real strength andlegitimacy to the CEO for implementing the strategy he had designed. The board atSwissair, however, appeared to a large extent to have outsourced its role to exter-nal consultants in terms of contributing to strategy. Where Nestlé used consultantsas experts on ad hoc basis to add a competence that was missing on a particularproject, Swissair’s board went so far as to relinquish their advisory role to externalconsultants.

Not only was the board at Swissair the advocate of a strategy in whose creationthey had very little involvement, they did not rigorously monitor the implementationof Bruggisser’s strategy or the pertinence of the acquisition wave to the company’sgoals. Significantly, they did not question the use of liquidity in terms of the realdevelopment of the targets or the investment policy. Instead, they allowed Swissaircash to be spent on paying targets’ debts rather than on financing growth. A goodexample of this is that the board did not avoid the deal in which the Group wasobliged to guarantee the debts in the case of Sabena and Airlib (previously knownas Air Liberté). This became an open invitation to these companies to spend fundswithout having to justify the expenses. As a result, this guarantee and subsidy waspermitting these companies to retain highly inefficient cost structures. The moneyflowing into them was not connected to an obligation to restructure or instigate asustainable growth plan which would involve a sound investment plan. This was indirect contrast to the board at Nestlé where mutual synergies were carefully analysedincluding cost considerations.

Nestlé’s board was also highly attentive to the sustainability of the firm and assuch, regularly requested information about the state of the brands and their indi-vidual current potential. This included questions about new products, products thatwere being “retired”, a product’s life cycle, cash flow, market share and so on (seeFig. 4.2, correspondence de Weck to Maucher). Furthermore, they asked rigorousquestions about all areas of the company: the coherence of acquisitions with theestablished strategy and the industrial and commercial needs of the Group. Moreparticularly, the board was made up of bright, independent people who were notafraid to ask difficult questions at difficult moments regarding resources (includinghuman), targets, management and so on. In this way, they ensured the fulfilment ofthe acquisition principles. This is in direct contrast to the board at Nestlé who werenot inquisitive about the state of the company.

Board PreparationsMuch of the above was a consequence of information availability (or lack thereof).At Swissair, there was a significant lack of preparation for board meetings partly


because the documents were only made available at the beginning of the meeting,partly because the information provided was not clear and comprehensive. No mean-ingful reflection was possible therefore because the CEO had, effectively, preventedit. Despite this, the board did not react to the absence of regular information fromthe management and was not proactive in trying to get this input to aid their work.Getting the approval of the board was more important to the CEO than convincingor consulting them. Opacity became the unspoken rule and the board never tried tochange this.

Again, a great disparity exists between the modus operandi of Swissair andNestlé. At Nestlé, while Maucher provided limited information in terms of volume,it was extremely relevant (see Appendix A with regard to Maucher’s thirteen pagesto the board on a given acquisition). Maucher preferred to put his time into creat-ing pertinent short documents rather than providing reams of excessive information,with a view to making the meetings more efficient. Furthermore, under Maucher’sinstigation, the board gathered a day before for the consultation of documents. Thisenabled board decisions to be grounded on the relevant facts.

Serving a Nation’s Myth or Serving a CompanyAt Nestlé, the board was made up of independent members who respected their CEObut were prepared to argue with him, ask difficult questions and demand answers.They were not bound by the social significance of being part of an iconic company,by the financial benefits (they were indeed all wealthy), and nor did they relax intoa state of “laisser faire”. They served the interests of Nestlé, not themselves or theirother companies, and critically, this enabled them to retain the ultimate goals of thecompany in mind when making decisions on matters like acquisitions.

At Swissair, there was an absence of clear goals in terms of satisfying or creatingclients, and this not only hampered the constructive exchange between board andmanagement, but was a result of operating within the myth of Swissair. For thisreason, focus concentrated more on the brand than on the real health of the company.Whereas at Nestlé, the brand was a means to an end (to strengthen the business,competitiveness and sustainability, and eventually to satisfy clients and costumers),at Swissair, it was an end in itself. As such, the board became the defender of animage which it perceived as the company’s main asset.

Swissair was not run and managed by the “rules” of how a corporation in a marketplace should be managed. Based on faith in the Swissair myth, the board’s actionswere further affected by the accepted idea that the company was as much there toserve the Swiss economy as its own development because an airline is a systemicstrength for a country. Moreover, the interest defended by the board was also theinterest of the other companies they were leading for which Swissair was function-ally vital. They were thus divided between Swissair, and how it could contribute tothe growth of leading Swiss firms. Lastly, Swissair, as a symbol of Swiss quality,served the board members’ own sense of national identity. This obsession with brandand the absence of industrial perspective partly explains the inertia of the Swissairboard when facing the absence of vision in terms of strategic development.


Indeed, it is also fascinating to see the manner in which the strategy at Swissairwas influenced by national sentiment in relation to strategic development. Thereis no doubt that the nation was adamantly against outsiders in terms of foreignersrunning their national flag carrier and that they considered Swissair valuable to themand this influenced the popularity of the Hunter Strategy. That the company hadnever been a private enterprise in this way was revealed by the partners in interview.

As discussed above, the Swissair board, in contrast to Nestlé, was not a proactivepartner to its management; they were effectively letting the CEO control the strat-egy (or not as the case may be). Indeed, the board refrained from challenging themanagement because, as discussed, they felt the main interest of the company wasits brand and their role was to defend it in the face of public expectations. With theboard focused on external shareholder interest, the implementation and monitoringof a sustainable business model, the primary role of a board, came a poor second.It is not a coincidence that when the press spoke about Swissair, the eras of thechairmen were more commonly referred to than the CEOs’. This is in stark contrastto Nestlé where the CEO is used in the chronological definition of an era. This issignificant because it shows that the board of Swissair operated more as a PR insti-tution than as a governance regulatory body. In this way, they mainly functioned asa representative board; the board, with a prestigious composition, became more ofan exhibited circle to promote the company than a truly active and vital institutionperforming their tasks.

Preliminary ConclusionsThus, the Nestlé board made the system work. Their policy on recruitment for boththe board itself and the CEO was effective. Furthermore their relationship with theirCEO was active and their preparation for meetings consistently good. They devel-oped strategy with their CEO which served the interests of firm and fulfilled theirduties as a board in every aspect. In contrast, the Swissair board had a precariousrecruitment policy for both their CEO and board members who had other interests inthe company. They developed an ill-conceived strategy and then did not stick to it ormonitor acquisitions, particularly in the area of liquidity. Ultimately, they behavedas a representative board, a symbolic rather than functioning body, largely as a resultof their persistent attachment to the myth of Swissair.


Summary

Not fulfilled

Stronglyfulfilled

Fulfilled

P2) Acquirer’s contribution to target

P3) Common core of unity

P4) Acquirer’s respect for target

P5) Capabilities to provide management

P6) Creating visible opportunities for target employees

P1) Business strategy

Recruitment

Board’s relationship with the CEO

The board’s role in terms of leadership and strategy

Board preparations

Serving a nation’s myth or serving a company

E N V I R O N M E N T

Partiallyfulfilled

Fig. 5.2 Environment that enables the principles to be successfully implemented (author’screation)

6Best Practice Recommendations for Boards

Using the insights gained from the case studies, comparative analysis and interpre-tation, the findings are examined in order to answer the research question of howboards of directors can contribute more effectively to better acquisition results. Bestpractice recommendations are then formulated.

The first research question, “how can the board of directors create an environ-ment that enables greater fulfilment of the M&A success factors?” is the subject ofSection 6.1.

The second, “how can the board of directors govern the board-managementrelationship during the acquisition process in order to enhance acquisition successlikelihood?” is the subject of Section 6.2.

6.1 Creation of an Environment Which Enablesthe Acquisitions Principles to Be Fulfilled

Building on the above discussions and insights, several best practice recommenda-tions can be deduced with regard to the duties of boards in the context of corporateacquisitions. Through adhering to these best practice recommendations, an environ-ment in terms of the company’s orientation, the board-management structure, itsfunctions, power relations and interactions, can thus be created in which the acqui-sition success principles can be fulfilled. By respecting the best practices as outlinedbelow, they can establish processes that are more effective at delivering acquisitionoutcomes compared to many current corporate models.

(1) A clear definition of whose interest the board is serving as well as boardinvolvement in fixing the basic strategy

The board needs to know what and whose interests it is serving. The interest ofthe company and ultimately its clients should always be the priority and not stake-holders, as was the case in Swissair, where the TMT attempted to serve a varietyof stakeholder interests simultaneously. The board and management must agree thisinterest and also the exact nature of the needs of the companies’ customers. This


154 6 Best Practice Recommendations for Boards

creates a transparent environment in which the company’s orientation is clearlyunderstood, a foundation on which good business conditions can flourish.

Only when this is in place can a clearly outlined strategy be created. This shouldbe co-developed by the management and board and periodically revised. Based onthis, goals can then be derived which are to be achieved through acquisition. Asdiscussed in the theoretical section of this study, extensive studies have shown thatmore than half of takeovers fail. Takeovers are connected with high risks. Theserisks can be reduced only by the existence of a clear strategy. As illustrated in theempirical section, if the underlying strategy is not good and hence the subsequentreasoning behind the merger or acquisition is not in place, then nothing will help.The development of this strategy, therefore, becomes the central challenge of theM&A process and is the first responsibility of the board of directors. It is vitalthat an acquisition respects the fixed underlying strategy which was approved bythe board (even if the board was not actively involved in the original elaborationof the strategy, but approved it subsequently). In this way, from the outset, thereis agreement as to whose interests are being served and how they can be servedthrough a strategy. This creates an environment in which the TMT are pulling in thesame direction, using the same language and this creates a framework for healthy,constructive discussion on the future development of the company.

More specifically, with acquisitions, by contributing to the development of thestrategy, the board of directors can exert great influence on M&A activities. In addi-tion, the board’s perspective on the firm’s strategy constitutes a valuable input for thetop management as their distance from the day-to-day business allows board mem-bers to critically challenge the elaborated concepts with a measure of objectivity.This again enables the board to contribute to the M&A process through enhancing anenvironment in which the management and board bring various levels of perspective(micro and macro respectively) on the firm’s strategy and its implementation.

(2) Added value approach

A major element which impacts the environment, as the Nestlé case study revealed,is what Maucher coined as the added value approach. This is realised when the TMTis focused on how it can add value to the firm rather than simply exercising formalauthority. This approach should permeate all levels and activities of the companyand can only be realised if each employee is highly involved and working towardsthe same goal. With this, special assignments and project work is more likely topush through the traditional boundaries of authority. At board level, this task-basedmodus operandi can be achieved through the instalment of a board committee, aswitnessed in the Nestlé case study.

Generally, in terms of realising the added value approach, companies shouldbe costumer and result oriented rather than system oriented. Though systems arerequired, the TMT should ensure that they are not an end in themselves. For thisreason, when customer confidence and the retention of their loyalty is the primaryfocus, boards must make sure that a culture of long-term thinking permeates allmanagement activities.

6.1 Creation of an Environment Which Enables the Acquisitions Principles . . . 155

More specifically, in terms of realising this added value approach on an organi-sational level, it is important to ensure an appropriate management structure whichis flat and flexible. An organisation which is as decentralised as possible in order tobe adaptable, creates a constructive environment with fewer levels of management.

Finally, in order to create added value on a management level, it is vital thatthe board ensures clearly defined goals, levels of responsibility and accountability.TMTs must make sure that capability is maximised through a flexible, task basedapproach. This is key. In this way, Maucher attempted to figure out at what pointhe added value or provided gainful input in the debate, and otherwise handed overmatters, even when technically the final choice ought to be made by him. Thus, theTMT works less through job titles and the powers associated with them and moreby intentionally generating added value for the firm.

The board must ensure that this added value approach, is deeply embedded in thecorporate culture and constantly maintained. This creates the right environment forsuccess on every level: the company’s orientation based on customers; the board-management structure involving, for instance, a board committee; and optimalisedinteractions through a task-based ethos.

(3) Global outlook, operating with local specificity

The board has to apply the Matrioschka System: Acquisitions should be conducted top-down, bottom-up and laterally, and all these approaches should be linked to each other. Thisis the ‘Glocal Approach’.


Hilb’s “Glocal Approach” is a combination of thinking globally and acting locallythrough the relevant local employees who are familiar with the geographical,cultural, political and business specificities.

Further to involving local employees, board diversity is once again crucial asboards of directors who are active on an international scale can help managementunderstand the specificities of the socio-economic systems and bring valuable localexpertise. In this way, the board gains contributions from directors with understand-ing of the acquired management and learn of possible caveats linked, for example,to socio-cultural factors. In so doing, the board facilitates an environment in whichexpertise flow easily between bodies, enriching interaction and ultimately creatingan enhanced awareness of socio-cultural matters, enabling the acquisition successfactors to be fulfilled.

(4) Composition in terms of special expertise

Specialist skills are vital and a member of the board who possesses applicable skillsto a deal should contribute them. Moreover, the board should only employ externalexpertise if this is deemed necessary. Special expertise should be found in a welldiversified board with directors of various and complementary experience. Boardcomposition is decisive in getting these special expertises. Furthermore, the specialexpertise inside the board should be given priority and able to contradict externalexperts, especially where they are grounded in field specificities.


Ideally, the members should have experience associated with the company andits markets. This experience gives the director the opportunity to identify devel-opments in the environment and to estimate their effects on the company. This isconcluded despite Maucher’s view in which he greatly prioritises a board member’scritical mind, over company and industry knowledge. At Nestlé, this worked be-cause Maucher was a brilliant leader, but it seems more likely that a board whounderstands the industry is more likely to ask the right questions and be capableof meaningful contribution. In this way, an environment is created in which thereis enhanced interaction and critical examination of proposals. With a deeper levelof discussion, there is an increased likelihood that the relevant success factors areidentified, considered and reviewed.

In conclusion, each member of a board of directors should have expertise in arelevant area and must make sure the board is aware of this competence. In thisway, they are capable of critically and competently evaluating the problems con-cerning specific areas and become a pool of capabilities the CEO can mobilize in aparticular situation. As the case studies revealed, however, should this requirementnot be fulfilled, the board can still be successful. In this situation, the board shouldmainly focus on the diligent fulfilment of the acquisition process and making surethat they receive the key information and relevant experts’ opinions in order to makedecisions. By doing so, an environment is created where the board is optimising itsfunction as monitor thereby making decisions on M&A necessarily more fruitful.

(5) An active board committee for strategy

When analysing a potential acquisition, along with the latest projected figures andrelevant information, an active board committee is vital. As illustrated in the Nestlécase, a small, well-informed committee with expertise and good communicationwith the CEO can efficiently contribute, monitor and serve a transaction. This isbecause they are more active, for example by meeting more frequently, and gain amore in-depth knowledge of the matter under consideration. In this way, the commit-tee has the potential to be a highly effective means of keeping the board connectedto the daily operations of the company.

They also work alongside the CEO, act on behalf of the board on less majordecisions, and, along with the CEO, equip the board to make more major decisions.As a delegation of the board, the committee introduces another level of decisionmaking, acting as a middle ground. Thus, the board committee maximises theboard’s function through generating more levels of decision-making. This fosters anenvironment which enables effective implementation of acquisitions and optimizesinteraction and the board-management structure.

(6) Identification of appropriate acquisition targets & mobilising expert knowl-edge to review targets

Board expertise not only help members to ask the right questions at meetings, buttheir special contacts can also be harnessed in the search for targets of takeover, inwhich they can be used to identify suitable companies. Many boards of directorshave extensive networks of relationships, which can be of use in many respects.


Firstly, these relationships enable the initial identification of appropriate targets.Secondly, the board members know many companies due to personal contacts intop management positions and thus can provide additional inside knowledge toaugment (perhaps even contradict) the due diligences that are mostly confined toeconomic and technical data. Building on these connections, the board of direc-tors can also establish first contact with the selected targets in order to facilitateaccess and to foster a friendly environment during the execution of the takeover. Inthis way too, potential hostilities are minimised and the later integration process isfacilitated.

Furthermore, following the identification of a takeover target, more detailedassessments are often necessary. Although specialist knowledge is required, boardmembers who possess the necessary expertise are often asked to conduct theassessment. This is often the case with lawyers, for example, who can supportthe management with legal advice. Another example is technicians, who can pro-vide valuable assistance in the evaluation of production sites or products. In thisphase, only select members are asked for advice; only in rare circumstances do thewhole board get involved. Thus, when selecting target acquisitions, both connec-tions and special expertise create an environment in which resources are maximisedand interactions enhanced, in which there is a greater chance of identifying the besttarget acquisition which, in turn, lays the ground for successful implementation ofthe acquisition principles.

(7) Consideration of the management proposal after target selection

An extremely important duty of the board is the critical examination of the manage-ment proposal after the selection of the takeover target. The board of directors hasto consider the proposal with a sole view to the interests of the company. Firstly, itis necessary to clarify that the acquisition or merger is in line with the basic strategyof the company and that its goals can be achieved through the intended acquisition.Secondly, it is vital for the board to ascertain if there are sufficient human resourcesavailable in the case of the target management leaving the firm. Lastly, the boardmust ascertain if the planned mutual synergies can be realised and if the expectedprofits are realistic. It is worth noting, however, that an objective evaluation is oftenvery difficult to conduct because the board of directors is influenced by the opinionof the management. The board is then no longer capable of performing their super-visory function. Indeed, Malik (2002) points out the need to for the board to makeprovision against the management’s influence:

Is it sufficient if the executive provides information in an open and generous way? I don’tthink so. The supervisory body should, actually must, be able to get his own informationfrom independent sources.

Malik goes on to explain that it is a delicate situation, in which the board must findthe balance between getting the right information but without doing too much so asto undermine the CEO and his authority (Malik 2002).

Thus, the board must examine the management proposal in terms of strategy,resources, synergies and profits. Moreover, they must find an objective method of


analysis in order to limit the influence of the board and retain their supervisory role.In this way, a critical and objective environment is fostered in terms of the exami-nation of the management proposal and, by ascertaining an objective understandingof the acquired firm, the board enables the six principles to be realised.

(8) Integration of the acquired company

Another way in which the board can help to create a healthy environment is inthe assistance they can lend the CEO when trying to integrate the acquired com-pany. Such measures mainly consist of building the confidence of a company aftera takeover and include taking into account the acquired firm’s internal and externalculture, providing equal opportunities to all personnel, implementing the Groupsmodus operandi with moderation as well as working alongside the acquired firm’smanagement.

A board can not only share its knowledge of work culture variance in differentcountries and within companies but can select a management who integrates corpo-rate culture in its practice. In addition, it is crucial that they continue to question theCEO on the integration process and to monitor the results. In this way, the board nur-tures an environment in which integration can occur smoothly, thus increasing thepossibility of the acquisition’s success through the application of the six principles.

(9) Full disclosure

An important contribution from the board in creating an environment which fostersgood interactions is in the promotion of transparency. Full disclosure is vital in thatboards should make every effort to ensure that the CEO and his team give the boardcomplete information in terms of the target acquisition. It is critical, however, thatthe information is condensed down to its most crucial parts, so that the board canuse the information provided to make a sound decision in an efficient way. The casestudies revealed that long, complex and detailed decision documents are counter-productive and do not enable useful discussion. At Nestlé, most complex deals werepresented on 13 pages or less: this allowed for full and transparent disclosure, butwas still sufficiently condensed for the board to make an informed decision in areasonable time.

Furthermore, all information on real and possible clashes of interest should berevealed. The board must also ensure that the CEO and his team give accurate infor-mation together with projected figures. Therefore, the appointment of a CEO whotrusts the board as much as the board trusts him is critical to an environment inwhich there is free circulation of information and, therefore, healthy interaction. Itremains crucial, however, that the board also seeks information from independentsources in order to preserve its uncompromised supervisory function. As discussed,this becomes a delicate balance in terms of getting accurate information without un-dermining the CEO’s authority. If handled well, an open environment exist in whichthe principles can be realised and acquisitions can thrive.


(10) Clarity about the board’s role & a proactive relationship between manage-ment and board

It is vital that the role of the board of directors is understood by the CEO and histeam. It is the board’s task to supervise and monitor the CEO Moreover, from theoutset of the deal, the board ought to clarify with the CEO which decisions will bemade by the CEO and his team and which will be made by the board (beyond theboard’s original agreement to do the deal). In addition, the two bodies should agreeon the type and frequency of board meetings, as well as the information the boardwant to review before, during and between these sessions.

Moreover, it is important for both bodies to understand that monitoring doesnot mean infantilisation. Monitoring is a questioning process which protects thefuture of the company and improves the CEO’s reflection. The questions asked bythe board should be designed to improve effectiveness and the CEO’s capacity toimplement strategies. In turn, the CEO should not treat the board as an alterativesource of strategic creation but rather solicit the board to strengthen the legitimacyof his strategy.

As explored when looking at board-management models (Section 5.2), extremepower imbalances between the two bodies are not effective. Ideally, the board isnot a second management (Swissair in its first phase) nor the management a secondboard (Swissair in its second phase). Rather, the board should instil a partenerialrelationship with the management in which there is mutual trust. This is also fosteredif the board shows its intention to remain a board and not to become a concurrentmanagement. The board is then a proactive, independent entity which asks questionsand necessitates active persuasion by the CEO.

As such, a board should not behave as a tribunal. It is not a competitor of theCEO, it is an institution protecting the interests of the company and ensuring M&Aare aligned to the company’s strategy. The CEO remains in the driving seat but theboard monitors the CEO, if he is running the company effectively along the linespreviously agreed and if the M&A are in line with this strategy.

In this way, the board does not, by itself, make an acquisition successful but it isvital in creating the environment for the acquisition principles to flourish by filter-ing the acquisition through the validated strategy and supporting the management’sreflection process.

(11) Accepting that the CEO remains the key figure

If the company is run well, the board is superfluous; if it’s run badly, the board is helpless.


Though many boards assume that they are the most important body in a companybecause the law grants them ultimate responsibility, this clearly does not reflect thereality. As discussed, the CEO works full-time, compared to the board’s relativelyinfrequent meetings, is the closest to the business and has the greatest understandingof it. It is therefore crucial to understand and accept that the CEO is the key figurein a company.


While the board must accept that they are not in the driving seat, this does notmean that they do not have impact. The CEO is responsible for developing the basicstrategy and the subsequent M&A and must persuade the board of the validity ofhis plans based on full disclosure of his thoughts and actions. The board adds valueby having a degree of objectivity on this, a macro perspective. The board criticallyexamines, questions and approves the CEO’s actions. In this sense, they have thefinal power.

Finally, the board must also safe-guard the limits of the CEO’s power and avoidthe case where “absolute power corrupts absolutely”.

In this way, if the board is aware of the above key insights in terms of the pow-erful role of the CEO, the importance of full disclosure and the corrupting influenceof absolute power it is not superfluous. The board takes effective action once a com-pany is being mismanaged, as it can recognise this in early stages before a disasteroccurs. Referring to the opening quote, when a board is armed with these insights itis no longer “helpless” because it can identify inadequacies early on and take action.The board’s most critical point of impact, therefore, is in recruiting the right CEO.

In conclusion, recognising the CEO as the key figure in the company enables anenvironment in which there is clarity about respective roles and duties. In recognis-ing the CEO’s power the board-management relationship is described accurately andthe board is hyper-aware of the critical importance of full disclosure in their interac-tions. The board and the CEO should mutually agree on high level boundaries of theCEO’s power such as needing board approval for acquisitions over a given amountor outside the approved strategy. This ensures that major decisions are made on asound basis and an environment exists in which constructive processes are available.

(12) Succession plan for the key figure of CEO

With the insight that the CEO is the key figure in a company, the topic of succes-sion planning becomes crucial for the maintenance of a health environment and acompany’s long-term success. It is vital that the board is aware of this duty, partic-ularly if the CEO has a strong personality who typically avoids having other strongpersonalities around him. This results in a weak pool of people for the next CEO. Incontrast, Maucher, though strong, surrounded himself with strong people. As count-less examples bear witness, successorship becomes a source of serious problems onboards where it is not prioritised and contingences are not made.

If a successorship plan is not in place a destructive vacuum occurs in whichrivalries arise which are damaging to an environment with healthy interactions.Thus, in a weak position, the board are forced to find a solution quickly and usuallychoose under a great deal of pressure. Often, external, uninitiated people who arenot familiar with the company’s culture are brought in to plug this gap.

If a solid succession plan is in place, however, there is certainty and transparency.Most importantly, a well thought out plan allows for a “stress test” of future leaders:they are well-known to the board giving a sense of continuity; they have been withthe company for a long a time and have an engrained added value approach; andtheir true values in times of crises have been observed. As a result, internal jostling


for position does not create factions, a smooth changeover results and business cancontinue uninterrupted.

The environment is thereby enriched through a sense of stability and continuity,avoiding vacuums, crises, and rushed, ineffectual appointments.

Summary

Recruitment

Board’s relationship with the CEO

The board’s role in terms of leadership and strategy

Board preparations

Serving a nation’s myth or serving a company

E N V I R O N M E N T

R E C O M M E N D A T I O N S

1) A clear definition of whose interest the board is serving as well as board involvement in fixing the basic strategy

2) Added Value Approach3) Global outlook, operating

with local specificity4) Composition in terms of

special expertise5) An active board committee

for strategy6) Identification of

appropriate acquisition targets & mobilising expert knowledge to review targets

7) Consideration of the management proposal after target selection

8) Integration of the acquired company

9) Full disclosure10) Clarity about the board’s

role & a proactive relationship between management and board

11) Accepting that the CEOremains the key figure

12) Succession plan for the keyfigure of CEO

Notfulfilled

Partiallyfulfilled

Stronglyfulfilled

Fulfilled

P2) Acquirer’scontribution totarget

P3) Commoncore of unity

P4) Acquirer’srespect for target

P5) Capabilitiesto providemanagement

P6) Creating visibleopportunities fortarget employees

P1) Businessstrategy

Fig. 6.1 Recommendations for creating an effective environment (author’s creation)


6.2 Governing the Board-Management Relationship in orderto Enhance the Acquisition Success Likelihood

Besides the relationship between the board and CEO, its equilibrium and the qual-ity of exchange, another important aspect revealed through doing the empiricalfield research, was that the board’s stance was of great importance. Indeed, thesewere discovered to be largely interdependent and as such, mutually defining: therelationship between the board and the CEO dictated the board stance and viceversa.

Dynamic board stances in the context of M&A

It was revealed in the theoretical section that a board is capable of adopting manydifferent stances based on what the situation or specific acquisition required. Nestléis a good example of this, as outlined below, becoming an active, knowledgeable,entrepreneurial and representative board as the situation needed. On the most part,however, they took up an entrepreneurial stance, the ideal, but remained adaptable.At Swissair, in contrast, they only ever assumed two kinds of stances, representativeand active, and neither position proved successful in the longer-term.

These various stances were outlined in general terms in Section 2.3.5. Based onthe knowledge gained through the empirical work, they are now examined below inthe specific context of M&A activities and the way in which boards can use thesestances to contribute to acquisitions.

The Representative BoardDue to its significant distance from the day-to-day business of the company therepresentative board of directors is only marginally involved in M&A. Acquisitionsare entirely controlled by the management, who only inform the board of directorson a regular basis. In this stance, the board of directors only contributes through theirextensive business connections. As explored above, Swissair’s second incarnationunder Bruggisser saw the board lapse into a representative stance, as a body overlyconcerned with its PR and brand mythology. At Nestlé, however, a representativestance was used only in the sense that the law demanded that a certain portion of theboard be Swiss. In this sense, there were always members who had a representativerole. Nevertheless, it never became the governing stance.

The Knowledge BoardIn this model, the M&A activities are conducted mainly by the management,however, they specifically seek the advice and input of the board. An instance ofthis would be that lawyers are deployed to give advice on legal documents or techni-cians are asked for expert opinions on products and on production sites. The overallcontribution of the board to M&A activities is therefore limited to selective expertassignments. At Nestlé, for example, the board moved into a knowledgeable stancewhen Maucher called for specific legal advice from Boeckli or financial advice fromde Weck (Maucher, during interview).

6.2 Governing the Board-Management Relationship in order to Enhance . . . 163

The Entrepreneurial BoardAs outline in the theoretical section of this study, entrepreneurial characteristicsare vital to have on a board team. Building on Maucher (2007) and the insightsgained through the case studies, it was revealed that entrepreneurs are individualswho think in the long-term and whose objective is to innovate and create. They counton intuition and creative interpretation of the information in difficult situations andin this sense, entrepreneurs have great leadership qualities. They challenge ratherthan administer and are a source of inspiration. Thinking and motivated like ownersand always assuming accountability for their actions, entrepreneurial boards are agreat resource in M&A activities.

A good example of this is the way in which Nestlé’s board acted through theirboard committee in order to be close to the business; in this manner, the board couldface the business challenges alongside management. In this sense, they were notonly a formal body but a proactive and involved one.

Hence, the entrepreneurial board stance is best for coping with complex issuesrelated to M&A and forms the basis for successful acquisitions.

The Active BoardIn this stance, the board has an active role during acquisitions by taking on man-agement duties and thereby becoming the driving force in M&A activities. In thismodel, the board is capable of leading the M&A process and handling the corre-sponding risks. Swissair in its first phase, when the CEO was very much subservientto the board, is a good example of this. In fact, it resulted in the CEO implement-ing strategy he did not agree with. Conversely, the board at Nestlé only moved intothis stance if a member had specific connections at a target company and couldtherefore operate as a point of contact. This was only ever used in a limited way,however, because Maucher was a strong and involved CEO who would take chargebefore long.

ConclusionThus, Swissair’s board took up two stances during the periods covered in the casestudy. At first, they were an active board, as the driving force behind acquisitionssuch as Sabena. With the rise to power of Bruggisser, they relinquished their powersand subsided into a representative board, as discussed previously. In contrast to this,Nestlé was, on the whole, an entrepreneurial board, however, they were capable ofchanging their stance when particular acquisitions called for it.

It can also be deduced that the entrepreneurial stance is the ideal model; the boardoperates through a few entrepreneurial board members in a committee which iscloser to the business and this enables them to constructively contribute to businessproblems while still respecting the Hilb’s board doctrine of keeping “your nose inbut your hands out”. The relationship between the management and CEO in thisstance is excellent in that both parties get the most out of it; the CEO gains access tovaluable internal resources and added value leadership and the board benefits froma much stronger understanding of what is happening on the ground.


Today’s business world is undergoing faster and more significant changes thanpreviously experienced, based on an increasingly more globalised world. In orderto cope with these changes, it is increasingly more important that the managementis supported by entrepreneurial personalities. Because they think in the long-termand have great qualities of commitment, these personalities have the necessary toolsto continuously evaluate the organisation, its challenges, staff, and structure. With aboard a like this in place, it is the management’s prerogative to use the board as aexpert resource and sounding board. Therefore it can be concluded, that having anentrepreneurial board of directors is the best precondition to meeting the challengesof M&A and developing effective solutions.

Though an entrepreneurial stance is ideal, the ability to move between stances indifferent situations is the key; for example, if an acquisition is an exceptional situ-ation or an acquisition is outside the agreed strategy, then increased input from theboard is necessary and it becomes appropriate that they move towards being a moreactive board. Another example would be if the CEO were in the process of decid-ing whether to enter into a new geographical market or a different product group,then the ability of the board as an internal resource to move into a knowledge stancewould be of great advantage to the CEO. The board would be capable of providinga unique viewpoint on the matter from within the company to which external con-sultants are not privy such as internal strengths and weaknesses or cultural aspects.Hence every case is different and a board capable of adopting stances which reflectthe needs of a given situation.

To conclude, an adaptable and proactive entrepreneurial board is the ideal model.Nestlé serves as an excellent example of this, operating usually as an entrepreneurialboard (with representative aspects), as a knowledgeable board when expertise wereneeded on a project and as an active board when a particular connection existedbetween a board member and the target firm.

6.3 Summary

Literature, law, and corporate governance makes the board the main governing bodyin an organisation. As the majority of acquisitions still fail, the starting point ofthis analysis was, therefore, to look at the role of the board in M&A. The reality,however, proved very different. It was revealed by the case studies that the CEO is,de facto, the most powerful person in the firm despite, de jure, the board being thekey body with ultimate responsibility.

The board delegates its responsibility, which is proof of the discrepancy be-tween action and responsibility, reality and law. This structural discrepancy radicallydisempowers the board, a merely pro forma body, as it cannot have an impact if theCEO does not proactively involve it. An extraordinary CEO who always puts theinterests of the company and its customers first can negotiate this, however, as thereare a limited number of Mauchers in the world, this cannot become a template tobe generalised. Nevertheless, by respecting the twelve best practice recommenda-tions for boards and the adaptable board stances as outlined above, the resultant

6.3 Summary 165

board-management relationship can create a constructive environment in whichthe principles can be fulfilled, resulting in successful acquisitions in the currentframework. This addressed the research questions.

The in-depth analysis of board-management relationships in M&A revealed thefundamental structural inadequacies in the current corporate governance and legalsystem and are discussed in the conclusion below. These structural inadequaciesare becoming increasingly critical, particularly because of the changing nature ofacquisition forms in a business world of increasing complexity. Radical solutionsare needed.

7Outlook and Conclusion

7.1 Outlook: The Changing Nature of M&A

The Rapid Increase in M&A: The Actual SignificanceUp to the present, there have been many sudden increases in M&A and new waveswill occur again when the economic crisis have been alleviated. The sudden increasein M&A a hundred years ago at the turn of the 20th century was probably the largestand most significant recorded in the United States. It established the vast bulk oflarge corporations that lead the American economy right up to the 1960s and 1970s.These included, amongst others, the GEs, the United States Steel Corporations, theGMs, Alexander Graham Bell’s AT&T, associated companies under Rockefeller,etc. This was also the case in Europe, for example, with Siemens.

Since then, several other sudden increases in mergers have happened in Europeanand the US. In the final years of the 1920s, many small firms merged establishingthe bigger utility-chemical firms such as Steel-Union, the Interessen-GemeinschaftFarbenindustrie AG, or its corresponding British firm, Imperial Chemical Indus-tries. Furthermore, during this time several larger British and German banks merged.These developments resulted in a consolidation of the number of corporations in themarket.

The Changing Nature of AcquisitionsMergers in the past were used as an “offensive tactic” with a view to enhancingprosperity and profit. Most of the mergers nowadays, however, are designed as adefence to decrease the rate of deterioration. In a vulnerable or contracting sector,the best method of stopping or reducing this is to reduce expenditure. Spreading theoutlays to larger companies with which the firm acquires is the simplest method inthe short-term and this is currently the reason behind numerous large mergers. It isunknown if this has the required effect in the longer-run.

Nowadays, despite continuous mergers there is no more consolidation. Rather,with each large acquisition, very often a number of parts are sold to small or medium


168 7 Outlook and Conclusion

sized firms. Thus, there is a deliberate division of large firms creating a number ofautonomous firms. Indeed, more than 50% of the acquisitions in 2009 were divesti-tures (Insite 2010). Furthermore, it looks probable that this will increase. Recentexamples include Rio Tinto acquiring Alcan in 2007 and thereafter implementinga broad disposal programme, or the Vodafone-Mannesmann deal in 2000. Subse-quently, Vodafone disposed of several of its businesses. Very recently, Solvay soldits pharmaceuticals business to Abbott.

The origins of this trend may be in the beginning of the 1980s, when Welchtook up the position of chief executive at General Electrics and declared that thefirm would dispose of any of its parts that were not capable of securing first orsecond positions globally. While Welch’s decision was a completely original ideaat the time, over the last 20 years or so it has become a trend, transforming globalbusiness.

Usually, a firm becomes healthier and more concentrated as a result of demerg-ing, and often gets smaller. The awareness that diversity is becoming progressivelymore difficult in the global markets is a possible explanation for current acquisitionand disposal trend. In order to prosper, firms have to concentrate on their strongpoints within their core businesses. Also, the tendency to source large sections ofthe production procedure outside the firm is another reason for many demergers. Inthis case, a firm makes a deal with another one to carry out certain aspects of theprocess such as taking care of the firm’s IT, HR and training, accounting, caretakingand upkeep, and the buying of supplies apart from a small number of essentials. Theextent of this in today’s business is not entirely clear, but suffice to say, almost alllarge firms (and indeed smaller ones) contract out huge sections of their businessthat, until recently, were internal affairs.

To conclude, though demergers and mergers are always at the centre of mediaattention, they are not likely to be the most significant aspect of the future structureof corporations and even economies. Rather, new and diverse organisation of firms’structures and strategies will constitute the key means of business evolvement.

Moving from Acquisition Towards a New Form of CooperationIn the future it is likely that acquisition will lose ground with regard to fos-tering a corporation’s prosperity. Largely unmarked by the media, and generallyunperceived, the real changes seem to be happening as alliances: joint ventures; co-operative deals in relation to marketing-research-technology etc.; the case where alarge firm purchases a minority share in a smaller firm; and frequently, “handshakedeals” which do not involve many law-based or formal contracts to support them.In this manner, for example, the pharma sector has, on the whole, edged into freshtechnologies like those surrounding the science of genes (Gerber, during interview).Previously, buying a firm in the new sector of the industry, or less frequently, makingits own advancement in this sector would have been a large and reputable firm’s wayof manoeuvring into the sector.

Currently, the usual way of doing this is through a deal that prevents the largefirm from gaining power over the operation, like the many deals between Americanuniversities’ science departments with global pharma firms.

7.1 Outlook: The Changing Nature of M&A 169

Nevertheless, whether law- or finance-based, numerous alliances resist conven-tional classification. By way of an example, how might one define the nature of thealliance in 1995 between Sony and Intel (or Ericsson) which, it is said, was agreedwith no formal, written deal? For Sony, the conception of a personal computer andthe production of its key parts in terms of electronics will be carried out by In-tel. As a direct competitor with the main buyers of Intel’s products, Sony will puttogether these parts and sell the personal computer in America. No monetary invest-ment, either way, exists between the firms and both cover their own overheads. Sonybenefits from the design expertise at Intel and they, in turn, benefit from the fact thattheir latest microchip has a certain and exclusive buyer. Undoubtedly, this does notfigure as either a typical joint venture or deal based on expertise.

Recent examples of such joint ventures include Rio Tinto and BHP Billiton,a joint venture to combine their Western Australian iron ore assets and shareinfrastructure. Another example is the joint venture between Société Générale andCrédit Agricole to cooperate with regard to their asset management business. Fur-thermore the joint venture between BP and TNK to jointly proceed with oil and gasexploration in Russia is worth mentioning.

It is interesting to note that the Securities and Exchange Commission does notneed notifying of these associations. No sums are printed. On the whole, they requirelittle investment and therefore can go unmentioned in an audit.

By law, the paper work involved is very similar to that drawn up for servicevendors or suppliers. But in terms of the economy, it involves operating alongsideeach other as partners and is supposed to be a long-term effort. Far greater than thenumber of M&A, the number of these alliances is undoubtedly very big.

Financial concerns are not the major consideration behind these new kinds ofrelationships. Finding the necessary funds to acquire companies or make their ownadvancements in the area would not be hard for large, reputable firms. Rather, a newway of thinking is behind the shift.

Previously, it was generally accepted that all businesses could operate under thesame type of management structure. Harold Geneen established a huge firm basedon acquiring firms in the 1960s and 1970s was a particularly strong advocate of thistheory. In incredibly diverse sectors, he made over 300 acquisitions. Moreover, hewas sure that by transplanting uniform systems and fund monitoring, they could beeffectively managed and prosperity would follow. Indeed, as long as he was at thehelm, the company’s ITT was celebrated in the stock market. Once he left in the late1970s, however, the firm began to deteriorate.

Nowadays, we are starting to recognise that even though there are generalground-rules of management, their implementation and relevance may need to beadjusted for variations in markets, IT, internal cultures, and, primarily, the particularbusiness theory used.

Are Current Corporate Governance Structures and Management MethodsCapable of Dealing with These Changes?These new forms of relationships between organisations alter our conception ofwhat constitutes leadership, because no one is in control when relationships are


constituted of partners and allies through co-existence. With no leader, there is noone to answer to; in the same way, no one serves. A person who is leader of oneproject may be the follower in the next. For example on a business operation whichrequires cultural specificities, an expert with this cultural and legal backgroundwould be most apt to run this project. The same person may only operate on theperipheries of the next deal, as only some of his skill and experiences are relevant.

Although these new relationships involve cooperation, the companies still op-erate autonomously in order to achieve individual targets and fulfil individualduties. As a result, previous methods of managing M&A relationships, founded onownership and control, will not function under these new kinds of co-operations.In contrast, these relationships are founds on equality, rather than ownership, trustrather than control, and they last only as long as both parties benefit.

These joint ventures and alliances, as opposed to the old model of M&A, will,therefore, require new management and governance structures in order to realisetheir potential.

7.2 Current Corporate Governance and Future Challenges

The understanding that the board was the most important body in a firm was thejumping off point for this study. This is supported in literature, by law, and inthe opinions of many board members who were interviewed during the empiricalresearch. For this reason, the role of the board was placed as the primary con-sideration in the research question in order to understand why acquisitions fail orsucceed.

Based on the analysis of M&A governance and empirical investigation of lead-ing CEOs’ and chairmen’s opinions about the reality of managing acquisitions, thefollowing was revealed.

Firstly, the board’s influence is currently over-estimated: the board is widely con-sidered to be the most important body in the firm, the “brain” and the driving force.In reality, as leading international CEOs such as Maucher, Gerber and de Weck re-vealed through in depth discussion, it is the CEO who is the real mover within thecompany. In this sense, the board is merely a pro forma body, its overarching in-fluence “wishful thinking” on the part of the large majority of board members andthose dealing with and writing about boards. But it is, in fact, ludicrous to thinkthat the board could run a company if they only meet, at best, once a month. Themaxim that “knowledge is power” holds true here. The CEO is in daily contact withevery aspect of the business, he is “on the ground”, most knowledgeable about theindustry and his staff and he chooses what is reported back of this. If he is a goodCEO, then the best attempt at a partial reckoning is made at these meetings, if not,as in Bruggisser’s case, the CEO has the power to deliberately withhold or influencethe clear understanding of the board. Thus, in reality, as per the Nestlé case study,Maucher made the system work by actually giving the board influence in order thatthey could meaningfully contribute, but ultimately, he still ran the company.

Secondly, reflecting on the reality of the CEO-board relationship, the fundamen-tal reason for the fact that the CEO is so powerful (besides the fact that he is closest

7.2 Current Corporate Governance and Future Challenges 171

to the business and most knowledgeable about his industry and his staff etc.) isstructural in nature. Currently, the relationships between a company’s bodies areultimately governed by legal and corporate governance requirements as these decideultimate responsibility. These laws and requirements were created because of previ-ous corporate failures and so lawyers and financial experts were brought in to draftlaws and recommendations to avoid future mistakes. They formulated this, as is thenature of laws, in terms of “what is forbidden or to be avoided to prevent failure”.Thus, in order to appease the law’s need for accountability and, critically, to decidewho goes to jail when failures occur, organs were created and boundaries strictlydelineated in Art. 716 which outlines the responsibility of the board.

The law saw that the board was the highest body in a company (though thishas been revealed to be only superficial) due to its role as advisor and monitor andtherefore assigned the board ultimate responsibility. At the same time, it allowed theboard to delegate many of its responsibilities, including its role as strategy maker. Inpractice, the board does delegate this to the CEO because it is not de facto involvedwith the actual running of the company. This can only be interpreted that the boardis not in a position to exercise its given duties. There is clearly a discrepancy. Theboard should not be responsible for something if they are not actually doing it.Moreover, because the board is delegating, it means that they are doing this becausethey cannot fulfil the tasks themselves. So why are these tasks given to board in thefirst place? It appears that the current legal context is clearly not appropriate.

In this way, the problems with the relationship between the management andboard are further compounded by law and corporate governance. As discussed, ifthe CEO does not actively involve the board, it is difficult for the board to fulfil theirrole. The argument that the board could fire the CEO if they thought he was insuf-ficient or that the board were being given limited information is not valid because,in reality, the board would not necessarily know that they were not “in the loop”until it was too late. Furthermore, when the CEO is also the chairman, this meansthat effectively the CEO is electing his own board. The CEO can therefore influenceboard composition; a strong personality might bring in weaker people or people whodo not understand the industry and will not ask pertinent questions. Again, the sys-tem requires that the CEO is an incorruptible entity and capable of almost inhumanimpartiality.

As noted in the interviews with the leading CEOs, the CEO becomes much morepowerful due to the CEO’s proximity to the business, the fact that the board onlymeets once a month, the board delegates many of its duties, and the legal structureinvites the CEO to take risks without incurring responsibility and so on. Absolutepower begins to focus on one individual and the danger “of absolute power corrupt-ing absolutely” becomes real. The system only works when a strong personality,such as Maucher, takes the helm.

Maucher was brilliant and made a flawed system work. Critically, he was notegocentric and even had the personality and foresight to make arrangements fora successor, realising that big personalities leave huge power vacuums on theirdeparture. One could compare it to a dictatorship in that if the right man is inpower, it is the best form of governance and the most efficient, but if the wrongman holds absolute power then disaster on a large scale is inevitable (“l’État, c’est


moi”). Democracy, therefore, becomes the lesser evil and the safeguard from greatdisaster.

Thus, several interesting conclusions have arisen. Despite the title of the thesisand the original premise on which the research question was based, that the boardis the major mover in a firm, it is now clear that, counter to intuition, the CEO is thekey force in the company and in acquisitions. This is in line with Maucher’s beliefthat the main cause of failure is a CEO corrupted by vanity:

You can’t have people in this position who are too vain, get carried away, or become ob-sessed with power. They need to exercise their power because that is part of their job. Butif these people become irrational then they are in the wrong place.


As a result, Maucher believed that for an acquisition to be a success, the board’scrucial role was not increased involvement but simply hiring the right CEO.

While the empirical research in this study has borne out this idea, it is toolimited and there are other vital elements to acknowledge in acquisition success.The relationship between the board and management, as discussed, is vital and italso dictates the board’s stance (and vice versa). Furthermore, the board, ideally anentrepreneurial one, need to request effective information packaged in a concise anduseful way (as was the case in Maucher’s reign). This enables efficient meetings inwhich pertinent questions can be raised and informed decisions made. Transparencyshould be a key note. Lastly, because of the key nature of the board-managementrelationship in successful acquisitions, the board need to recruit their CEO inter-nally. It is vital that the board know their CEO well, have tested them under a varietyof situations and are therefore aware of their strengths or weaknesses.

Based on the insights above, several factors are necessary to a successfulacquisition: a cooperative CEO; a board that is entrepreneurial and, importantly,is a dynamic body which can adopt various stances; and a good relationship be-tween both bodies. This, in turn, creates an environment in which the six acquisitionprinciples can be fulfilled.

In this way, the current corporate governance system can be effectively nego-tiated, even compensated, using the best practice recommendations. Nevertheless,this does not address the root problem, which is that the legal structure and currentcorporate governance do not reflect the reality of business and nor is it likely thatthey will be able to cope with the business world of the near future. As exploredpreviously, we are entering into a very different business world due to the changingbusiness practices and global business interaction. Broadly speaking, acquisition isbeing replaced by cooperation, partnerships, joint ventures and new, lateral struc-tures in terms of hierarchy and so on. If the current corporate governance cannoteven cope with the current business world, it will become an increasingly seriousproblem in the future.

Corporate structure would also benefit by moving from a hierarchical systemto one based on competence. This would alleviate the problems associated with ahierarchy in which people work for recognition, for example, to please the CEO, asopposed to being results orientated in order to climb the hierarchical ladder.

7.2 Current Corporate Governance and Future Challenges 173

Moreover, corporate structures which are not so much body based but functionbased would further engender a dynamic mode of operation as opposed to a staticone. This is not to suggest that bodies ought to be dismissed as organisational struc-tures but that more fluidity should exist within them where emphasis shifts towardsfunction. In this way, the system would be better able to cope with the joint ventureglobal business world currently emerging where, for example, research bodies fromdifferent companies often combine efforts while their TMTs continue as separateentities.

This would also play a part at an individual level: jobs would be based not somuch on the job title but on the skill set of the individual. In this way, individualshave the potential to operate in many capacities on different projects, thereby max-imising their usefulness. A more dynamic system is thereby created, which is moreindependent of bodies and job titles.

Maucher was moving in this direction when he restructured the TMT under hispolicy of “as much hierarchy as necessary but as little as possible” (Maucher, duringinterview). He also insisted that the TMT worked less through job titles and thepowers associated with them and more by intentionally generating added value forthe firm. On a broader scale, Maucher recognised:

(. . .) more principles and fewer detailed regulations are needed because, fundamentally,these regulations do not fit every company


By institutionalising what Maucher started with his “value added” policy, the roleof the board would be to enable the “best fit for the deal” or “staffing for strength”in terms of positioning the most suitable people for a specific project who bringthe required knowledge, experience and skill base. Each project has its own uniqueneeds and staff requirements and therefore people are allocated on a value addedbasis, changing their role and position from one acquisition project to another. Fur-thermore, it would be advantageous if the board could work as a dynamic forceby itself, independent of the CEO, rather than dependent on a Maucher to be aninitiating force.

Just as Nestlé had dynamic board stances, dynamic roles could create the samestrengths. In this way, the CEO could be a changeable entity or have lots of differentroles, and operate more like a project manager. Thus, concentration of power in thehands of one person would be avoided as would the inherent risk involved.

Perhaps, like Malik (2008) suggested, the CEO’s role could be divided amongstfive people because, again, there are a limited number of Mauchers in the world. Ademocratic institution would develop in this case.

Whatever shape future solutions might take, the fundamental problem today isthat the current corporate governance system is riddled with problems which resultfrom inadequate reaction to context. The key point is that corporate governanceshould provide answers to the questions of how the environment should be struc-tured so that the board can lead effectively and what makes good leadership andmanagement? These are much more relevant and important questions than the ques-tion corporate governance is currently attempting to answer, that of how failures canbe avoided in the future.


7.3 Limitations of the Research

The present study has a number of limitations.Firstly, the number of case studies was limited, being only two, due to the exten-

sive nature of analysis in each case. More case studies could, however, add to thestrength of the conclusions.

Secondly, the Swissair case study was based largely on secondary informationsince interviewees were not forthcoming with information. First-hand informationcould have contributed to the generation of new knowledge.

Thirdly, this work focused on two large, internationally integrated companies.It also looked at economic sectors in which technological innovations are less fre-quent and thus it is not as likely that the TMT will have to face sudden and brutalinnovation gaps. The study also focused on companies with strong brands with acapacity to attract directors. This meant that the companies had the pick of peoplewith valuable competencies. They had the opportunity to have an ideally composedboard and to recruit top members with the desired skills. Problems would, therefore,be different for companies who do not have the financial or persuasive capacity tohire top members.

7.4 Suggestions for Future Research

The present study represents a detailed attempt to understand key corporate gover-nance structures and related activities in firms undergoing M&A. It is hoped thatthe findings of this study serve as a stepping-stone for further analysis of the issuesaddressed. It is also hoped that the present study is further expanded in the future tocover small and medium-sized internationalizing companies, as well as companiesfrom other countries, to see if cultural and legal differences affect these corporategovernance issues.

Such research has the potential to make a valuable contribution to theory andpractice given the important role corporate governance plays in corporate successand M&A activity globally.

As Macus (2002) points out, it is clear that further studies need to exam-ine and elucidate the complex relationship between the TMT and the board, andindeed, those occurring within the board itself. Future studies also need to examineimportant discoveries in psychological and sociological research which would shedlight on these matters.

Lastly, as discussed in the conclusion, new business structures are emerging glob-ally in terms of a fresh emphasis on joint ventures and lateral cooperation and so on.New research is needed, therefore, to explore the adjustments necessary to businessand corporate governance structure to cope with these changes.

Appendix AMaucher’s 13-Page AcquisitionMemorandum to the Board

175F. Farschtschian, The Reality of M&A Governance,DOI 10.1007/978-3-642-22778-3, © Springer-Verlag Berlin Heidelberg 2012

176 Appendix A: Maucher’s 13-Page Acquisition Memorandum to the Board

Appendix A: Maucher’s 13-Page Acquisition Memorandum to the Board 177

Appendix BExpert Interview with Dr. h.c. HelmutMaucher

Niederschrift des geführten Expertengesprächs mit Dr. h.c. Helmut Maucherim Rahmen der Forschungsarbeit von Farsam Farschtschian an der UniversitätSt. Gallen.

Expert Interview with Dr. h.c. Helmut Maucher• Former CEO and chairman Nestlé• Honorary chairman Nestlé

Farsam Farschtschian: Herr Maucher, wie können Sie die Art und Weise, wie Siebei der Nestlé Akquisitionen vorgenommen haben, darstellen?

Helmut Maucher: Zu diesem Thema muss ich erst einen Punkt voranschicken.Wie Sie wissen, hat nach dem Schweizer Gesetz der Verwaltungsrat (VR) dieOberleitung. Das heisst, er führt normalerweise die Geschäfte.

In der Praxis ist das natürlich nicht realistisch, denn in einem grossen Geschäftkann der VR nicht mit 15 Leuten das Geschäft führen. In der Regel delegiert derVR die Geschäftsführung an den so genannten „Delegierten des VRs“. Wenn dasder Fall ist, hat dieser Delegierte eine relativ grosse Vollmacht, und der VR wird –nicht ganz – aber in Richtung eines deutschen Aufsichtsrats (AR) zurückgestuft.Denn er hat seine Kompetenz weiterdelegiert. Allerdings geht das nie so weit, wiedas in Deutschland der Fall ist. Dort kann der Vorstand zum Beispiel eine Firma von10 Milliarden kaufen, ohne den AR zu fragen.

Dies ist in der Schweiz nicht so: Bei uns entscheidet der VR nicht nur beider Nomination der Generaldirektoren, sondern ist bei allem dabei, was das Ma-nagement angeht, so wie bei wichtigen Strategien und Akquisitionen. Das ist inder Regel festgelegt. Ich hatte bei uns festgelegt, dass der VR dann mitentschei-den muss, wenn eine Akquisition mehr als 500 Millionen CHF kostet. Aber derVR-Ausschuss musste bereits ab 150 Millionen mitgenehmigen. Wir machen jaMilliarden Investitionen – da kann man nicht jeden Tag den VR in alles einbeziehen.

Um zusammenzufassen: Erstens ist die Kompetenz des CEO ab einer bestimmtenGrössenordnung zu Ende. Zweitens ist sie zu Ende, wenn die Akquisition zu einer

189

190 Appendix B: Expert Interview with Dr. h.c. Helmut Maucher

Strategieänderung führen würde. Wenn wir zum Beispiel in die Pharmazie gehenwürden oder ins Reisegeschäft, wäre dies eine strategische Frage.

Die Kompetenzen des CEO und des Ausschusses gingen bei uns sehr weit, abernur innerhalb der festgelegten Strategie. Diese hat der VR jedes Jahr mindestenseinmal anhand eines grossen Papiers diskutiert. Man konnte dann sagen: „Basierendauf dieser Strategie kaufen wir nun ein Pet Food Unternehmen“.

Die Funktionen des VR sind in wichtigen Sachen mitzureden und vorher die Stra-tegie festzulegen. Innerhalb dieser zwei Parameter kann der CEO, beziehungsweiseder Ausschuss, handeln. Das muss man wissen, sonst versteht man den Rest nicht.

Farsam Farschtschian: Gehen wir nun von Akquisitionen aus, die über dieseGrössenordnung hinausgehen, also über 150 oder 500 Millionen. Wie läuft esda ab?

Helmut Maucher: Die Initiative geht ganz klar vom CEO aus. Er ist ja auch Mit-glied des VR. Er hat zusammen mit dem VR die Strategie festgelegt und sagt nun:„Im Rahmen dieser Strategie kaufe ich jetzt ein Pet Food Unternehmen oder einNutrition Unternehmen.“

Der CEO studiert mit seinen Mitarbeitern das Projekt und wenn er es für sinnvollerachtet, legt er es dem VR vor. Dieser muss nun entscheiden. Wenn er sich für„nein“ entscheidet, ist das Projekt zu Ende. Bei mir ist es so: Wenn der VR drei Malgegen meinen Vorschlag entscheidet, kündige ich. Denn dann gehe ich davon aus,dass er ein Problem mit mir hat und nicht mit den Projekten.

Die Stellung des CEO ist also ziemlich stark. Solange er Erfolg hat, wird derVR Schwierigkeiten haben, „nein“ zu sagen. Ich habe immer 100% Zustimmunggehabt – aber ich habe den VR auch immer voll informiert. Die Mitglieder des VRwussten immer, worum es geht. Sie hatten Vertrauen in mich. Aber wenn ich diesesVertrauen missbraucht hätte, hätten sie alle Möglichkeiten gehabt zu reagieren.

Nach der Entscheidung des VRs wurden die Akquisitionen in Gang gesetztund durchgeführt. Danach hat das Management eine Berichtspflicht. Wir müssenden VR über alles informieren. Wie geht das Projekt weiter? Wie läuft die neueAkquisition? Geht es gut? Geht es schlecht? Entspricht es unseren Plänen? Gibtes Probleme? All das gehört zur normalen Berichtspflicht für den VR. Natürlichgeht es bei diesen Entscheidungen über Akquisitionen nicht nur darum, ob man et-was tut oder nicht, sondern im Allgemeinen auch um das Finanzierungskonzept.Nehmen wir neue Aktien auf oder machen wir es durch Commercial Papers undversuchen dann Selbstfinanzierung? Oder nehmen wir einen grösseren langfristigenKredit auf? Diese Fragen gehören in der Regel mit zum Entscheidungskonzept.

Generell möchte ich zu Akquisitionen folgendes sagen: Wir haben bei Nestlékeine Akquisition gemacht, die später nicht erfolgreich war. Das liegt sicherlichdaran, dass wir keine Abenteuer eingegangen sind. Wir wussten immer, was wirkauften.

Den VR interessiert immer: Inwieweit wird dabei der Gewinn kurzfristigbeeinträchtigt? Es könnte passieren, dass ich eine Akquisition machen möchte,die strategisch richtig ist, aber kurzfristig zu einer Dilution des Profit per Shareführt. Wenn ich momentan einen hohen Betrag hinlegen muss, kann das unter

Appendix B: Expert Interview with Dr. h.c. Helmut Maucher 191

Umständen den Net Profit beeinflussen, weil für 2–3 Jahre die neuen Deckungs-beiträge etwas kleiner sind als die neue Zinsbelastung bis sich die Akquisitionentsprechend rentiert. Bei solchen Fragen wird natürlich mitdiskutiert.

Bei Nestlé hatten wir praktisch keine Misserfolge, denn wir haben erstens dieDinge realistisch und nüchtern betrachtet und zweitens nur Firmen unserer eigenenBranche gekauft, von denen wir also selber etwas verstehen. McKinsey behauptet,zwei Drittel der Akquisitionen gehen schief – das war bei uns nicht der Fall.

Ganz wichtig für Akquisitionen ist, auf welchen Grundlagen die Entscheidungbasiert. Heutzutage produzieren Investment Banker Tonnen von Papier. Wir hin-gegen haben kaum Investment Banker eingesetzt. Wir haben sie lediglich selektiveingesetzt, wenn sie zum Beispiel in einem Land die Gesetzgebung besser kannten,oder weil die andere Firma sie eingeschaltet hatte. Aber wir haben nicht Millionenund Milliarden für sie ausgegeben. Wir haben uns gesagt, dass wir selber wissenmüssen, was wir tun.

Wir waren sehr vorsichtig im Umgang mit Investment Bankern. Es werden jaheute tonnenweise Dokumente produziert, aber was man wirklich braucht, ist garnicht so viel.

Ich kann Ihnen ein Beispiel sagen: Als wir „Carnation“ kauften, war das die erstegrosse Akquisition einer europäischen Firma in den Vereinigten Staaten. Es gingum 3.5 Milliarden USD. Das war vor über zwanzig Jahren ungeheuer viel Geld. Ichhabe dem VR damals genau dreizehn Seiten gegeben. Darin stand alles, was wichtigwar und anhand dieser dreizehn Seiten hat der VR entschieden.

Was ich damit unterstreichen möchte: Es ist besser, die Entscheidungen mit Hilfeweniger Dokumente und Studien zu treffen. Denn in der Regel stimmen Einzelhei-ten sowieso nicht. Die Welt bewegt sich ohnehin immer anders als die Leute glaubenund eine übertrieben grosse Anzahl an Studien täuscht eine Genauigkeit vor, diegar nicht existiert. Die wesentlichen Grundlagen standen in meinen dreizehn Seitennatürlich alle drin: Warum machen wir diese Akquisition? Stärken wir Amerika?Stärken wir „Pet Food“? Was kostet es und wie finanzieren wir es? Das ist alles.

Was noch viel wichtiger ist und warum ich glaube, weshalb viele Akquisitionenschief laufen, das sind die Massnahmen nach der Akquisition. Da machen vieleLeute Fehler: Oft werden Stäbe in die gekauften Firmen geschickt, die alles besserwissen und durch psychologische Fehler die ganze Firma frustrieren. Oft wird dasManagement nicht genug involviert und ein Klima geschaffen, das dazu führt, dassdie Leute nicht mehr motiviert sind. Oder das ganze Management wird entlassen.Das sind alles Punkte, die dazu führen, dass eine Akquisition scheitert.

Hier haben wir keine Fehler gemacht, worauf ich sehr stolz bin. Ich war beijeder Akquisition am nächsten Tag in der neuen Firma und habe sowohl mit denLeuten als auch mit dem Management gesprochen. Jeden Kader, der etwas taugte,liess ich entweder auf seinem Posten oder gab ihm die Möglichkeit, sich innerhalbvon Nestlé einer neuen Aufgabe zu widmen. Denn das waren ja keine schlechtenLeute. Die zentralen Stäbe habe ich ganz vorsichtig eingesetzt. Wenn die nämlichwie Ameisen über so eine Firma herfallen, dann geht die Firma kaputt.

Ich glaube, dass wir psychologisch und was die Involvierung neuer Leute betrifft,keine Fehler gemacht haben. Viele, die eine Akquisition durchführen, glauben, sie


seien die Schlauen und die anderen seien die Dummen. Ich habe den Leuten auchzugehört, denn die sind nicht dumm. Ich habe zum Beispiel die Firma „Stouffer“gekauft. Der Chef von „Stouffer“ wurde nachher eine Zeit lang Chef von Amerika.Später habe ich „Carnation“ gekauft, wo ich dem ersten Mann – er war über 70 –sagen musste, er müsse gehen. Er hatte einen Nachfolger, dieser wurde dann nichtnur Chef von „Carnation“, sondern Chef von ganz Amerika.

Ich habe also die tüchtigen Leute immer genutzt. Ich habe den Leuten immergesagt: „Ihr gehört jetzt zu Nestlé, ihr habt die gleichen Chancen wie jeder anderein unserem Unternehmen!“ Das habe ich nicht nur gesagt, sondern es an solchenBeispielen auch gezeigt.

Diese psychologischen Fragen – wie man das nachher managed, von derFührung, von der Motivation, von der Einbeziehung dieser Leute, von der Wert-schätzung – spielen, meines Erachtens eine ganz entscheidende Rolle über denletztendlichen Erfolg einer Akquisition.

Farsam Farschtschian: Interessant, denn man liest, gerade wenn es um PostMerger Integration (PMI) geht, dass es relativ rasch und zügig gehen muss. Aus-serdem habe ich bei Ihnen gelesen, dass Sie zum Beispiel bei „Carnation“ nichtdirekt integriert haben. . .

Helmut Maucher: In vielen Fällen habe ich die Leute für sich gelassen. Wirbeobachteten erst einmal und haben erst dann Schritte eingeleitet. Wir haben zumBeispiel eine Tochtergesellschaft in Deutschland in die deutsche Nestlé integriert,weil wir von Deutschland mehr verstanden haben als „Carnation“. Manche Firmen,die wir zu Nestlé genommen haben, liessen wir erst einmal vorsichtig laufen undhaben sie dann schrittweise integriert.

Natürlich haben wir von Anfang an Synergien wahrgenommen: Man braucht javon Anfang an etwas weniger Head Office, zum Beispiel keine eigene Research.Die Integration fand also schrittweise und sowohl sozialverträglich als auch sozial-politisch verträglich statt. All das sind Schritte, bei denen man viele Fehler machenkann; oder es eben auch richtig machen kann.

Ich hatte lange zwei Chefs in Amerika, die mir direkt berichtet haben. Die habennatürlich zusammengearbeitet, bestimmte Synergien wurden immer wahrgenom-men – aber es waren lange Zeit zwei. Die Finanz-Analysten fragten mich, warumich die Posten nicht zusammenlegte. Ich sagte: „Weil ich klug bin, im Gegensatzzu Ihnen“. Dadurch sind die Firmen alle gut gelaufen und haben Gewinne gemacht.Erst später, als sie sich aneinander gewöhnt hatten und sich auch kannten, dann kamerst der nächste Schritt, wo wir nur noch einen Chef Amerika brauchten.

Farsam Farschtschian: Also ist hier auch die Kommunikation sehr wichtig. SehenSie dies auch als eine Aufgabe des VR?

Helmut Maucher: Nein, damit hat der VR überhaupt nichts zu tun. Das machtalles der CEO. Überschätzen Sie den VR nicht. Wenn jemand alle vier Wochen insGeschäft kommt, kann er die Firma nicht leiten. Das müsste ein Wunderkind sein.


Ich habe als CEO immer einen Vorsprung an Information und Erfahrung. Im VRsitzen Juristen, Banker und alle möglichen Leute, die keine Nestlé-Erfahrung haben.Die hat nur der CEO.

Der VR muss informiert werden und er muss die Entscheidung mittragen. Manmuss Leute im VR haben, die generell vom Geschäft und von Strategien etwas ver-stehen – aber sie müssen nicht die Nestlé genau verstehen und das können sie auchgar nicht. Deswegen habe ich all diese Geschichten ohne den VR gemacht, aber denVR ständig darüber unterrichtet, was passiert.

Farsam Farschtschian: Nestlé ist ja ein Paradebeispiel eines exzellenten Falles.Aber wenn man all die anderen Firmen ansieht, die bei Akquisitionen schei-tern, dann ist es doch vielfach deswegen, weil der CEO nicht im Sinne desUnternehmens handelt sondern aus persönlichen Gründen, zum Beispiel ausMachtgründen.

Helmut Maucher: Aber da muss der VR eingreifen. Es macht keinen Sinn, demCEO in alles reinzureden. Aber wenn der CEO eine andere Agenda hat und ständigseine eigene Suppe kocht, oder das Geschäft zu wenig versteht; dann muss der VRsofort reagieren.

Farsam Farschtschian: Und wie erkennt das der VR?

Helmut Maucher: Der VR sollte ja aus klugen Leuten bestehen. Nehmen Sie zumBeispiel den Ausschuss den ich hatte (ich war je eine zeitlang Chairman und CEO):Ich hatte im Ausschuss einen Herrn Gerber, er hat Zurich und Roche hochgebracht.Ich hatte eine Herrn Kalbermatten, er hat eine eigene Firma geleitet, er wusste, wiees läuft. Ich hatte einen Herrn Gut, der Präsident der CS war, ich hatte einen HerrnLeutwiler, er war Präsident der Nationalbank.

Diese Leute haben alle Erfahrung im Leben, einen gesunden Menschenverstandund sind unabhängig genug, dass sie, sobald ich aus dem Ruder gelaufen wäre,sofort reagiert hätten. Ich war nicht dafür, dass sie mir jeden Tag jeden Schritt sagenund zeigen, wo ich hinlaufen soll; das weiss ich besser. Aber sie waren zu jedemZeitpunkt über alles unterrichtet und konnten Fragen stellen.

Gute, erfahrene VR-Leute merken sehr rasch, ob etwas gut gemacht wird odernicht. Wenn nicht, haben sie die oberste Pflicht, sofort zu handeln.

Farsam Farschtschian: Aber gerade solch hochkarätige Leute waren doch auchbei der Swiss Air dabei. Trotzdem haben sie dem Herrn Bruggisser nicht auf dieHände geklopft.

Helmut Maucher: Wenn ich dabei gewesen wäre, wäre es anders gelaufen. Ichglaube, die waren zum Teil vernebelt und zum Teil hat Herr Bruggisser sie nichtgenau informiert. Für mich ist es fast nicht verständlich, wie vernünftige Leute,die eigentlich gut sind, dort so lange zuschauen konnten. Das kann nur dieseSR-Vernebelung sein.

Ich sage, es war eine Kombination aus Vernebelung und der Schwächen ebendieser Leute.


Farsam Farschtschian: Aber für einen VR solchen Kalibers kann doch Vernebe-lung nicht als Argument dienen?

Helmut Maucher: Ich verstehe es nach wie vor nicht. Für mich ist es ein Phänomen.Aber ich kann es mir nicht anders erklären.

Farsam Farschtschian: Ich versuche zu verstehen, weshalb es bei Nestlé soexzellent funktioniert hat und bei anderen nicht. Sie haben angesprochen, dassdie Kommunikation zwischen CEO und VR sehr effektiv war. Aber gerade wennes um Fusionen geht, gibt es ja die Vertraulichkeitsgespräche, da die Märkte jasofort reagieren. Wie haben Sie das gehandhabt?

Helmut Maucher: Wir hatten volle Transparenz. Der VR wusste, dass er in allenwichtigen Entscheidungen beigezogen wird.

Farsam Farschtschian: Schon früh in Diskussionen?

Helmut Maucher: Jederzeit, sofort. Der Ausschuss zum Beispiel wusste immerBescheid.

Farsam Farschtschian: Bei „Rowntree“ zum Beispiel?

Helmut Maucher: Das war das selbe. Der Ausschuss hat mich von Anfang anbegleitet. Der VR, der vier Mal im Jahr tagte, wurde immer involviert. Hohe Trans-parenz ist wichtig und es ist wichtig, in wichtigen Fragen im VR und im Ausschusseine Einstimmung zu erzielen. Aber man muss den VR nicht mit jeder Einzelheitkonfrontieren.

Farsam Farschtschian: Das hat bei SR nicht geklappt. Ich hab den E&Y Berichtgelesen und Herr Bruggisser hat den Board nur selektiv informiert.

Helmut Maucher: Genau, er wollte seine Strategie durch zwingen und hat dannselektiv informiert. Ich sage Ihnen eines: Ich möchte mich selber nicht loben, aberich war nicht im Swiss Air VR. Ich habe von aussen mit den Leuten gesprochenund habe mehr gesehen als die Mitglieder des VR. Das habe ich gespürt. Dasist eine Tragödie, die auf so viele menschliche Fehler zurückzuführen ist. Das istbedauerlich und tat mir fast selber weh für die Schweiz. Ich verstehe es nach wievor nicht ganz.

Farsam Farschtschian: Wie erkennt ein VR, ob ihn der CEO richtig, ausführlichund transparent informiert?

Helmut Maucher: Das kann man nicht lernen. Das ist eine Frage des Judgements,eine Frage der eigenen persönlichen Erfahrung – und es geht darum, die richtigenFragen zu stellen. Leute wie Herr Gerber oder Herr Kalbermatten wussten, wie manfragt. Die waren nicht dumm. Die hätten das bestimmt gemerkt, wenn ich aus demRuder gelaufen wäre. Aber das ist eine Frage der Persönlichkeit, ob man ein gutesJudgement hat und die richtigen Fragen stellen kann. Dann dürfen Sie nicht verges-sen, dass es ja auch ein Audit Committee in jedem VR gibt, das vollen Zugang zuallen Informationen hat. Der VR muss volle Transparenz verlangen.


Ich habe immer gesagt: „Ich bin ein starker CEO und ich möchte nicht, dass sichder VR ständig ins Tagesgeschäft einmischt“. Aber der VR hat erstens jedes Jahrein umfangreiches Strategiepapier erhalten, in dem ich meine ganzen Überlegun-gen dargestellt habe, und zweitens hat er jedes Jahr neben dem Geschäftsberichtund all diesen Dingen ein Papier erhalten, das bei uns „Note Confidentielle“ heisst.Das ist ein ganz ausführliches Papier über den Ablauf des letzten Jahres, eineArt Photographie, auf der alles zu lesen ist, pro Land, pro Produkt, Gewinne,Kostenverschiebung etc.

Und mit diesen zwei Dokumenten war jeder sehr genau informiert. Die Doku-mente wurden auch diskutiert. Der VR konnte fragen: „Warum sind die Kostenin Brasilien plötzlich gestiegen? Warum haben wir hier keine Gewinne?“ Daraufmussten der CEO und seine Generaldirektoren Antwort geben.

Wenn man bei all dem nichts merkt, dann tut es mir leid. Man muss unterscheidenzwischen viel delegieren und selber nicht in der Lage sein, das Geschäft zu führen.Wenn ich als CEO keinen Wissens- und Erfahrungsvorsprung habe gegenüber demVR Mitglieder, die andere Geschäfte machen, dann bin ich der falsche Mann.

Farsam Farschtschian: Sie haben vorher die Strategie angesprochen, die Sie jaauch gemacht haben. Wie ist die Unterscheidung zwischen der Strategie, die derCEO macht und jener, die der VR ausarbeitet? Gibt der VR den grossen Rahmen?

Helmut Maucher: Nein, die Strategie wird vom CEO ausgearbeitet. Der VR kanndas nicht machen. Überschätzen Sie den VR nicht. Wie soll ein VR Mitglied ohnedetaillierte Erfahrung in den Nestlé Branchen die Strategie von Nestlé ausarbeiten?Die Strategie habe ich ausgearbeitet zusammen mit meinen Managern. Dann habeich sie dem VR vorgelegt und gesagt: „Das ist meine Strategie. Das ist die Strategie,die ich für das Unternehmen vorschlage.“ Dann konnte der VR Fragen stellen undMeinungen abgeben.

Farsam Farschtschian: Also im Sinne eines konstruktiven Feedbacks?

Helmut Maucher: Das könnte man so sagen. Wenn der VR allerdings zu eineranderen Meinung kommt und ich die Leute nicht überzeugen kann, dann muss dieStrategie entsprechend geändert werden.

Farsam Farschtschian: Dann sehen Sie, wenn ich Sie richtig verstehe, die Rolledes VR erst als ein Mitwirkorgan und dann als ein Kontrollorgan?

Helmut Maucher: Ja, und ein Entscheidungsorgan für wichtige Entscheidungen.Ich kann ja gewisse Sachen nicht ohne den VR machen. Aber wenn er drei Malgegen mich etwas entscheidet, dann wird ein starker und erfolgreicher CEO wie ichsagen: „Dann müsst ihr euch einen anderen suchen“.

Als ich in die Schweiz kam war nicht ganz klar, wie lange ich das Amt habenwürde. Das war nicht geklärt und ich hatte auch nie einen Vertrag. Der einzige Ver-trag, den ich bei Nestlé hatte, war ein Lehrlingsvertrag, da dies von Gesetzes wegengemacht werden musste. Wir haben uns jedes Jahr neu konstituiert. Das heisst: JedesJahr wurde neu festgelegt, wer im nächsten Jahr Präsident ist, wer Delegierter ist,wer im Audit Committee ist und wer im Ausschuss.


Ich möchte nichts anderes. Erstens gehe ich davon aus, dass ich, auch wenn wirKrach haben, anständig behandelt werde, zum Beispiel was die Pension betrifft etc.Diesbezüglich gab es bei Nestlé nie Probleme. Zweitens bin ich der Meinung, dassdie anderen frei sein müssen, sich von mir zu trennen wenn sie nicht mehr mit mireinverstanden sind. Da dürfen keine rechtlichen Probleme im Weg stehen, denn dazuist der Posten zu wichtig für die Firma. Aber wenn ich ernannt bin, dann führe ichdas Geschäft und nicht der VR.

Farsam Farschtschian: Interessant, ich lernte den VR aus der Literatur anderskennen.

Helmut Maucher: Was soll denn die Aufgabe des VR sein? Der kann doch dasGeschäft nicht führen. Deswegen hat man ja das Instrument geschaffen, dass derVR an einen seiner Kollegen die Geschäftsführung delegieren kann.

Wir haben ja in unserer Geschäftsordnung ganz klar festgelegt, welche Kom-petenzen der CEO hat und in welchen Fragen der Ausschuss oder der gesamteVR involviert werden muss. Da steht drin, welche Rechte er für die Informationhat und dass selbstverständlich kein Generaldirektor ernannt werden kann ohne dieZustimmung des VR. Die ganze Nomination und Entlassung ist Sache des VR. DerVR muss die Strategie begleiten. Er muss erstklassig informiert sein und nebst derStrategie muss er in wichtigen Einzelfragen mit entscheiden, zum Beispiel bei einerwichtigen Akquisition.

Farsam Farschtschian: Aber kommt es nicht vor, dass der VR eine Initiativeergreift für eine Akquisition oder sogar die Gespräche führt hinsichtlich einererwünschten Akquisition? Denn der VR hat ein gute etabliertes und breitesNetzwerk.

Helmut Maucher: Das ist möglich. Es kann vorkommen, dass vielleicht irgendwoeiner der VR Mitglieder zufällig einen ersten Kontakt hat. Dem VR ist es unbenom-men, Initiativen zu ergreifen. Das ist zwar relativ beschränkt, aber die Möglichkeitbesteht.

Farsam Farschtschian: Sie haben auch die VR-Ausschüsse angesprochen. DemCFO zum Beispiel ist ein Audit Committee gegenüber gestellt. Könnte es vielleichteinmal ein M&A-Committee geben, welches dem CEO gegenüber gestellt wird?

Helmut Maucher: Ich würde das nicht machen. Ich bin für möglichst wenigKomitees. Zurzeit gibt es den Trend, dass man jeden VR in zwei Komitees invol-vieren soll. Ich halte das für falsch. Wir haben doch einen generellen Ausschuss,der die wichtigen Fragen vorentscheiden muss, wir haben ein Audit Committee,das dem VR die Möglichkeit gibt, alles zu prüfen und wir haben logischerweiseimmer ein Remuneration Committee gehabt, das aber zum Teil identisch war mitdem Ausschuss, nur weniger Leute beinhaltete.

Die neuen Entwicklungen verlangen, dass der CEO nicht mehr im Remunera-tion Committee sitzt. Ich halte das für unsinnig. Herr Brabeck zum Beispiel sitztnicht mehr im Remuneration Committee. Das halte ich für eine reine Heuchlerei.Wer glauben Sie, wer jetzt entscheidet? Die gehen vorher zu Herrn Brabeck undfragen, was sie dem Finanzchef bezahlen sollen. Der CEO kennt die Leute, er weiss


Bescheid und er macht die Vorschläge, aber er entscheidet nicht mehr. Das ist reineHeuchlerei. Ich habe Herrn Brabeck oft gesagt, dass ich, wenn ich an seiner Stellewäre, dieses Komitee nie verlassen hätte. Denn es gehört zu meiner Pflicht und zumeiner Vollmacht, dort mitzuentscheiden.

Was soll denn all dieses Misstrauen gegen den Chef? Mit vielen Dingen,die heute unter dem Titel Corporate Governance laufen, bin ich überhaupt nichteinverstanden.

Farsam Farschtschian: Das ist die Modeerscheinung. . .

Helmut Maucher: Das ist die Modeerscheinung, die ich nie mitmachen würde.Aber ich habe immer gesagt, dass der VR in allen Fragen, in denen er dieEntscheidung trifft, voll informiert sein muss. Und seine Entscheidung gilt.

Aber ich sage es nochmals: Wenn er drei Mal gegen mich entscheidet, dann hater mich nicht mehr als CEO. Dann stimmt etwas mit dem Konzept nicht. Dann hatder VR eine völlig andere Meinung, wie man die Geschäfte führt, als ich. Das kannich nicht ändern, aber ich kann demissionieren.

Farsam Farschtschian: Verschiedene Autoren meinen, dass die Ausschüsse we-niger geeignet sind, weil dann die Entscheidungen in den Ausschüssen gemachtwerden und eben nicht im VR als Ganzes.

Helmut Maucher: Diese glauben dann eben, dass die Mitglieder des VRs eineCliquenwirtschaft betreiben und kooperieren. Das kommt aber auf den VR an. Invielen Dingen können die Ausschüsse das Geschäft etwas näher begleiten als derVR, denn der Ausschuss tagt alle vier Wochen (bei uns jedenfalls) und der VR nurdrei bis vier Mal im Jahr. Er ist somit auch weiter weg von den Dingen.

Natürlich kann ich, wenn ich den Ausschuss zusammensetze, meine Militär-freunde einbinden. Aber das sieht doch der VR! Ich hatte lauter Leute, die überhauptnicht von mir abhingen. Ich sagte immer: „In den Ausschuss müssen die tüchtigstenund unabhängigsten Leute.“ Ansonsten haben Sie Recht. Gerade in der Schweiz istdiese Cliquenwirtschaft sehr vertreten. Aber wenn das nicht der Fall ist, dann istes sinnvoll, Stufen einzubauen, ein „degree of decision making“, wie viel ich anden Ausschuss delegiere, wie viel an den Delegierten und wo der VR insgesamtentscheiden muss.

Eine M&A muss im Geschäft gemacht werden und wenn ich das richtig vorbe-reite, dann kann der Ausschuss seine Meinung äussern. Wenn der es für gut befindet,dann wird es dem gesamten VR vorgelegt.

Darüber hinaus habe ich für bestimmte Fragen einen Adhoc-Ausschuss veran-lasst. Zum Beispiel als sich die Frage stellte, ob wir das Aktienkapital erhöhen oderdie Nominalaktien aufgeben und eine Einheitsaktie einführen. Damals wollte ich,dass der VR das genau studiert, denn je mehr es um Publikationen, Finanzen undAktionäre geht, desto mehr muss der VR involviert sein. So habe ich damals einenAdhoc-Ausschuss veranlasst – aus dem VR. Da war Herr Rainer Gut involviert undebenfalls Herr de Weck.

Oder wenn ich umfangreiche Fragen habe, wobei ich die Satzungen ändere, damuss ich Leute hinzuziehen wie zum Beispiel Herrn Böckli. So haben wir für dieses


zeitlich begrenzte Projekt einen Ausschuss gebildet bis es gelöst war. Das habe ichöfter gemacht.

Angenommen, wir haben fünf Akquisitionen, die für uns die wichtigsten sind undich möchte, dass diese vom VR genauer studiert werden, dann wäre es theoretischdenkbar, dass ich irgendwann einen Ausschuss für M&A mache.

Aber generell bin ich gegen zu viele Spezialausschüsse. Im VR gibt es keineSpezialisten. Wenn die es besser wissen als ich und mein Management, dann sollendie die Firma führen. Das ist aber nicht so.

Ich war selber in zahlreichen VR. Wenn ich im VR von Bayer in Deutschlandbin, dann wird doch der Vorstand mehr über Bayer wissen als ich. In wichtigenFragen – Judgements, Urteilsvermögen, wichtige Strategien, Grundüberlegungen –kann auch jemand mitreden der nicht selbst Spezialist ist. Alles andere ist Unsinn.Das kann nur von Juristen und Theoretikern verbreitet werden – und von gewissenProfessoren.

Farsam Farschtschian: Die Überlegung die ich mir gemacht habe, basierend aufLiteratur und Gesprächen mit Managern, ist die folgende: Wenn man einen sol-chen M&A-Ausschuss hätte und zum Beispiel der Head of M&A direkt zum VRrapportieren würde, wäre das nicht eine weitere Kontrollfunktion für den CEO?

Helmut Maucher: Das ist Misstrauen gegen den CEO. Ich hätte nie erlaubt, dassirgendeiner meiner Generaldirektoren direkt etwas mit dem VR behandelt, von demich nichts weiss. Ich leite das Geschäft und ich bestimme. Natürlich hat im AuditCommittee der VR den Generaldirektor direkt über Einzelheiten befragt; aber ichwusste Bescheid.

Gegen den CEO jemand einzusetzen ist Misstrauen. Das ist Machiavelli. Wennman glaubt, dem CEO nicht mehr trauen zu können, dann ist es besser, ihnabzusetzen.

Alles andere führt nur zu Intrigen und Machkämpfen.

Farsam Farschtschian: Dann ist also das vertrauensvolle Verhältnis zwischen VRund CEO das Ausschlaggebende?

Helmut Maucher: Dieses Verhältnis muss stimmen, sonst muss es geändert wer-den. Wenn man gegen den CEO gewisse Dinge einbauen muss, geht das Ganze dochschief.

Die Macht und das Vertrauen des ersten Mannes so zu untergraben und mit Miss-trauen zu säen, das funktioniert nie, nie. Aber es ist immer richtig, den ersten Mannbrutaler zu beurteilen und in diesem Bereich konsequenter zu sein.

Farsam Farschtschian: Es gibt in der Literatur viele Publikationen über dieideale Zusammensetzung des Boards. Die Mitglieder sollen international sein,aus verschiedenen Industrien kommen, etc. Was halten Sie davon?

Helmut Maucher: Das ist doch Unsinn. Ich brauche keine Spezialisten im VRsondern gesunde Persönlichkeiten mit Unabhängigkeit und allgemeiner Geschäfts-erfahrung.


Nur weil ich zum Beispiel Alcon, die Ophthalmologie, als Firma habe, braucheich doch keinen Augenarzt und keinen Professor für Augenheilkunde in meinemBoard. Dieses Wissen haben doch meine Leute. Das wäre naiv und theoretisch. Dasist nicht die Aufgabe eines VR.

Wenn der VR solche Aufgaben übernimmt, dann wird er es schlechter machenals ein erfahrener Mann aus dem Geschäft. Nur ein schwacher CEO würde das ak-zeptieren. Ein Mann wie ich würde das nie akzeptieren. Und die Nestlé ist mit mirbesser gefahren als mit einem schwachen CEO.

Farsam Farschtschian: Und was sagen Sie zum Thema Internationalität des VR?

Helmut Maucher: Ich bin schon der Meinung, dass man den VR vielfältig zu-sammensetzen muss. Es gibt im VR gewisse Dinge, die immer eine grosse Rollespielen: Finanzen, juristische Fragen/Satzungen, Aktionärsversammlung. Deswe-gen hatte ich immer jemanden, der etwas davon verstanden hat. Zum Beispiel habeich den Herrn Böckli hinzugezogen.

Zum andern wollten wir immer eine gewisse Internationalität haben, zum Teilaus Image-Gründen. Es macht schon Sinn, dass man zum Beispiel jemanden ausAsien hat, der sagen kann: „Passt auf, in Japan laufen die Uhren anders.“ Ich hatteauch immer internationale Leute. Ich hatte Herrn Volcker, den Präsidenten der Na-tionalbank in den Vereinigten Staaten. Und Herr Brabeck hat jetzt den Präsidentender früheren Nationalbank in England.

Wir haben schon Leute im VR, die verschiedene Erfahrungen und verschiedeneNationalitäten mitbringen, für mehr Farbe, mehr Gesamterfahrung, aber nicht, umSpezialisten zu haben.

Farsam Farschtschian: So wie ich Sie verstanden habe wurde bei Ihnen immersehr transparent kommuniziert. Aber gab es trotzdem – gerade bei Akquisitionen –informelle Gespräche, bei denen die Diskussion nicht mit dem ganzen VR geführtwurde?

Helmut Maucher: Nein, alles wurde im Ausschuss behandelt und dann im gesam-ten VR. Da brauche ich keine informellen Gespräche. Es ist falsch, wenn Sachenlaufen, von denen der VR nichts weiss. Jeder konnte jeden Tag zu mir kommen wenner ein Problem hatte, ich hatte ein offenes Ohr -aber dann ging das am nächsten Tagin den VR.

Farsam Farschtschian: Das wurde also nicht bilateral gelegt?

Helmut Maucher: Nein! Das sind alles hinterhältige Dinge. Jeder konnte zu mirkommen, und ich hörte es mir an, aber anschliessend musste es im VR diskutiertwerden. Ich sagte meine Meinung dazu und ob ich es gut fand oder nicht: Mankonnte damit rechnen, dass ich das im VR aufbringe und auch dort meine Meinungsage. Aber es ging nie hinten herum, denn das funktioniert nicht!


Farsam Farschtschian: Interessant. Das scheint eine Ausnahmereglung bei Ih-nen zu sein. Denn ich habe ja schon zahlreiche Gespräche auch mit anderenVR-Mitgliedern geführt und habe festgestellt, dass es bei vielen Firmen solche„informellen“ Gesprächen gibt.

Helmut Maucher: Ich habe nichts gegen informelle Gespräche. Jeder kann sich mitjedem unterhalten. Aber wenn die Gespräche eine gewisse Qualität bekommen –wenn sie zu Entscheidungen oder neuen Überlegungen führen – dann hat der Be-treffende die Pflicht, mich zu informieren und ich bringe es in den VR. Ich kann janicht einen Teil des VR desavouieren.

Farsam Farschtschian: Einer der Hauptscheiterungsgründe von Akquisitionenwird genannt, dass man zuviel bezahlt. Ich habe in Ihren Schriften gelesen,dass es viel wichtiger sei, dass ein Projekt strategisch Sinn macht und dassder Preis zweitrangig ist. Trotzdem, ein Premium von 40–50% kann doch einScheiterungsgrund sein, weil man dann das Vorhaben finanziell nicht mehrverträgt?

Helmut Maucher: Man muss natürlich immer wissen, wie viel man bezahlen kann.Es gibt viele Leute, die nicht mitmachen wollen, weil sie die langfristige

Komponente zu wenig beachten.Finanzanalysten oder reine Finanzleute rieten oft von einer Akquisition ab, wenn

es für drei Jahre eine Beeinträchtigung des Gewinnes gab. Ich habe dann gesagt:„Wir machen ja trotzdem noch einen Gewinn von X; aber das ist eine Jahrhun-dertentscheidung. Wenn wir das jetzt nicht machen, dann werden wir die Nestlélangfristig nicht dahin führen wo wir wollen.“

Bei „Rowntree“ habe ich damals über 6 Milliarden CHF bezahlt. Ich habe da-mals gesagt, dass die Zusatzzinsen, die wir bezahlen, den Zusatzdeckungsbeiträgenentsprechen müssen, sodass der Betrag der selbe bleibt, aber dass wir im Gewinnnicht den gleichen Fortschritt machen für die nächsten 2–3 Jahre. Aber das war eineJahrhundertentscheidung. In diesem Gebiet der Süsswaren, Riegelprodukte, gab esnur zwei Firmen, „Mars“ und „Rowntree“. Wenn wir in Schokolade drin bleibenwollten, mussten wir diese Akquisition tätigen. Es hat sich längstens bewährt.

Diese Frage, ob langfristig oder kurzfristig, ist ganz wichtig und man muss sieauch mit dem VR diskutieren, denn es geht ja um die Strategie.

Farsam Farschtschian: Basiert der VR seine Beurteilung vollkommen auf derBewertung des Targets des CEO oder zieht er externe Finanzexperten bei?

Helmut Maucher: Nein. Wenn der VR Zusatzinformationen braucht, dann holt derCEO die ein, und nicht der VR direkt. Das gibt nur Intrigen, wenn man das andersmacht. Wenn der VR neue Informationen haben möchte, dann sagt er das mir undentweder ich sage ihm dann, dass wir die nicht brauchen oder ich beschaffe dieInformation für ihn. Auf jeden Fall geht es über meinen Tisch. Alles andere sindMisstrauensvoten, die ein guter CEO nie akzeptieren wird.

Der Preis ist natürlich ein wichtiger Punkt. Meine Erfahrung ist, dass dieteuersten Akquisitionen die besten waren, und die billigsten oft die schlechtesten.


Was langfristig einen richtigen Wert hat, hat seinen Preis. Man zahlt oft weit überden Buchwert diesen Goodwill – aber der kommt mit der Rentabilität wieder herein.

Farsam Farschtschian: Man sagt, Cash bezahlte Deals führen eher zum Erfolg. . .

Helmut Maucher: Die Finanzierung ist eine völlig andere Geschichte. Es kommtdarauf an, wie man die Firma finanziert. Ich kann mit wenig Equity und viel Fremd-kapital führen oder umgekehrt. Das ist eine Frage der finanziellen Risikobereitschafteines Unternehmens.

Wir haben in der Strategie ganz klare Grundsätze festgelegt. Wir haben zum Bei-spiel gesagt, dass wir nie soweit wie die Amerikaner gehen. Wir als Schweizer sindvorsichtiger. Ich habe in der Regel gesagt, dass die Netto-Finanzverschuldung – alsoalle Kredite die wir haben abzüglich Cash – normalerweise nie höher als 50% desEigenkapitals sein soll. Die Amerikaner gehen da leicht bis zu 100%. Das machenwir nicht. Wir wollen auch in unsicheren Zeiten nicht in Schwierigkeiten kom-men. Ausserdem kommt es darauf an, wie viel Cashflow ich habe. Wenn ich mehrCashflow habe, kann ich mehr riskieren, als wenn ich wenig Cashflow habe.

Die Finanzpolitik und die Risikopolitik sind unabhängig von der Akquisition.Aber die Akquisition beeinflusst diese Politik. Ich muss mir überlegen, ob, wennich eine Akquisition mache, meine Risikopolitik finanziell noch gesichert ist oderob ich an den Kapitalmarkt gehen und neues Eigenkapital holen muss. Es wird alsobei einer Akquisition geprüft, ob meine Finanzpolitik noch stimmt, oder ob ich neueÜberlegungen anstellen muss. Ob Cash finanziert wird oder nicht, hängt von meinerFinanzstrategie ab.

Farsam Farschtschian: Das wäre also nun die Sicht der Unternehmung. MeineFrage geht auch dahin, wie die Finanzmärkte das beurteilen?

Helmut Maucher: Das ist ein Thema, das wir bis anhin nicht angesprochen ha-ben: Das ganze Thema IR und Finanzmärkte. Das muss ich als Chef natürlichberücksichtigen.

Doch in der Regel wird das zu stark berücksichtigt. Diese Themen sind natürlichbesonders für die Firmen wichtig, die wieder an den Kapitalmarkt wollen, weil danndie Kapitalkosten höher werden und dann der Kurs zu niedrig ist.

Aber prinzipiell müssen wir das tun, was langfristig richtig ist. Ich habe deshalbFinanzanalysten kritisiert. Kurzfristig sind ihre Meinungen wichtig und langfristigdie Tatsachen.

Ich bin nie auf Finanzanalysten eingestiegen, weil ich das Gefühl hatte, dass sieschief lagen. Ein paar Jahre später war der Aktienkurs wieder höher weil der Markteingesehen hat, dass die Entscheidung richtig war.

Zu meiner Zeit war ja der Aktienkurs über 100 Milliarden erhöht worden. Ein-zelne haben immer geglaubt, es würde zu einer Diluted Profit per Share kommen.Mir war das immer alles egal. Ich hatte meine Strategie, die habe ich erklärt undgesagt: „Ich kann mir nicht vorstellen, dass so ein junger Finanzanalyst, der frischder Uni entsprungen ist und noch nie eine Fabrik gesehen hat, mir gute Ratschlägegeben kann!“


Natürlich muss ich generell in meine Überlegungen einbeziehen, wie der Kapi-talmarkt reagiert. Aber weil wir fast nie Kapital vom Kapitalmarkt brauchten, sahich nicht ein, warum es mich kümmern sollte, wenn der Kurs einmal sechs Monaterunter ging. Wenn die Vorstände nur an Ihre Stock Options denken, dann handelnsie nicht im Unternehmensinteresse. Ich wusste, dass der Kurs mittelfristig stabilbleibt. Wenn das Geschäft steigt und der Ertrag steigt, dann wird der Markt auchdementsprechend reagieren.

Wenn ich dauernd auf dieses kurzfristige Denken Rücksicht nehme, leite ich dasGeschäft falsch und ganz sicherlich nicht langfristig. Das habe ich nicht gemacht.

Generell muss ich bei meinen Überlegungen auf die Meinung des KapitalmarktesRücksicht nehmen – aber dann muss ich es eben erklären. Dann gibt es ein IR Com-mittee oder eine Konferenz. Im Allgemeinen ist mir das immer gut gelungen, dennder Aktienkurs ging immer nur nach oben.

Farsam Farschtschian: Also dann ist dies auch die Aufgabe des CEO und nichtdes VR?

Helmut Maucher: Richtig. Aber der VR schaut sich das auch an. Die Information,die der VR regelmässig bekommt, beinhaltet den Aktienkurs im Vergleich zur Kon-kurrenz, zum Index der Schweiz. Der CEO berichtet immer über seine Besuche inMärkten und von seinen Konferenzen mit den Investor Relations. Das alles gehörtzu seiner Berichtspflicht.

Dadurch kann der VR reagieren. Der VR kann jedoch nicht direkt zu denFinanzmärkten gehen. Das ist nicht seine Aufgabe. Er wird vollständig darüberunterrichtet, was passiert und auch darüber, wie sich das Aktienkapital zwischenAmerikanern und Schweizern verteilt.

Ich habe ausserdem immer über meine Reisen berichtet und über meinen Kontaktmit Finanzleuten und mit Staatsmännern. Das gehört alles zu meiner Berichtspflicht.Aber wenn der VR glaubt, er müsse das ohne mich machen, dann kann er sich einenanderen CEO suchen.

Farsam Farschtschian: Gerade in diesem Kontext: Wann tritt der Chairman auf,und wann der CEO?

Helmut Maucher: Das müssen die beiden miteinander vereinbaren. Ich hatte jaeine Zeitlang beide Funktionen. Zunächst war ich nur Delegierter, dann beides, dannnur Chairman. Wir haben immer genau festgelegt, wie wir die Aufgaben verteilen.

Als ich Delegierter war – und ich war ein starker Delegierter – war Herr JollesPräsident, der Staatssekretär in der Regierung. Damals habe ich als CEO im Prin-zip 90% der Kontakte wahrgenommen. Die Leute wollten den Chef sehen und daswar ich.

Herr Jolles hatte allgemeine Kontakte, zum Beispiel in der Regierung. Aber alleKontakte, die Substanz hatten, bei denen Geschäfte verhandelt wurden, oder wo dieNestlé in der Öffentlichkeit vertreten werden musste, habe ich wahrgenommen.

Als ich dann Chairman und Delegierter war, habe ich mit Herrn Brabeck ent-schieden, dass er nun alle Kontakte wahrnehmen soll, die mit seiner Funktion alsCEO zusammenhängen. Ich bin dann auf keine Pressekonferenzen mehr gegangen


und habe keine IR Konferenz mehr geleitet. All dies muss er als CEO machen. Dasheisst, 70–80% der Kontakte habe ich sofort an den CEO abgegeben – obwohl ichein aktiver Chairman war.

Nur in gewissen Fragen, wo ich alte Beziehungen hatte, machte ich noch eineZeit lang weiter. Zum Beispiel war ich noch eine Weile Präsident des EuropeanRoundtable. Oder wenn ich den Primeminister von Indien besser kannte, dann gingich mit Absprache mit Herrn Brabeck dahin.

Prinzipiell hatte ich schon – obwohl ich ein starker CEO war – die meisten Kon-takte an ihn übergeben. Nicht weil ich das nicht hätte tun können, sondern weil ichder Meinung bin, dass diese Dinge zur Funktion des CEO gehören. Der muss dasjetzt wahrnehmen. Der muss sich jetzt profilieren, muss seine Autorität zeigen undbekannt werden.

Ich bin heute noch stolz, dass ich mich in diesem Bereich zurückgenommen habe,denn das ist im Interesse von Nestlé für die Zukunft.

Farsam Farschtschian: Wenn ich Sie richtig verstehe, dann ist eine Rolle oderAufgabe des VR, sich zurückzunehmen und dem CEO seine Freiheiten zu lassen?

Helmut Maucher: Ja. Der VR muss sich disziplinieren – aber er muss konsequenthandeln, wenn er das Gefühl hat, dass das Geschäft nicht mehr gut geführt wird.

Farsam Farschtschian: Professor Böckli vertritt die Meinung, dass es die Aufgabedes Verwaltungsratspräsidenten ist, mit der Aussenwelt zu kommunizieren.

Helmut Maucher: Als ich CEO war, hatten wir die Regel, dass für die Nestlé nurder Chairman oder der CEO spricht, sonst niemand.

Welcher von den beiden, das machen die beiden unter sich ab – sofern die Funk-tion nicht zusammenfällt. Intern sagen wir alle, was uns nicht passt, aber externsprechen wir nur eine Sprache, und zwar via CEO oder Chairman. Wenn Sie dasnicht tun, dann fängt die Sache an schief zu gehen.

Farsam Farschtschian: Ich war mir bewusst, dass die Nestlé-Führung sehr gutwar, aber dass so klare Richtlinien vorherrschten wusste ich nicht.

Helmut Maucher: Ja, das stand auch in unserer Satzung. Ob Sie es wollen odernicht: Der CEO, ob er gleichzeitig Chairman ist oder nicht, ist die Schlüsselfigur imLaden.

Wenn der nicht funktioniert, können Sie den besten VR haben und das Un-ternehmen geht trotzdem schief. Es gibt in Deutschland den Spruch: „Wenn dasUnternehmen gut geführt ist, ist der VR überflüssig, und wenn es schlecht geführtist, ist er hilflos“. Da ist doch etwas dran.

Ich habe noch keine Firma auf der ganzen Welt gesehen, bei der mit einemschlechten CEO die Firma gut gelaufen ist nur weil der VR gut war. Auf der anderenSeite gibt es zahlreiche Firmen, die gut laufen, in denen der VR nur mittelmässig istaber der CEO gut.


Farsam Farschtschian: Gerade die Funktionsfusion CEO/Chairman hat ja vielKritik erweckt. Es gibt Vorteile (vom Fach) aber auch Nachteile (Unabhängigkeit,Kontrolle). Wie ist Ihre Meinung?

Helmut Maucher: Meiner Meinung nach wird dieses Problem total überschätzt.Andere Fragen sind viel wichtiger. Generell finde ich, was die ganze Corporate Go-vernance betrifft: Es braucht mehr Prinzipien und weniger Detailreglung. Denn dieDetailreglung stimmt nie ganz genau für irgendein Unternehmen.

Zur Frage der Funktionsfusion habe ich eine offene Meinung. Das kann so oderso sein, je nachdem, welche Personen man hat. Wenn die Positionen zusammen-fallen, ich hatte ja die beiden Posten auch sieben Jahre, dann muss für zwei Dingegesorgt sein:1. Es muss ein Ausschuss da sein mit unabhängigen, kräftigen Leuten, die in der

Lage sind zu handeln, wenn der betreffende Mann seine Macht missbraucht odernicht mehr gut funktioniert.

2. Es muss im Unternehmen eine Alternative aufgebaut werden für den Fall, dass,wenn dem ersten Mann etwas passiert, nicht das ganze Unternehmen alleinedasteht.

Ich habe dem VR jedes Jahr gesagt, wie meine langfristige Nachfolgeplanung aus-sieht. Ich habe vorgeschlagen, wer nach mir CEO werden soll und ich habe aucheine Empfehlung abgegeben, was zu tun ist, und wer mich ersetzen soll, falls mirirgendetwas passiert.

Man muss für eine Nachfolge, für eine Alternative und für einen stark.n Ausschuss sorgen. Wenn diese Voraussetzungen gegeben sind, dann ist die Zu-

sammenlegung der Funktionen sinnvoll denn das ist administrativ unkomplizierter.Es stimmt überhaupt nicht, dass damit eine Machvollkommenheit entsteht. Denn

ob ich Delegierter oder Chairman bin: Ich muss meine Macht immer mit dem VRteilen. Es gibt ganz klare Regelungen, wo er entscheidet und nicht ich und ich habedie Berichtspflicht.

Diese beiden Dinge müssen natürlich gewährleistet sein – aber diese so genannteAllmacht gibt es nicht.

Farsam Farschtschian: Herr Maucher, nochmals für mein Verständnis bitte:Der starke Ausschuss, wie kann man sich das vorstellen? Wie wird dann derCEO/Chairman vom Ausschuss kontrolliert?

Helmut Maucher: Er kriegt alle Berichte. Er hat die volle Information und er hatnoch ein Audit Committee. Jemand der nicht naiv ist, merkt doch, ob die Firmagut läuft oder nicht. Er sieht doch an den Zahlen sofort, wie die Dinge laufen. Ersieht laufend die Berichte über Gewinne und Umsätze, er sieht, ob Leute weggehen.Er hat alle Informationen: Presse, Investorenkonferenzen, interne Berichte – er hatalles. Wenn er nicht merkt, wenn etwas schief läuft, dann haben wir den falschenAusschuss.


Farsam Farschtschian: Aber gerade bei den Zahlen kann man doch beschönigen.Da gibt es doch Spielräume?

Helmut Maucher: Wir haben doch klare Regeln. Wir haben Buchhaltungsregelnund wir haben ein Audit Committee. Wenn einer beginnt, kriminell zu werden, dannkann er das vielleicht eine zeitlang tun, aber ich glaube nicht, dass das lange funktio-niert. In einem Unternehmen sind doch 50 Leute eingeschaltet im Rechnungswesen.Die wissen doch ganz genau, ob etwas verschoben wird oder nicht.

Natürlich sind Sie gegen Kriminalität zunächst machtlos, aber früher oder späterkommt die Sache raus. Man kann auf der ganzen Welt nirgends vermeiden, dasses Leute gibt, die kriminell werden. Deshalb sind ja Mechanismen eingebaut: Au-dit Committee, Treuhandgesellschaft, Berichterstattung und all die vielen Leute dieim Rechnungswesen involviert sind. Es gibt genaue Sicherungen – aber die letzteSicherheit kann man nie geben.

Man kann kein System kreieren, in dem alles vollständig abgesichert ist. Sonstbeginnen Sie, überall unten „zu basteln“ und untergraben die Autorität des Chefs.Damit führen Sie das Unternehmen in den Abgrund.

Farsam Farschtschian: Nun zur Diskussionskultur, Beispiel Jack Welch und GE:Jack Welch sagte jeweils während den Meetings, wenn alle mit ihm einverstandenwaren: „dann müssen wir uns wieder treffen, wenn wir nicht einer Meinung sind.Denn erst dann finden wir die effektiven Lösungen“. Wie war das bei Ihnen? Gabes da auch Oppositionen und eine rege Diskussion, wenn Sie eine Akquisitionvorgeschlagen haben, oder waren alle immer einverstanden, weil die Lösung desCEO so durchdacht war?

Helmut Maucher: Es gab immer eine rege Diskussion. Manchmal haben auch ei-nige Leute Bedenken geäussert, besonders wenn langfristig gewisse Dinge auch mitgewissen Risiken verbunden waren.

Aber die Leute haben jedes Jahr mehr Vertrauen zu mir gewonnen, weil ich sienicht hintergangen habe. Ich habe sie nicht angelogen. Es hat ihnen auch eingeleuch-tet, was ich ihnen erzählt habe. Die Leute haben gemerkt, dass ich kein Abenteurerbin, denn ich bin keine übertriebenen Risiken eingegangen. So haben sie mir auchimmer zugestimmt. Ich hatte eigentlich nie ein Problem, den ganzen VR auf meineSeite zu ziehen. Die Firma muss schauen, dass sie solche Leute kriegt. Wenn Siedem CEO nicht mehr trauen, muss er abgesetzt werden.

Die Qualität des CEO ist der entscheidende Punkt – und zwar nicht nur von derIntelligenz her, sondern auch vom Charakter. Es braucht beides: Persönlichkeit undberufliche Intelligenz.

Farsam Farschtschian: Ihren Ausführungen zufolge hat also der VR vor allemeine Kontrollfunktion?

Helmut Maucher: Ja, aber er begleitet auch die Strategie und legt auch die Strategiefest. Vorschlagen muss die Strategie der CEO und dann muss ein Einverständniserzielt werden. Damit komme ich wieder auf meine frühere Aussage zurück: Wenn


die Mitglieder des VR drei Mal nicht einverstanden sind mit meiner Strategie, dannkönnen die ihre Strategie machen, aber ohne mich.

Manchmal gab es aber auch einen Punkt, an den ich nicht gedacht hatte, den wirberücksichtigen mussten. Der VR arbeitet da voll mit. Nur wenn er generell nie mitmir einverstanden ist, dann geht es nicht.

Farsam Farschtschian: Erlauben Sie mir, dass ich an dieser Stelle eine provo-zierende Aussage mache: Dann wäre folgend z. B. den McKinsey/ATKearneyStudien die besagen dass 60–80% der Akquisitionen scheitern also 80% der CEOsfehl am Platz?

Helmut Maucher: Ich glaube ja. Ich bin überzeugt davon, dass die Hauptursacheimmer beim CEO liegt. Wenn der CEO ein Egomane ist oder nur Macht im Augehat oder einen Höhenrausch kriegt, dann sollte man ihn ersetzen. Man merkt doch,was für ein Mensch jemand ist.

Sie können an dieser Position keine Leute haben, die zu eitel sind, die Höhen-rausch kriegen, die machtbesessen werden. Die Leute müssen Macht ausüben, dennMacht gehört zum Job. Aber Leute die dann irrational werden sind fehl am Platz.

Farsam Farschtschian: Sie sagen also, dass, damit eine Akquisition ein Erfolgwird, der VR sich nicht „stärker“ involvieren muss, sondern den richtigen CEOwählen muss?

Helmut Maucher: Das ist das gleiche, wie wenn Sie sagen: „Das ist ein netterKerl, ich lasse ihn und gebe ihm einen tüchtigen Assistenten.“ Falsch. Man darfProbleme nie von unten lösen. Weg mit dem schlechten CEO. Je höher der Job,desto konsequenter muss man die Dinge ändern.

Farsam Farschtschian: In Gesprächen, die ich mit VR-Mitgliedern aus meinemBekanntenkreis führte, habe ich vielfach gehört, dass der VR ein Pro-Forma-Organ ist. Wenn ich mir das also so anschaue, dann haben wir einen VR der einPro-Forma-Organ ist und 80% der CEOs sind inkompetent. Aber die Wirtschaftmuss ja trotzdem funktionieren? Helfen Sie mir hier, ein klareres Bild zu erhalten,denn so schlimm sieht es ja doch wieder nicht aus und die Wirtschaft muss weiterfunktionieren. . .

Helmut Maucher: Der VR wird immer offiziell, theoretisch oder nach dem Ge-setz eine grössere Macht haben, als er es in Wirklichkeit hat. Er muss sich vielmehr auf den CEO verlassen, als es normalerweise der Fall ist. Man kann vom VRaus die Geschäfte nicht führen. Man kann die Strategie begleiten, das Managementnominieren, informieren und kontrollieren.

Alles andere ist graue Theorie. Ich bin auch gegen den Ausdruck „Oberleitung“,den Herr Böckli in der Schweiz eingeführt hat. Bis heute weiss kein Mensch genau,was das sein soll. Mir ist der Begriff egal, solange der VR die Möglichkeit hat, seineOberleitung zu 90% an den CEO zu delegieren. So haben wir das Problem ja wiedergelöst.


Bei einer kleinen Firma ist der VR auch Chef des Unternehmens. Das ist inOrdnung. Aber bei einer Publikumsgesellschaft mit 250 000 Aktionären und 100Milliarden Umsatz geht das nicht.

Farsam Farschtschian: Ich kenne die Erfolgsfaktoren, die Sie bei Nestlé publi-ziert haben. Sie sagen, dass eine Akquisition das Hauptgeschäft stärken muss,oder dass es Zugang zu einem wichtigen Markt geben soll, wo man eine Haupt-kompetenz hat, oder dass die Akquisition die Zeit verkürzt um sich eine neueProduktlinie anzueignen, die wieder zur Strategie passt. . .

Helmut Maucher: . . .Sie sprechen hier von der Wachstumsstrategie. Bei derWachstumsstrategie gibt es generell immer die Alternative: Akquisition oder in-ternes Wachstum. Letzteres muss es geben, denn sonst hat das Unternehmen keineDynamik mehr.

Aber man kann gewisse Prozesse abkürzen, indem man eine Akquisition vor-nimmt. Man bezahlt dann kurzfristig mehr, denn man bezahlt ja den Preis für denErfolg der anderen, aber kann damit schneller bestimmte Ziele erreichen. Dannmuss man sehen, ob sich das rentiert.

Eine zeitlang war es bei mir so, dass ich zwei Drittel mit Akquisitionen gemachthabe und ein Drittel mit internem Wachstum. Denn ich musste das Unternehmenin kurzer Zeit auf eine neue Dimension stellen. Ich musste das machen, bevor nunjeder gemerkt hatte, was Globalisierung bedeutet, oder was Wasser bedeutet, oderwas Pet Food bedeutet. Das habe ich alles abgekürzt. Zehn Jahre später wäre dasalles viel teurer geworden.

Man muss also beides machen: Intern wachsen aber auch in neue Produktfeldergehen, von denen man glaubt, dass sie in Zukunft Potential haben. Deswegen binich in Pet Food, in Wasser und in Nutrition hinein gegangen.

Eine Akquisition kann auch sinnvoll sein, um bestimmte Länder zu stärken. DieAkquisition von „Carnation“ war eine der Strategien, unser Geschäft in Amerika zustärken. Die Akquisition mit „Rowntree“ wurde durchgeführt, weil wir im BereichSüsswaren langfristig eine führende Position haben wollten. Deswegen mussten wirin dieses Segment – und nicht nur in die Schokoladentafeln und in Pralinee.

Als ich begann, Wasser zu kaufen, haben mich die Leute zuerst ausgelacht. Heutelacht keiner mehr. Wir verkaufen heute schon 15–20 Milliarden Liter Wasser. Was-ser ist wie Öl: Entweder hat man es oder nicht. Inzwischen ist Wasser ein wichtigerGeschäftszweig von Nestlé. Das mussten wir via Akquisition machen.

Es gibt auch andere Wachstumstheorien: Ich wollte zum Beispiel ein Equili-brium zwischen den Produktgruppen haben. Als ich in die Schweiz kam, entstandder Gewinn zu 50% durch Nescafé. Ich sagte: „Das ist schön, aber längerfristiggefährlich.“ Also haben wir die Produktpalette erweitert.

Ich habe auch gesagt: „Wir können nicht auf Dauer über 50% des Gewinns inEuropa haben, wenn die Welt an anderen Stellen wächst.“ Also habe ich in Amerika,Asien, etc. investiert. Es gab auch gewisse Lücken in gewissen Ländern, in denenwir kaum vertreten waren.


Doch das sind alles Dinge, die in einer Gesamtstrategie mit dem Board festgelegtwerden. Ich habe mit dem Board diskutiert und der Board hat mich in der Regel po-sitiv begleitet. Der Board konnte auch hier an einer langfristigen Politik mitmachen,weil ich ja trotzdem in der Lage war, jedes Jahr meine Gewinne zu steigern. Wennich nur noch langfristige Erträge verspreche und kurzfristig keine Gewinne mehrhabe, dann werden die Öffentlichkeit, die Aktionäre und der Board nervös. Doch dader Aktienwert und die laufenden Gewinne immer weiter stiegen und damit ebendie Produktivität, waren die Leute zufrieden mit meiner Arbeit.

Wenn eine Komponente nicht mehr stimmt, dann wird der Board zu Recht Fragenstellen. Aber ich hatte das Glück, dass die Dinge bei mir relativ gut gelaufen sind.

Farsam Farschtschian: Eine Ihrer Grundprinzipien, die Sie jeweils bei Akquisi-tionen verfolgt haben, war ja, dass gegenseitige Lernbereitschaft da sein sollte.Daher haben Sie grundsätzlich keine Hostie Takeovers gemacht. Aber es gabAusnahmen. . .

Helmut Maucher: Ich habe anfangs keine Hostile Takeovers gemacht, habe meineMeinung dann aber geändert. Inzwischen werden Hostile Takeovers gemacht, weiles manchmal sein muss.

„Rowntree“ war eine halb feindliche Übernahme. Ich bin dann allerdings trotz-dem sofort in die Firma gegangen, habe die Leute motiviert, überzeugt, habe ihnenChancen gegeben. Die haben dann die Situation akzeptiert weil ihnen einleuchtete,was ich ihnen erzählte. Ich habe die Leute geschützt. Ich habe sozial eine sauberePolitik betrieben und habe auch den neuen Leuten Chancen gegeben. Wenn das soläuft, dann merken die Leute sofort, dass das eine gute Sache ist.

Farsam Farschtschian: Und so hat es auch nie Konglomerate und auch keinevertikale Integration in diesem Sinne gegeben.

Helmut Maucher: Nein, ich habe all diese Dinge nicht gemacht. Früher, vor 30 Jah-ren, war Diversifikation Mode. Ich habe damals keine Fahrradfabriken gekauft undso musste ich später, als Konsolidierung modern war, auch keine mehr verkaufen.So einfach ist das.

Farsam Farschtschian: Glauben Sie, dass Ihre spezifischen Faktoren nur erfolg-reich für Akquisitionen bei Nestlé waren oder kann man diese auch in anderenUnternehmen anwenden?

Helmut Maucher: Ich glaube allgemein stimmen die Prinzipien immer. Das heisst:erstens die Psychologie bei Akquisitionen von der ich gesprochen habe und zwei-tens, dass man keine Sache kauft, von der man nichts versteht. Denn wenn mandas tut, dann muss man das Unternehmen total umstrukturieren. Dann ist man eineFinanzholding, die die einzelnen Geschäfte laufen lässt und sie nur noch an denZahlen kontrolliert.

Wir haben immer gesagt, wir wollen Geschäfte betreiben, von denen wir auch et-was verstehen. Wir wollen also echte Geschäftsführung ausüben. Dadurch verbietetes sich, Dinge zu kaufen, die nicht zu uns passen.


Farsam Farschtschian: Herr Maucher, dürfte ich in diesem Kontext und alsSchlussbemerkung um Ihre Meinung zum Ansatz des Shareholder Values bitten,welcher von zahlreichen Publikumgesellschaften, gerade in den USA, intensivverfolgt wird?

Helmut Maucher: Ich bin nicht gegen Shareholder-Value, aber ich bin gegen dieMacht, die dort angesiedelt ist und nur kurzfristig genutzt wird. Sobald ein Share-holder bereit ist, mit mir zu überlegen, was langfristig gut ist, bin ich wahrscheinlichzu 95 bis 100% mit ihm einverstanden.

Sie wissen, dass wenn sich zum Beispiel zwei Fonds am Jahresende bezüglichihrer jeweiligen Rendite messen, man auch kurzfristige Realisierungen macht, umdiese Performance zu erreichen. Das kann aber nicht in meinem Interesse liegen undauch nicht im Interesse des langfristigen Shareholders, der das Unternehmen lang-fristig begleitet und langfristig Ertragssteigerungen haben will und Sicherungen.Dann kann ich nicht auf solche kurzfristigen opportunistischen Dinge eingehen.

Die meisten Diskussionen zum Thema Shareholder sind immer zum Thema:Langfristig oder kurzfristig.

Auch in der Sozialpolitik können Sie fast alles lösen, wenn Sie langfristigdenken, denn langfristig sind wir alle im gleichen Boot. Wenn Sie kurzfristig maxi-mieren wollen, dann entlassen Sie 6000 Leute und haben über die nächsten 10 Jahreden Laden nicht optimiert und motiviert. Deshalb bin ich dafür, dass man sozialflankierend etwas investiert, um diesen viel grösseren Schaden zu vermeiden. Indem Moment, in dem Sie längerfristig denken, sind Sie mehr an der Motivation derMitarbeiter interessiert, mehr am Image des Unternehmens, mehr an der langfristi-gen Ertragssicherung. Dann verschwinden viele der Konflikte, die im kurzfristigenRaum entstehen.

Farsam Farschtschian: Aber man muss natürlich „die Grösse“ für so eineWeitsicht haben.

Helmut Maucher: Die Stärke muss man haben und die Nerven, um Kritik zuwiderstehen.

Deswegen sage ich immer wieder: Die Persönlichkeit ist fast wichtiger als allesandere. Chefs, die keinen Charakter haben, die keine Nerven haben, und keineKommunikationsfähigkeit haben, um andere zu überzeugen, die werden es schwerhaben.

Appendix CExpert Interview with Philippe de Weck

Niederschrift des geführten Expertengesprächs mit Philippe de Weck imRahmen der Forschungsarbeit von Farsam Farschtschian an der UniversitätSt. Gallen.

Expert Interview with Philippe de Weck• Ancien Président du Conseil d’Administration de l’UBS• Ancien Membre du Conseil d’Administration de Nestlé

Introduction de la thématique par Farsam Farschtschian

Même si l’on connaît les facteurs de succès et les abondantes recherches en lamatière, la majorité des prises de participation et acquisitions ne réussissent pastoujours. Selon moi, il faut prendre une nouvelle perspective, car il ne me semblepas encore y avoir une théorie explicative. Beaucoup d’acquisitions pourraient êtrequalifiées d’échecs, car les structures et les processus entre le Conseil d’Adminis-tration (CA) et le management sont, soit inadéquats, ou tout simplement inexistants.C’est dans cette problématiques, dans cette structure managériale et ce processusque mon regard se pose sur le rôle des CA; et cela dans le contexte Suisse par-ticulièrement: à titre comparatif, en Allemagne, rien que le contexte juridique nepermet pas aux CA d’être opérativement actifs – a contrario du système juridiquesuisse.

C’est donc dans ce contexte juridique que mon analyse sera de savoir commentle CA pourrait alors mieux s’impliquer, mieux contrôler aussi le Management pourque les décisions soient mieux élaborées dans une perspective de court terme maisaussi sur une vision à plus long terme. C’est donc en ces quelques lignes que seprésente le cadre de ma pensée.

Philippe de Weck: Je n’ai pas fait d’études, mais je peux bien vous parler del’aspect pratique.

Je me suis concentré sur le cas de Nestlé, comme vous me l’avez dit. Un casmêlant succès, mais aussi échecs.

211

212 Appendix C: Expert Interview with Philippe de Weck

Au point de vue de l’organisation de Nestlé, nous parlons de l’époque des années80, donc il y a environ 20 ans. A cette époque, il y avait en principe un président duconseil, un administrateur délégué (c’est le CEO et est membre de CA), un comitédu conseil (qui n’était pas nombreux) et un conseil d’administration qui était plusnombreux.

L’union personnelle du Président et du CEO, moi je ne l’ai pas personnellementvécue, parce que dans la banque, déjà à l’époque, cela est interdit par la loi. Je penseque cela vient du fait que les décisions à prendre sont plus nombreuses (comme parexemple les décisions quotidiennes sur les crédits etc.) alors que dans l’industrie,elles portent plus généralement sur les grandes questions stratégiques et de ce fait,correspond plus à un environnement favorable à la fusion personnelle du Présidentet du CEO.

Personnellement, je n’ai pas vécu cette expérience; mais durant mes deuxdernières années chez Nestlé, Mr. Maucher était à la fois Chairman et CEO.

Ce fonctionnement ne m’avait pas posé de problème, sauf une fois, lorsqueNestlé avait désigné comme CEO un financier, Mr. Fourrer, et que les affairesavaient été mal gérées. C’était d’ailleurs avant le CEO – Mr. Maucher. Cela venaitdu fait qu’il y avait plusieurs étrangers qui dirigeaient Nestlé, d’abord un Italien,puis Liotard-Vogt (un Français). Par la suite, Mr. Liotard-Vogt voulait que le pro-chain soit Suisse. Ce fut donc Mr. Fourer qui pris la suite, mais celui-ci n’étaitpas un industriel, c’était un financier. Au sein de CA, nous nous sommes rendus,d’ailleurs, compte qu’avec ce CEO les affaires ne pouvaient pas aller bien pourNestlé. A l’époque, Mr. Dalle, de l’Oréal, et moi-même (nous étions tous deux viceprésidents), sommes allés chez Mr. Lieuthart (alors retraité), et nous lui avons ditque nous étions obligés de revenir sur la décision qu’il avait prise, car ce n’étaitpas le meilleur choix (1) ni pour la société (2) ni pour lui-même (en effet, tout lemonde pouvait l’accuser d’avoir pris ou consenti à la décision d’élire comme CEOMr. Maucher.

C’est d’ailleurs de cette manière que Mr. Maucher est parvenu à la position deCEO – par une intervention du Conseil.

Farsam Farschtschian: Très intéressant et assez exceptionnelle. Aujourd’hui,j’entends souvent que le CA est devenu un organe pro-forma, et passive.

Philippe de Weck: Ce qui était actif à l’époque c’était – non pas le CA – maisce qu’on appelle le Comité du Conseil, qui comprenait toujours seulement 4 ou 5personnes. Le Président, l’Administrateur Délégué et 2 ou 3 autres personnes.

J’étais quand même 17 ans au CA de Nestlé. Assez rapidement, je faisais partiedu Comité du Conseil environ 3 ou 4 ans après et nous nous réunissions toutes les 3semaines.

Là, il y avait déjà une continuité, et nous nous réunissions, après avoir étudié lesdossiers. Alors, nous allions la veille à Vevey, normalement 1 jour, ou au minimumune demie journée, durant laquelle on ne faisait qu’étudier les dossiers, ensuite ily avait la séance le lendemain. Ainsi, la séance a été bien préparée par l’étude desdossiers.

Appendix C: Expert Interview with Philippe de Weck 213

Farsam Farschtschian: Mais, auparavant, receviez-vous ces documents?

Philippe de Weck: On ne nous les envoyait pas avant. On devait aller les voir surplace. On ne les sortait pas. Et ceux qui n’habitaient pas dans la région, devaientdormir à Vevey.

Farsam Farschtschian: Donc l’intention de vous faire venir sur place, c’est pourêtre sûr qu’ils étudient?

Philippe de Weck: Oui, je crois.

Farsam Farschtschian: Donc une situation assez « scolaire » je dirais.

Philippe de Weck: Peut être aussi pour des raisons de secret.Mais je trouvais que cela était un assez bon processus du fonctionnement du

Comité du Conseil. Le rôle du CA lui était moins important car il avait seulement6 séances par an et était à l’époque assez nombreux. Les discussions étaient doncmoins faciles.

A l’heure actuelle, on fait beaucoup de Comités: Alors, il y a le Audit Committee,Compensentation Committee, etc. Cela n’existait pas à l’époque. Lorsqu’il y avaitdes questions de finance par exemple, on faisait appel à un comité AD HOC que j’aid’ailleurs présidé car j’étais l’homme de la finance. Une fois les questions résolues,le Comité était dissolu. On le réunissait sur des sujets précis.

Farsam Farschtschian: Monsieur de Weck, à quel point pensez-vous que le back-ground des membres du CA puisse être important? Est-ce que la composition duCA a une influence directe sur le succès ou bien est-ce plus important d’avoir desmembres ayant une certaine intégrité?

Philippe de Weck: Personnellement, je ne crois pas beaucoup à la connaissancespécifique pour les membres du CA. Je pense que la personnalité est plus impor-tante que les connaissances spécifiques. Dans certain domaine, c’est utile d’avoir untechnicien ou un financier ou un juriste. Mais il n’y a pas besoin que tout le mondeait une spécialisation.

Une fois un chasseur de tête faisait une étude sur tous les critères que les membresde CA devraient avoir. J’ai lui dit: « Monsieur, vous oubliez un critère très important:Ils doivent être riches. »

Farsam Farschtschian: Pour être indépendant?

Philippe de Weck: Pour être indépendant. On n’ose pas le dire comme ça. Maisdonc ils doivent être suffisamment aisés pour ne pas dépendre de ce mandat.

Farsam Farschtschian: Mon Professeur de thèse dit toujours « never accept a job(board seat) that you can’t afford to loose ».

Philippe de Weck: Sur les questions de la rémunération, à l’époque de mon service,ça ne se posait pas, elle était modeste. On savait que les CEO gagnaient 1,5 million –moi en tant que président de UBS je faisais 1 million. Avec des chiffres comme ça,il n’y avait pas de problèmes pour une grande compagnie comme ça. Ce n’était pasla peine pour cela d’avoir de grands Audit Committee.


Il y a, dans l’économie, comme dans le sport, différentes leagues. Federer,Backham etc. font 40 millions. . . je n’y suis pas pour, mais on ne peut pas l’éviter.

Farsam Farschtschian: Moi, j’ai rien contre de grandes rémunérations, mais undes problèmes ici, c’est la transparence.

Philippe de Weck: Cela pousse les chiffres.

Farsam Farschtschian: Exactement, mettre les chiffres dans les rapports annuels,ça va trop loin.

Philippe de Weck: Je vous ai préparé un dossier sur les acquisitions: Il y eut desacquisitions avant mon arrivée au Conseil. Là, j’avais pu constater que sous ladirection du CEO italien, il y avait eu 2 acquisitions qui ne furent pas un succès:(1) Mibi (USA) et (2) Cross and Brackwords.

Ces deux acquisitions furent, par la suite, liquiditées par Monsieur Maucher.

Farsam Farschtschian: Moi, j’ai surtout pris en compte la période Maucher. Avotre avis Monsieur, quand est-ce que l’on peut considérer qu’une acquisition estun succès et comment en mesure-t-on le succès?

Philippe de Weck: C’étaient avant tout des acquisitions d’une dimension telle,qu’elles « n’étaient pas fondues dans le tout » et qu’elles restaient indépendantes.(1) Mibi – c’était des conserves et (2) Cross and Brackwords – c’était des sauces,ou encore ketchup etc. que Nestlé ne produisait pas d’ailleurs.

Rester indépendant, ça peut bien marcher, mais ici, ce sont les résultats d’ordrefinancier qui n’ont pas été au bon niveau.

Avant mon arrivée au CA, Nestlé avait tenté une extraordinaire prise de parti-cipation dans L’Oréal. Elle avait été entièrement le fait du Président Liotard-Vogt,parce qu’il était Français, il connaissait bien la France, il connaissait Bettencourt,dont la femme était propriétaire de l’affaire. C’était donc une relation tout à fait per-sonnelle. C’est une acquisition sans intérêt du point de vue industrielle, mais c’étaitun formidable pas en avant. L’Oréal vaut env. 50mia aujourd’hui.

Cela veut dire que si Nestlé avait eu besoin d’argent, il n’aurait eu qu’à vendre lesparts détenues dans l’Oréal. En fait, il n’aurait pas pu le faire dans l’immédiat, caril y aurait eu un accord de pool impliquant des délais (accord purement financier).

Liotard-Vogt avait vu cette acquisition avant tout comme une diversification dubusiness de Nestlé. Moi, je n’étais pas encore là à ce moment. Mais cette acquisitionn’avait finalement pas réussi, car la France c’est comme ça, et la famille propriétairede l’Oréal n’avait finalement jamais voulu céder la majorité.

Donc, de ce point de vue là, si vous voulez, c’est une participation qui n’a pasréussit au point de vue industrielle, mais au niveau financier.

Après mon arrivée au CA en 1973, ce fut le cas de la Stufer Corporation, (surge-lés et restauration). Nestlé y avait consacré 300 millions. A ma connaissance, ça atoujours été un succès. Pas tellement pour la restauration – d’ailleurs, je ne sais passi ça existe encore, mais les surgelés existent encore.

En 1978, il y a eu une 2ème acquisition importante de type non industrielle:Alcon Laboratories. On avait payé 77 millions, qui vaut de milliards et des milliards.


Alcon (pharmaceutique) est une société qui est totalement en dehors de la ligneNestlé. Elle a été acquise entièrement sur une initiative d’un membre du conseil,Mr. Dalles, Président de L’Oréal. Les dirigeants de Nestlé ne connaissaient rien dece domaine-là.

Mais je dirais, malgré tout, qu’il s’agissait qu’en même d’un produit plus prochede l’esprit Nestlé par opposition aux produits de beauté etc. D’ailleurs, je pense quesi un jour Nestlé a besoin d’une plus grande diversification, Alcon pourrait être uneformidable base de diversification dans le domaine pharmaceutique. En attendantc’est une formidable affaire.

Ainsi, Nestlé a deux „caisses d’épargne“: Alcon et L’Oréal, ce sont des milliards.Ensuite arrive Mr. Maucher. On avait en 1985 Carnation aux EU. En préparant

le meeting d’aujourd’hui, j’ai retrouvé des articles de la NZZ, où ce deal a étéhorriblement critiqué.

Farsam Farschtschian: Oui, j’avait lu que vous été reçu avec des protestation etc.aux Etats-Unis.

Philippe de Weck: Mais les aliments pour animaux étaient une diversificationextrêmement intéressante pour Nestlé. Une acquisition très ruineuse, entièrementmenée par Mr. Maucher.

Farsam Farschtschian: Monsieur, donc pour le cas de Carnation, comment sedéroulait le processus en détail?

Philippe de Weck: Mr. Maucher avait fourni des documents au Comité qui lesavait étudié; ils avaient donc étudiés le cas. Le CA avait reçu des documents plussynthétiques. La décision a donc bien été prise avec le Comité.

Farsam Farschtschian: Très intéressant. J’avais l’idée que tout venait du CEO,donc de Mr. Maucher. Je ne savais pas que le Comité était si actif. Phénoménal:Donc je vois a quel point le Comité était actif. J’en avais une autre impression.

Philippe de Weck: En CA, on posait beaucoup des questions.

Philippe de Weck: Bon, je voudrais aussi vous dire ce en quoi je considère commetrès important quand on parle d’acquisitions:

La première chose, c’était la couverture des produits. Est-ce que les produitsacquis peuvent se combiner avec les produits Nestlé? Est-ce qu’il va ne pas avoir ducannibalisme, c’est à dire qui vont se manger mutuellement; est-ce que ces produitsse recouvrent ou est-ce que il y a des nouveaux produits ? etc.

Pour qu’une acquisition soit un succès, à mon avis, il faut qu’un mixte desproduits joue.

La deuxième chose, c’était le antitrust, toujours dans le domaine des produits.Est-ce que l’on a confronté à de grands risques antitrust ? Sur quel marché et avecquelle acquisition allons-nous nous trouver en situation de processus antitrust quinuira à l’opération ? etc. Donc il fallait la étudier.

La troisième chose: C’était la synergie. Quelle synergie pouvait être retiré del’acquisition ?

Et une quatrième chose, c’était l’aspect financier.


Farsam Farschtschian: Est-ce la aussi l’ordre des priorités ?

Philippe de Weck: Oui. Je suis financier moi-même, mais je mets l’aspect financierà la fin !

Farsam Farschtschian: Vos collègues m’ont dit la même chose, que les fi-nances viennent à la fin. Les juristes et consultants/analystes par contre disentle contraire.

A ce sujet, si on regarde, par exemple, les Sociétés du Private Equity, comme 3i.Ils ont beaucoup de succès au niveau des acquisitions, car ils sont très disciplinés:(1) discipline financière et (2) pas d’euphories, car pas de problème de synergie etintégration.

Farsam Farschtschian: Est-ce que le CEO dans l’industrie ne peut pas ca-cher les coûts avec l’argument des grandes synergies, s’il veut absolument fairel’acquisition ? Comment le CA peut cerner cette problématique ?

Philippe de Weck: Les synergies sont faites par des calculs. L’ordre des grandeurspeut être cerné, plus ou moins. Pour une compagnie industrielle comme Nestlé, jedirai que les synergies n’étaient pas d’une priorité exceptionnelle. Ce n’était pas lebut! Mais le but essentiel était toujours la couverture des marchés avec des produits.

Donc « march é » et « produit », c’était ça l’essentiel.Et cela pour un Private Equity ce n’est pas la même chose. Donc, tant mieux, s’il

y a de la synergie! On peut malgré tout faire une acquisition, même si il n’y a pasde synergie. Mais on considère qu’en même la synergie, car elle a un rapport directavec le prix. Vous avez raison de ce point de vue.

De plus, je voulais, de plus, attirer votre attention sur le fait que nous ne faisionspas seulement des acquisitions, nous DES-investissions également beaucoup. Avecpresque chaque acquisition, il y avait un parti qui partait de l’objet acquit, soit acause du antitrust. Soit à cause de nos propres raisons.

Et puis, constamment – au moins sous l’ère Maucher – il y avait des ventes desociétés qui ne nous plaisaient pas. On ne les gardait pas, on les vendait tout de suite.

Farsam Farschtschian: Monsieur, comment voyez vous un modèle idéal du CA ?

Philippe de Weck: Voyez dans la législation Suisse, on a énormément augmentéla responsabilité des CA au cours de ces dernières années. Je me demande si lesadministrateurs actuels pourraient facilement – avec la responsabilité que le nou-veau code des obligations leur a donnée – accepter cette charge. Car, en somme,ils avaient dans ce système-là assez largement délégué à un certain nombre depersonnes qui ont été membres du Comité du CA.

Et la nouvelle législation ne me parait pas favoriser ce modèle-là. Je pense qu’ilvaudrait mieux, dans la législation actuelle, avoir un CA petit, mais pas avoir unComité du Conseil. Mais alors il faut faire tourner le Conseil.

Donc 3 à 5 personnes permanentes !


Farsam Farschtschian: Mais cela voudrait dire que le CA devient un organe àplein temps?

Philippe de Weck: C’est ce que voulait la loi. Moi avec la nouvelle législation, jen’accepterai pas d’avoir 4 ou 5 fois par an des séances.

Farsam Farschtschian: Après l’interview de Mr. Maucher, j’avais l’impressionqu’il faisait tout. Je vois maintenant que le CA était actif.

Philippe de Weck: Oui, nous lui faisions confiance, Mais il y avait des discussionssur tout, quand même.

Farsam Farschtschian: Comment est-ce que l’on peut inciter le board pour qu’ilfasse ses devoirs. Je pense aujourd’hui que comme les membres d’un boardcumulent généralement plusieurs mandats, ils sont souvent amenés à ne paspleinement remplir leur devoir (lire les documents etc. . . .)

Philippe de Weck: Je vous raconte une petite histoire : Comme une de mes col-lègues n’était pas venue à une ou deux séances du board meeting de Nestlé –notamment au début car elle était assez occupée – le président de l’époque, Mr.Liotard-Vogt, lui avait demandé soit de venir soit de se retirer du Board, car il luisemblais qu’elle n’était pas très intéressée. Alors depuis ce jour-là cette collèguen’avait pas raté une seule séance.

Cela joue bien, car pour un conseil, on a envie d’être. C’est un moyen facile !A moi aussi, c’est arrivé une fois pour obligation militaire. Après convocation parMr. Vogt, j’ai plus jamais raté une seule séance. Cela m’avait fait un choc quandmême.

Appendix DExpert Interview with Bruno DeKalbermatten

Niederschrift des geführten Expertengesprächs mit Bruno de Kalbermatten imRahmen der Forschungsarbeit von Farsam Farschtschian an der UniversitätSt. Gallen.

Expert Interview with Bruno De Kalbermatten• Ancien Membre du Conseil d’Administration de Nestlé• Ancien Président du Conseil d’Administration de Bobst SA

Introduction de la thématique par Farsam Farschtschian

Même si l’on connaît les facteurs de succès et les abondantes recherches en lamatière, la majorité des prises de participation et acquisitions ne réussissent pastoujours. Selon moi, il faut prendre une nouvelle perspective, car il ne me semblepas encore y avoir une théorie explicative. Beaucoup d’acquisitions pourraient êtrequalifiées d’échecs, car les structures et les processus entre le Conseil d’Administra-tion (CA) et le Management sont, soit inadéquats, ou tout simplement inexistants.C’est dans cette problématiques, dans cette structure managériale et ce processusque mon regard se pose sur le rôle des CA; et cela dans le contexte Suisse par-ticulièrement: à titre comparatif, en Allemagne, rien que le contexte juridique nepermet pas aux CA d’être opérativement actifs – a contrario du système juridiquesuisse.

C’est donc dans ce contexte juridique que mon analyse sera de savoir commentle CA pourrait alors mieux s’impliquer, mieux contrôler aussi le Management pourque les décisions soient mieux élaborées dans une perspective de court terme maisaussi sur une vision à plus long terme. C’est donc en ces quelques lignes que seprésente le cadre de ma pensée.

Bruno de Kalbermatten: Oui, il y a beaucoup de cas différents. Il n’y a pas derègle absolue. Chez Nestlé il est clair que l’élément de confiance entre le conseil etl’administrateur délégué de l’époque, M. Maucher, était tel qu’au fond on n’avaitpas de problème.

219

220 Appendix D: Expert Interview with Bruno De Kalbermatten

Moi, je me rappelle quand j’étais au comité de conseil, on décidait des choseimportantes et ça allait, car au départ on pensait que le dossier avait été préparé « enconfiance ».

M. Maucher dit « Marketing ist Chefsache » comme il l’a écrit aussi dans sonlivre. Alors, c’est juste. C’est un élément essentiel ça. Il y a eu des exceptions chezNestlé mais avec Helmut Maucher, ça allait très bien.

Là où les choses se compliquent, c’est quand on se demande si le CEO estvraiment le meilleur: Parce qu’il est malade, parce qu’il a trop de conseils d’ad-ministration, parce qu’il y a eu des acquisitions ratées etc. Il y a toujours desacquisitions ratées, car on ne peut pas tout toujours réussir, n’est ce pas. Mais c’estla quantité qui compte.

Et puis, vous avez des acquisitions qui sont partiellement ratées, parce que vousavez un groupe, et dans ce groupe il y a des éléments qui sont très bons et deséléments qui sont mauvais. Alors il faut du temps pour se débarrasser de ce qui estmauvais et puis valoriser ce qui est bon.

Tous ces éléments font qu’il y a beaucoup de cas d’espèce sans qu’il n’y ait derègle absolue. Je pense être d’ailleurs très nuancé à ce sujet.

Mais en principe, je crois que la tendance actuelle qui veut qu’on sépare le CEOdu chairman est quand même juste, à condition qu’ils ne soient pas des amis delongue date.

Farsam Farschtschian: Le chairman doit-il être un membre externe ?

Bruno de Kalbermatten: Oui, je le pense. Et il doit avoir une personnalité marquéepar l’indépendance de jugement et de pensée. Quant le chairman et le CEO sont tropamis, le premier n’est plus arbitre et il fait confiance au second. Il ne juge plus etcela peut se révéler dangereux.

Farsam Farschtschian: Comment le CA peut-il exercer son influence/pouvoirpour que le CEO n’abuse pas de son pouvoir et qu’il agisse toujours dans l’intérêtde l’entreprise ?

Bruno de Kalbermatten: Il faut tout d’abord que le CA fasse confiance au CEOcar il ne sait pas tout ce qui se passe. Mais ce qui compte, ce sont des résultats. Siles résultats ne sont pas bons, il faut que le CA agisse vite.

Farsam Farschtschian: Mais vous parlez de la « confiance ». Si on obtient laconfiance et que le CEO a du succès, il se peut, comme l’académie le dit, que sur-vienne le phénomène de « management hubris ». Et donc on fait une acquisition,qu’il ne fallait en fait pas faire. . .

Bruno de Kalbermatten: Ce que vous dites est absolument vrai.

Farsam Farschtschian: Comment le CA peut-il reconnaitre si le CEO ne surestimepas ses capacités, par exemple pour une acquisition ?

Bruno de Kalbermatten: Il n’y a pas vraiment de règle. Chez Nestlé, tant qu’il yavait M. Maucher, il n’y avait pas ce genre de problèmes. J’ai commencé a jouerun rôle quant je faisais partie du comité, car le CA, avec à l’époque environ 15–18

Appendix D: Expert Interview with Bruno De Kalbermatten 221

membres, était surtout un organe d’enregistrement, « une garantie de sérieux de lasociété ». C’est au comité qu’on préparait les décisions.

Farsam Farschtschian: Chez Nestlé cela n’était jamais le cas?

Bruno de Kalbermatten: Nestlé n’avait pas vraiment des branches avec unetechnologie très poussée. Ce que j’ai vu faire, c’était Carnation, Pellegrino, Perrier.

M. Maucher voulait entrer dans le domaine de l’eau. Une chose assez banale,mais c’était parfaitement juste, c’était très bien vu! Une autre culture, mais uneculture de base.

M. Maucher a ainsi très bien réussi. Carnation, le lait, c’était normal pour nous.Le café je n’en parle même pas. Donc tout correspondait encore au niveau de laculture.

Ma politique a toujours été de « faire ce qu’on peut faire mieux, perfection-ner cela, et de ne pas rentrer dans quelque chose d’autre. Ne pas réinventer unetechnologie qu’on ne maîtrise pas. »

Farsam Farschtschian: Donc deux choses seraient à votre avis nécessaires pourle succès d’une acquisition : La technologie, qui doit être proche de la sienne, etla culture, qui devrait être similaire?

Bruno de Kalbermatten: Je le pense. On peut toujours tenter la diversification,mais cela est très coûteux et risqu é!

Farsam Farschtschian: A ma connaissance, la seule entreprise qui a réussi a sediversifier c’était GE.

Bruno de Kalbermatten: GE est un cas particulier; ils étaient tellement grandsqu’ils pouvaient se permettre d’essayer des coups.

Nous, chez Bobst, on a fait une recherche et je me suis finalement trompé. Lebut était d’entrer dans la photocomposition (Fotosatzmaschinen). Mais l’évolutiondans le secteur était tellement rapide qu’on n’aurait pas dû commercialiser, on au-rait dû se contenter de faire de la recherche et du développement (où on maîtrisaitencore les coûts). La surprise est venue quand nous nous sommes dirigés vers lacommercialisation avec des pertes importantes.

Farsam Farschtschian: C’est un bon exemple pour vous poser une autre question:Si on fait un investissement que l’on poursuit dans le temps, après un moment,on arrive à un point de non retour. Par exemple si le CEO, avec plein d’euphorie,se lance dans une acquisition. Comment le CA peut-il avoir une vue d’ensemble ?En effet, si le CEO veut absolument cette acquisition, il peut toujours biaiserl’information à destination du CA. . .

Bruno de Kalbermatten: Oui, le CEO a un pouvoir d’influence. Le CA doit formerun comité qui a un droit de regard sur l’exécutif pour examiner ce qui s’y passe, etpuis il faut qu’il ait accès aux chiffres. Donc le CA peut organiser un comité destratégie. C’est par exemple ce nous avons chez Bobst.


Farsam Farschtschian: Oui, Bobst au sujet de CG me semble être un casexemplaire.

Bruno de Kalbermatten: Nous avons un comité de stratégie avec le vice présidentdu conseil et deux autres personnalités.

Farsam Farschtschian: J’ai remarqué que vous avez un comité de stratégie...

Bruno de Kalbermatten: Oui, mais c’est quelque chose de nouveau. Il n’a pas as-sez de capacité de pénétration. Pourquoi donc, me direz-vous? Parce que auparavantle CEO était très ami avec le président à travers l’ASM (Arbeitgeberverband derSchweizerischen Maschinenindustrie). Nous avons eu l’impression que le présidentn’exerçait plus assez sa fonction de contrôle à cause de cette amitié.

Je suis ainsi relativement favorable au principe d’avoir deux personnalités. Mêmesi chez Nestlé cela a parfaitement marché. Je suis resté seul président et admi-nistrateur délégué pendant 20ans (chez Bobst). Cela marchait bien car j’avais laconfiance et j’avais des amis – intelligents, qui possédaient de fortes personnalitéset qui posaient les bonnes questions. La société était aussi plus simple.

Cela veut dire qu’il n’y a pas de règle. Je pense qu’il est plus juste d’avoir deuxpersonnes, c’est moins risqué.

Cela fait déjà 20 ans que je dis qu’un jour nous n’aurons en Suisse pas assezde personnes pour les postes de CEO et de chairman. A présent de plus en plusd’étrangers occupent ces postes chez nous.

Farsam Farschtschian: Oui, M. Maucher me disait aussi que le CEO doit fairepartie du comité de rémunération.

Bruno de Kalbermatten: Vous voyez, à l’époque M. Maucher gagnait peut être 2et 3 millions, maintenant le PDG gagne entre 10 et 15 millions. Pourquoi ? Ce n’estpourtant pas plus difficile aujourd’hui qu’auparavant.

Farsam Farschtschian: C’est la transparence entre les marchés qui fait monterles prix, par exemple en comparaison avec les Etats-Unis. La transparence n’estpas toujours bonne.

Bruno de Kalbermatten: La transparence n’est effectivement pas toujours bonne.De tout façon, ce n’est pas bien de trop vouloir dire, car on ne dit jamais tout, alorsles gens tendent à interpréter. Tout va trop loin avec la transparence, car elle exciteles gens.

Mais je pense qu’il faut que les gens forts gagnent de l’argent, comme M. Vasella,par exemple. L’ennui pour moi, c’est que ça fait trop de bruit, ça pose des problèmesau niveau des négociations salariales. Il est normal que de nouvelles puissent secréer.

Farsam Farschtschian: Aussi, j’ai constaté un élément intéressant au niveau desincentives qui sont souvent fixé pour le management. Cela touche la sphère dusystème des rémunérations: Ce dernier comprend souvent l’élément du chiffred’affaires, qui pourrait être un moteur pour des acquisitions. Dès lors, comme lesmarchés ne sont pas indéfiniment grands pour augmenter les ventes et comme le


CEO doit augmenter le chiffre d’affaire (pour remplir ses objectifs), il se décidepour une série d’acquisitions. Dans ce cas d’espèce, le CA pourrait en effet jouerun rôle plus actif, et juger d’une manière objective sans tenir compte de l’euphoriedu CEO. Faudrait-il donc plus contrôler le CEO ?

Bruno de Kalbermatten: Cest une question de bon sens quand même. Quand M.Liotard-Vogt a amené l’idée de l’acquisition de l’Oréal, comment pensez-vous queles gens ont accueilli cela chez Nestlé ? Ils l’ont cru. Et quand ils ont acheté lasociété aux Etats-Unis, qui n’avait rien à voir avec les produits des eaux mais quirestait un produit de grande diffusion, ils lui ont fait confiance.

Farsam Farschtschian: Mais à l’époque la question de la rémunération n’étaitpas si sensible comme aujourd’hui.

Bruno de Kalbermatten: D’accord. Mais la question de la rémunérationaujourd’hui ce n’est pas a cause du « chiffre d’affaires », mais surtout a cause del’EBIT.

Farsam Farschtschian: Mais EBIT, c’est aussi Umsatz (chiffre d’affaires). Doncle manager a besoin de « Umsatz », et qu’il en crée beaucoup, les coûts ne sontplus si importants. . .

Bruno de Kalbermatten: Oui, mais tout de même. Vous voyez, il y a des trucs quifont de l’ « Umsatz » mais qui ne rapportent rien. Moi, vers 1965, j’ai acheté pourBobst une société aux Etat Unis qui s’appelait « Champlain »; il me fallait 15 anspour la faire marcher. Et aujourd’hui c’est l’un des fleurons de la société.

Je ne l’ai pas acheté d’abord pour faire plus d’argent. Le CEO en principe cherchequand même a renforcer la société; moins par « Umsatz » que par la stratégie duproduit et par EBIT.

Il peut se produire quelque fois que la société a absolument besoin de quelqu’unen particulier. Ainsi elle embauche un CEO avec un salaire élevée, 3–4 millions,plus un intérêt sur le « Umsatz », et puis après 3–4 ans si ça ne fonctionne pascomme prévu, le CEO s’en va avec un « golden parachute ». C’est insupportable. Ilfaut trouver une formule pour que les mauvaises performances soient pénalisées, oualors que le CEO ne profite pas de son départ.

Le contrat, à mon avis, il le faut pour des gens de plus de cinquante ans. Maisil est clair que si vous voulez embaucher quelqu’un de fort dans une entreprise, ilfaut lui donner des gages de sécurité. Comment vous y arrivez, c’est votre problèmeet c’est un vrai challenge. Qu’on veuille une certaine sécurité, je peux comprendre,mais pas le type d’excès que l’ont connait aujourd’hui.

Farsam Farschtschian: Quand est-ce que une acquisition pour vous est unsuccès ?

Bruno de Kalbermatten: Quand notre position sur le marché en sort renforcée;je parle ici de Bobst bien sûr. Nous voulons être les premiers dans le secteur oùl’on opère. Des bonnes acquisitions ce sont celles qui vous complètent et qui vousrenforcent.


Farsam Farschtschian: Et le prix d’achat ?

Bruno de Kalbermatten: Le prix d’achat n’est de loin pas important comme ilpeut l’être pour les analystes financiers. Si plus tard l’acquisition ne fonctionne pas,ce n’est pas à cause du prix, mais parce qu’on ne savait pas comment faire marcher letout. Il faut avoir une bonne vision d’ensemble, savoir quoi éliminer, savoir interagiravec les syndicats (et aussi savoir s’il faut licencier des gens, déplacer la productionetc).

Farsam Farschtschian: Et en ce qui concerne l’organisation du CA? Faut-il desexperts ?

Bruno de Kalbermatten: Prenons de nouveau le cas de Bobst. Il faut de l’expé-rience internationale surtout, Chine comprise. Nous avons choisi une personne ayantde l’expérience dans la finance. C’est important d’avoir quelqu’un de fort en financedans le CA.

Il faut aussi un juriste mais ce n’est pas si important, car peut être vous avezdéjà des juristes à l’intérieur de l’entreprise. C’est bien plus important d’avoir desgénéralistes dans le CA.

Farsam Farschtschian: M. Maucher disait que toutes les initiatives venaient dumanagement, mais il a communiqué d’une manière « concise » et « claire » à toutinstant avec le CA. Il paraît même qu’il ne vous a donné que 13 pages concernantRowntree. . .

Bruno de Kalbermatten: Oui, et nous étions toujours très informés. C’était l’idéede M. Maucher d’entrer dans le chocolat avec Rowntree. J’ai hésité avec cette déci-sion, mais j’ai compris que Nestlé voulait revenir dans le chocolat. Rowntree avaitune bonne image en Angleterre; c’est ce qui m’a décidé à y être favorable.

Farsam Farschtschian: Avez vous aussi posé des questions critiques?

Bruno de Kalbermatten: Oui, mais les questions que nous posions se rapportaientsurtout au sujet de l’intégration, si elle se faisait harmonieusement ou si il y avaitun blocage. En l’occurrence il y avait un blocage avec Rowntree, qui était unecompagnie familiale. Ils étaient tous fortunés et il ne se passait plus grand-choseà l’intérieur de l’entreprise. . . C’est là qu’ils ont commencé à avoir peur. Je coisqu’ils étaient contents lorsque nous sommes arrivés.

Farsam Farschtschian: Et vous avez ainsi gardé le management en place, et lechef de Rowntree est devenu, je crois, le chef de Chocolat Nestlé aux Etats-Unis.

Bruno de Kalbermatten: Oui, Rowntree a été une réussite.

Farsam Farschtschian: A votre avis quel rôle devrait avoir le CA: Un « monitoringrole » ou une « active advising role » ?

Bruno de Kalbermatten: Selon la grandeur de l’entreprise vous pouvez considérerun intermédiaire: Le comité de conseil. C’est ce que nous avions chez Nestlé. Nous


étions entre 15 et 18. Nous étions 5 ou 6 à avoir la compétence de décision pour desacquisitions jusqu′à 500 millions, ce qui n’est déjà pas si mal.

En outre nous étions souvent en contact avec les directeurs des régions qui ve-naient nous dire ce qui se passe chez eux. Le CEO était aussi dans le comité deconseil (MM Maucher, de Weck, Gerber, moi-même, MM Leutwyler et Angst, l’an-cien directeur général de Nestlé, qui était beaucoup apprécié en tant que responsabletechnique de Nestlé. On a lui fait l’honneur de participer aux activités du comité,tout en sachant que cela était une anomalie.

Normalement, on était tous des externes, sauf M. Maucher. Nous nous rencon-trions entre huit et dix fois par ans. Nous voyagions aussi ensemble. Nous avionsune bonne entente et la confiance était là. A cinq ou six il est possible de discuterautour d’une table. Au CA vous êtes quinze; si vous rajoutez les directeurs générauxvous vous retrouvez à vingt cinq. Là il n’est plus possible de discuter.

Tous les sujets passaient par le comité même si ce n’était pas dans noscompétences de décider. Rien n’allait directement au CA sans passer par le comité.

En outre un grand problème réside dans le fait que les gens ne partagent pas lamême langue ! Chez Nestlé il y avait une personne au CA qui ne parlait qu’anglais.Chez Bobst, les meetings se font dans le même temps en anglais. Je constate quela pensée n’est plus aussi claire; la communication n’est plus aussi effective du faitdes différents accents et surtout à cause du fait que nous avons tous des languesmaternelles différentes. C’est dommage, mais il faut vivre avec.

Donc : Il faudrait imposer pour le Board des cours d’anglais intensifs, afin quetous s’expriment correctement et pour vérifier que tout le monde a bien compris lemessage. Ce sont deux choses différentes.

Il faut parler un langage bien compréhensible. La langue anglaise est à priori laplus facile. Avec des traducteurs autour il n’y a pas vraiment d’environnent propiceà parler stratégie, technique concrète etc. Quand on parle de grandes thématiquespolitiques c’est encore acceptable. Mais quand la discussion devient technique çadevient difficile.

Farsam Farschtschian: Intéressant, je n’ai jamais rien lu à ce sujet. . .

Bruno de Kalbermatten: Chez Nestlé à l’époque c’était en français.

Farsam Farschtschian: Pour revenir au sujet du comité, chez Bobst le « StrategyCommittee » c’est la même chose que le comité du management chez Nestlé ?

Bruno de Kalbermatten: Non. Le « Strategy Committee » chez nous doit se po-ser la question sur ce que nous allons faire en Chine par exemple. Chez Bobst le« Strategy Committee », qui est différent du comité de management chez Nestlé,s’occupe des questions relatives aux marchés et aux produits (niveau stratégique).Donc comment il faut faire, avec quel produit, et dans quel pays. Chez Nestlé c’estun comité de décision.


Farsam Farschtschian: Mais est-ce que le CEO accepte que le comité de stratégielui dicte ce qu’il doit faire ?

Bruno de Kalbermatten: Le CEO devrait être une « Divin Force » et non une« Administration Force ». La « Stratégie Team » se rencontre plusieurs fois et pré-sente ses suggestions au CA en présence du CEO afin que ce dernier donne sonaccord.

Farsam Farschtschian: Mais vu que ce n’est pas lui qui a décidé, n’a-t-il pasvraiment la pression du résultat ?

Bruno de Kalbermatten: Le CEO veut améliorer les résultats, mais en même tempsil ne peut pas faire de miracle. Le marché est très complexe et hétérogène chez nous.Votre question, c’est une question de personnalité. En fin de compte la vraie questionest si le CEO est une « Divin Force » ou une « Administration Force ».

Chez Nestlé, la Driving Force vient aussi d’en bas. Les directeurs générauxlocaux voulaient développer leurs marchés. Par exemple ils nous demandaient s’ilspouvaient recevoir des moyens pour l’acquisition d’une usine. Chez Bobst, si ons’implante dans un marché, les machines complexes doivent aussi pouvoir fonc-tionner ailleurs, car le marché « local » n’est pas assez large. On se retrouve ainsiface à une situation plus complexe.

Appendix EExpert Interview with Dr. h.c. ThomasSchmidheiny

Niederschrift des geführten Expertengesprächs mit Dr. h.c. Thomas Schmid-heiny im Rahmen der Forschungsarbeit von Farsam Farschtschian an derUniversität St. Gallen.

Expert interview with Dr. h.c. Thomas Schmidheiny• Holcim (former CEO, chairman)• Swissair (former board member)

Farsam Farschtschian: Holcim war und ist sehr erfolgreich in Akquisitionen.Wie haben Sie als CEO/Chairman/Mehrheitsaktionär Akquisitionen bei Holcimgemanaged? Was ist Ihr Erfolgsrezept?

Thomas Schmidheiny: Ich war 25 Jahre CEO, Chairman und Mehrheitsaktionär. Inder Wachstumsphase der Holcim – und wir sind praktisch nur durch Akquisitionengewachsen – war bei uns, wie Sie sagen, also der Mehrheitsaktionär, der CEO undder Chairman die gleiche Person.

Ich führte das Geschäft klar regional. Jedes Mitglied der KL war für eine Regionzuständig und kannte diese intim. Das stellte einen grossen Vorteil dar, was die Ge-schwindigkeit bei Entscheidungen betrifft. Ein zweiter Vorteil lag bei uns darin, dassZementunternehmungen praktisch alle familiengeführt waren. Das war gut, denn sohat man die „Players“ im lokalen Markt über Jahre gekannt.

Ich habe auch durch die Erziehung durch meinen Vater sehr viel mitbekommen.In LA kauften wir nur zwei Positionen vom Staat und alle anderen kauften wirvon Familien. Das ist schon ein Unterschied zu „Publical Bids“, die wir später inAmerika dann aber logischerweise auch machten.

Die Positionen in Thailand kauften wir von einer Familie ebenso wie die in denPhilippinen und in Indonesien. Die letzte grosse Expansion, die ich gemacht habe,war Osteuropa und Asien.

Umgekehrt haben wir uns in Vietnam entschieden, alles alleine zu machen unddementsprechend verhandelten wir drei Jahre lang mit der Regierung.

In China kauften wir uns ein. Dort benötigten wir ein sehr starkes „Learning“.Aber das Business Modell von Holcim ist relativ einfach: Erstens wegen un-

seres Produkts und zweitens wegen des Netzwerks von Familien. Man kannte sich.

227

228 Appendix E: Expert Interview with Dr. h.c. Thomas Schmidheiny

Generationswechsel sah man kommen und Holcim wurde als „Consolidator“ ge-sehen. Ich habe immer signalisiert, dass wir interessiert sind mit den Familien zusprechen.

In der Schweiz z.B. waren wir 1992 sieben Familien, die im Zementkartell pro-duziert haben und heute sind es noch drei internationale Konzerne: Hier passierteein „Change of Ownership“ und dadurch sind die Firmen gewachsen; wir und genauso die anderen Unternehmen.

Der Prozess der Akquisition war damals sehr einfach. Wenn die Familie ent-schieden hat zu kaufen oder zu verkaufen, dann hat sie die Standards gekannt (alsoKapazität pro Tonne installierte Kapazität). Sie wusste also, wie viel sie bezahlenmusste. Dadurch, dass man sich gekannt hat, hat man auch die Positionen gekanntund damit auch die Stärken und Schwächen. Daher waren die Risiken eigentlichsehr klein.

Die Akquisitionskosten hingegen haben sehr variiert. Den höchsten Preis bezahl-ten wir in Lateinamerika, denn dort waren schon historisch die Preise immer höher.Und den tiefsten Preis, den ich je bezahlt habe, war in Russland. Genau 1% vonLateinamerika. Hier musste man die richtigen Leute kennen.

So hat ein Stamm einer Familie verkauft und wir sind kontinuierlich einges-tiegen. Aber wir haben dann sofort ein „Technical System Agreement“ gemacht,das „Environment“, „Technical Productivity“ und all diese Dinge beinhaltete. Sohat man die Position besser kennen gelernt und wir haben dann die Leute an unsgebunden.

Diese Welle lief so bis Mitte der 90er Jahre.

Farsam Farschtschian: Was hat dann geändert?

Thomas Schmidheiny: Ich habe dann gesagt, jetzt komme eine andere Welle aufuns zu: Wir müssen alles professionalisieren. Zu diesem Zeitpunkt haben wir dannauch unsere Struktur, unser Board, etc. „professionalisiert“.

Bis dahin war der Board wesentlich von mir als CEO geprägt gewesen, und dieLeute in den Regionen haben die Akquisitionen durchgeführt. Die sind zum Boardgekommen und haben gesagt, sie möchten diese oder jene Akquisition machen. Da-mals hatte man zwei Jahre Zeit, bis sich die Familie eine Meinung gebildet hatte.So war der Zeithorizont anders.

Der Board war hauptsächlich von der Familie Schmidheiny geprägt. Es gab im-mer auch drei bis vier Unabhängige, allerdings „controlled by the family“. MeinVater hat ja lang gelebt und war aktiv, er wurde dann „Deputy Chairman“ und hatalles begleitet.

Ich hatte aber zwischen 1983 und 1995 ein Board Mitglied, einen starken Juris-ten, der Corporate Governance gemacht und auf mich aufgepasst hat. Ich hatte einen„Vertrag“ mit ihm als mein „Watchdog“, denn ich war ja alles in einer Person: CEO,Shareholder, Chairman.

Ich habe ihm den Auftrag gegeben, dass, sobald ich etwas „Dummes“ mache,er am nächsten Tag zu mir kommen musste und wir einen Dialog führten. Zweimal im Jahr hatten wir sehr intensive Gespräche. Das hat sich sehr bewährt, denn

Appendix E: Expert Interview with Dr. h.c. Thomas Schmidheiny 229

wir hatten dadurch einen riesigen Vorteil: Wir waren unwahrscheinlich schnell undschlagkräftig.

Wenn ich gesagt habe, dass wir über Kapital finanzieren wollen, dann wurde dasgemacht, denn ich hatte ja die Mehrheit der Stimmen in den GV’s.

Im Vergleich hat eine andere Firma den Entscheid verschiedene Male zum Boardhoch bringen müssen, und gerade in Osteuropa hat das teilweise Wochen gedauert.

Wir haben dann ein Bid gegeben und nach zwei bis drei Tagen wussten wir schon,wo wir stehen. Dann sind wir dort hin geflogen, um die Dossiers und Fabrikenanzuschauen und sind sodann wieder abgereist.

Unsere Organisation hat das alles verdaut. Eigentlich hatten wir nie einen Flopim Akquisitionsbereich. Ausser einen grossen, der aber trotzdem keiner war, weilwir rechtzeitig ausgestiegen sind: Die berühmte „Cimpor“-Geschichte“. Wir wollteneine grosse Zementfirma in Portugal kaufen und mussten dann ein relativ intensives„Learning“ hinter uns bringen. Wir mussten lernen, dass man nicht in ein Land geht,wo man nicht willkommen ist.

Da können die besten Rules und Regulations etc. vorhanden sein, aber wennPortugal uns nicht will, dann kann man machen und zahlen was man will, es wirdnicht funktionieren.

Die wollten Holcim einfach nicht, die wollten keine Schweizer, und der, der füruns in Portugal akquirieren wollte, hat das einfach auch nicht gemerkt. Diese Erfah-rung hat uns nochmals weitergebracht, um die Risikofaktoren neu zu definieren.

Mitte der 90er haben wir dann etwas ganz Neues angefangen. Der Konzern wurdesehr gross. So haben wir eine „Risk Map“ aufgebaut. Wir waren vermutlich dieersten und wir haben heute noch wahrscheinlich das beste Risikomanagement der„Listed Companies“.

Wir hatten das damals mit der Arthur Anderson als 50/50 Projekt gestartet. Die„Risk Map“ hatte immer zwei Achsen: Erstens die Bottom-up-Risk-Darstellung imKonzern, und zweitens parallel dazu die Sicht des VR im Risikomanagement: Wiesieht der VR die Risiken global, inklusive Diskussion mit dem Management. Da gabes jeweils grosse Differenzen und Diskussionen, was die Abgleichung von Risikenbetrifft. Das Marktrisiko war wahrscheinlich immer das grösste Risiko. Zement alsCommodity wird immer über den Preis abgestimmt.

Farsam Farschtschian: Können Sie bitte dies und auch die Risk Matrix etwasmehr im Detail erklären?

Thomas Schmidheiny: In Mexiko ist zum Beispiel das Erdbebenrisiko enorm.Wenn eine Fabrik betroffen ist, müssen wir zusätzliche Kapazität bereitstellen, umtrotzdem liefern zu können. Dies hat dazu geführt, dass wir praktisch eine MillionTonnen Kapazität freihalten, die wir über alle Firmen verteilen.

Bei uns in der Schweiz ist dieses Erdbebenrisiko Null, dafür gibt es andere Ri-siken. So haben wir also diese Risiken Bottom-up herauf genommen und ebenfallsTop-down.

Dann haben wir angefangen, diese Risiko-Matrix in der ganzen Akquisitions-phase von Unternehmungen ebenfalls zu benützen: Für die Due Diligence etc. Diehaben wir dann ständig ergänzt, was sehr interessant war. So kamen etwa kulturelle


Aspekte hinzu, wie eben durch diese Angelegenheit in Portugal. Weiteres wurde indie „Risk Map“ aufgenommen, wie die Energieversorgung.

Heute ist diese „Risk Map“ das eigentliche Tool bei Akquisitionen und die DueDiligence wird durch die gleiche „Risk Map“ gesteuert, die wir immer wieder imBusiness Plan brauchen.

Im Februar oder März geht diese „Risk Map“ dann von der KL nach unten in dieUnternehmung. . Gegen September kommt die Map wieder hoch zum Board. Danngibt es relativ intensive Diskussionen.

Dadurch, dass wir überall die gleichen Tools gebraucht haben, hatten wir einensehr effizienten Prozess.

Parallel dazu hat sich dies auf VR-Niveau schon verändert. Holcim hatte im-mer eine sehr starke Konzernleitung. Da gab es schon immer Persönlichkeiten. Daswurde schon von meinem Onkel und meinem Vater geprägt. Die gingen gemeinsamzum Mittagessen und haben einfach kommuniziert „ich mache dies und das“ unddann war das bereits beschlossen und der Board wurde nur „informiert“. Ich war inden 60er Jahren als ETH-Student ab und zu bei diesen Lunches dabei und erinneremich daher.

Bezüglich unserer geografischen Aufstellung wäre zu sagen, dass wir den Ansatzgewählt haben relativ pragmatisch zu sagen: Wir wollen ein Drittel Europa, einDrittel USA und ein Drittel Emerging Market.

Das hat sich dann immer wieder verändert, zum Beispiel durch Osteuropa oderAsien. Aber es war eigentlich eine gute Guideline.

Der Board wurde dadurch trainiert, dass die „Risk Map“ immer wieder beiAkquisitionen angewendet wurde, so dass er die richtigen Fragen stellte: DieFragen, die der Board eigentlich stellen muss; ein Fragenkatalog.

Wir haben aber zum Beispiel nie ein Finanzkomitee für grosse Akquisitionengemacht.

Ansonsten hat der Board die Langzeitstrategie und die Personalentscheidungengetroffen und hat über die „Risk Map“ die Akquisition „begleitet“.

Dadurch, dass die Geschäftsleitung immer von starken Personen besetzt war,kamen die Akquisitionen immer sehr gut vorbereitet auf den Tisch. Der CEO hatklar die Schlüsselrolle, aber vielleicht doch nicht so stark wie bei Nestlé. Bei unskann der Board „Nein“ sagen.

Farsam Farschtschian: Also jetzt sind wir in der Periode nach 1995?

Thomas Schmidheiny: Ja, aber auch zu meiner Zeit konnte der Board „Nein“sagen. Im Board ging es eigentlich immer um finanzielle Fragen. Denn die Targetswaren immer gut gewählt.

Aber natürlich gab es – und das ist auch kein Geheimnis – quid pro quos. Es kamvor, dass einer gesagt hat: „Ich stimme für deine Akquisition in Asien wenn du mirin LA in der Konzernleitung zustimmst“. Das ist menschlich und deshalb brauchtes einen starken CEO, wie ich es war, der klar sagt, wo die Prioritäten liegen. Dennman kennt ja mit der Zeit die Leute.

Was gut war, ist, dass wir uns die Projekte immer aussuchen konnten. Es gibtUnternehmen, die müssen Akquisitionen suchen. Holcim hingegen hatte immer zu


viele Möglichkeiten. Wir mussten nie etwas herbeizwingen im Sinne „in diesemGebiet müssen wir unbedingt dies und jenes akquirieren“.

In Asien habe ich innerhalb von drei Jahren für 1.5 Milliarden CHF Positionengekauft. Heute sind wir dort der bei weitem grösste Zementproduzent.

Wir haben aber die Leute gekannt und die kamen in der Krise zu uns und wolltenbei uns mitmachen. Denn die wussten, dass wir sowohl gut arbeiten als auch ehr-lich und multikulturell sind. Ich habe praktisch in jedes Land lokale Leute schickenkönnen, die dort gar nicht auffielen. Das alles hat die Industrie gewusst.

Ein Gegenbeispiel bietet Lafarge: Die war langsam, administrativ und zentrali-siert strukturiert. Jede Akquisition musste durch eine lange Prozedur.

Farsam Farschtschian: Bei vielen Akquisitionen unterschätzt man ja die Man-power an guten Leuten die man braucht, gerade bei der Integration. Sie sagen,dass es dieses Problem bei Ihnen weniger gab, da Ihre Akquisitionspläne bei denTargets gut ankamen und die Integration einfacher ablief?

Thomas Schmidheiny: Sie müssen die Zementindustrie verstehen. Eine Zement-firma braucht zwei bis drei gute Leute. Wenn Sie eine mittelständische Firmaübernehmen, setzen Sie eine gute Person ein. Natürlich wird diese Person dann dieLeute schulen etc.

In diese Leute haben wir natürlich extrem investiert. Ein Land das enorm vieleLeute ausgebildet hat war interessanterweise Mexiko. Auch ich war einer vondenen, ich bin „zementmässig“ in Mexiko aufgewachsen.

In der Konzernleitung waren wir drei Mitglieder die in Mexico waren, Wir habenimmer wieder gute Leute ausgebildet und hochgebracht. Diese Mitarbeiter wurdendann wieder irgendwo in Holcim platziert. So kannten wir diese Leute und IhreFähigkeiten und wir konnten uns auf sie verlassen.

Das waren nie massive Truppen sondern sie wurden selektiv eingesetzt. ZumBeispiel haben wir sicherlich in jedem Target den CFO sofort ersetzt. Wenn Sie dieMehrheit haben, müssen Sie dies tun, insbesondere in den Emerging Markets.

Da gab es bei den Familien teilweise Strukturen, die wir als Public Companynicht fortführen konnten. In den Emerging Markets findet und sieht man alles. Damussten wir dann alles „bereinigen“. Im Akquisitionsprozess haben wir gesagt, wirlösen das alles auf, das ist Bestandteil des Kaufpreises.

Danach haben wir es abgelöst und die Leute raus genommen, da unser Businessnicht so läuft. Das musste man mit Subtilität und Menschlichkeit machen, aber mitder klaren Vision: „We want to have clean structures and processes“.

Mit der Einführung dieser „Risk Matrix“ hat sich ein Team gebildet, das heutedie Akquisitionen für den CEO höchst professionell behandelt. Das Team ist di-rekt dem CEO unterstellt und der macht sowohl das Top-down / Bottom-up-Systemwie auch die Due Diligence wenn etwas gekauft wird. Das läuft durch die gleicheMaschinerie.


Farsam Farschtschian: Dieses Team rapportiert also an den CEO, nicht an denVR. Und bei Board Meetings ist dieses Team dann dabei?

Thomas Schmidheiny: Ja, bei Akquisitionen ist der Verantwortliche bei den BoardMeetings dabei.

Farsam Farschtschian: Dann ist das also ähnlich wie ein Ad-hoc-Ausschuss fürAkquisitionen?

Thomas Schmidheiny: Ja, wenn Sie so möchten.Solange ich CEO und Chairman war, hatte ich ja ein enormes Know-how von

dieser Welt Zement/Beton/Kies und konnte die richtigen Fragen stellen.Auch historisch war es bei Holcim immer der Fall, dass die Konzernleitung bei

den VR-Sitzungen integral dabei ist, und das finde ich gut.Der Board diskutiert bei uns also nichts, ohne dass die Konzernleitung präsent ist.Es gibt aber „Private Meetings“, in denen der VR alleine tagen kann. Zum Bei-

spiel ist die jährliche Evaluation des Verwaltungsrates klar ein internes Thema ohneKonzernleitung. Aber wir haben schlussendlich bestimmt, dass der CEO ein Mit-glied des Boards ist, somit ist er hier bei jeder Board Sitzung dabei und in dieVerantwortung eingebunden. Der Chairman ist unabhängig.

Wir im Board haben dann private Meetings, Nomination Committees, FinanceCommittees etc. die sehr gut funktionieren und stark sind. Aber sie unterstützenund hinterfragen die Konzernleitung.

Diese Corporate Governance Struktur haben wir eingeführt bevor ich ging unddann wurde alles umgesetzt. Die extreme Konzentration von Macht bei mir musstenwir natürlich auflösen und auf verschiedene Personen verteilen.

Das Modell, in dem ich Hauptaktionär mit Mehrheit der Stimmen, CEO undChairman bin, war stimmig und interessant. Darüber habe ich auch schon Publika-tionen veröffentlicht.

Das war ein stimmiges Modell, weil ich die Mehrheit der Stimmen hatte undder Kapitalmarkt in London immer gesagt hat, solang jemand soviel Kapital in derFirma habe „you are bound to succeed“. Die Frage war viel mehr: Wer kommt nachmir von der Familie? Bleibt alles zusammen oder nicht?

Danach haben wir das Kapital umstrukturiert und „One Share One Vote“ ein-geführt. Der Chairman ist unabhängig und ich bin Member of the Board .Zusammenmit Herrn Dieter Spälti (ein ehemaliger McKinsey-Stratege der sich jahrelang mitZement-Strategie beschäftigt hat) vertrete ich im VR unsere Interessen. Der CEOist ein erfahrener Manager. Der neue Layout ist wieder ein stimmiges Modell, aberein komplett anderes.

Natürlich gibt es nun mehr Komitee-Sitzungen – aber das ist heute einfach so.Ich möchte heute nicht mehr unbedingt CEO sein. Denn all die Komitees, bei denender CEO anwesend sein und referieren muss, absorbiert enorm Zeit.

Ich habe das früher „aus Fun“ immer wieder gemacht, aber heute ist es organisiertentlang von Prozessen.

Und das ist auch notwendig, wegen Abfallbewirtschaftung, Emissionen, etc.


Ich glaube beide Modelle waren stimmig. Ich hatte natürlich mit der Mehrheitder Stimmen eine riesige Verantwortung gegenüber den Drittaktionären und habedies 20–25 Jahre getragen – immer mit meinem Team natürlich.

Ich meine, das heutige System mit einem Core Shareholder, der 20 Jahre Busi-ness Knowledge mitbringt und eine Konzernleitung die weiterhin sehr stark ist undmassiv umsetzt ist es wieder ein stimmiges Modell.

Und bezüglich der ganzen Thematik Due Diligence (die meines Erachtenseminent wichtig ist): Transparenz zu erstellen für den Board, der vor den Aktionärengerade stehen muss, wird durch die Risikomatrix gemacht. Das Risk ManagementTool, das wir damals mit der Arthur Anderson aufgebaut haben ist übrigens bewusstWeb-basiert gemacht worden: Man erhält die nicht veränderbare Maske und manmuss dann dort seine Position ablegen. Die Risiko-Vorgaben von der Geschäftslei-tung und dem Board sind alle auf einer Seite und im Prozess arbeiten alle mit dieserSeite.

Wenn Sie dann ein Risiko erkennen, auch bei Akquisitionen, dann müssen Sieberichten, was daraus gelernt wurde und wie man mit dem Risiko umgeht. Denngewisse Risiken kann man nicht einfach beseitigen. Die Risiken fliessen dann inden Business Plan und dort muss erklärt werden, was damit gemacht wird.

Holcim ist führungsmässig regional aufgegliedert. Dann berichtet jede Regionüber die Risiken zur Konzernleitung und der Board erhält eine Zusammenfassung.

Einmal im Jahr sieht der Board konsolidiert alle Risiken und Chancen vonHolcim weltweit durch.

Nochmals bezüglich Akquisitionen: Da wir überall nur Zement/Beton und Kieshaben, haben wir überall die gleichen Prozesse. Das ist bei uns der grosse Vorteil.Wir haben nicht wie zum Beispiel die Nestlé etliche Produkte mit verschiedenenProzessen.

Es war allerdings schwierig, unseren Managern beizubringen, dass der Prozess inDeutschland gleich ist wie in Frankreich. Das haben vor allem die Franzosen nichtgeglaubt.

Die letzte grosse Arbeit die ich noch gemacht habe, war der Global Brand „Hol-cim“ und die Vereinheitlichung des Rechnungswesens. Das waren zwei riesigeProjekte.

Der neue CEO hat dann die IT vereinheitlicht. Heute haben wir nur noch wenigeVerarbeitungszentren in der Welt und die ganze IT ist in Europa, in Madrid: eins inToronto, eins in Mexiko, eins in Indien.

Die Tradition, dass man die Board Members und die Konzernleitungsstufe imAkquisitionsprozess schult, stellt keine Ausnahme dar, weil wir ja ständig und per-manent akquirieren. Für Holcim ist Akquisitionstätigkeit eigentlich Tagesgeschäft.Es gibt praktisch keine Traktandenliste im Board von Holcim, auf der nicht eineAkquisition drauf ist.

Wenn man sich im Vergleich dazu den Fall Sauerer und Unaxis ansieht: Dort istes eine Ausnahmesituation, hier muss man Spezialkomitees einsetzen.

Eines der wesentlichen Fragen, die Sie gestellt haben, das ist ganz klar dasÜberzahlen bei Übernahmen, und das ist eines der kritischen Elemente.


Nehmen wir mal den Fall Indien, da haben wir Milliarden investiert. Wir habenneun mal EBITA bezahlt (wenn ich mich richtig erinnere) und da haben alle imBoard, die nicht lange dabei waren, gemeint, wir seien verrückt. Heute nach einemJahr sind wir nun bei 6.2 EBITA, weil das ganze System wächst. Wir mussten eineEintrittsprämie bezahlen und dann wächst das System in sich und die Prämie gehtzurück – wenn es natürlich gesund wächst. Wenn Sie in einen stagnierenden Markteintreten, haben Sie natürlich zuviel bezahlt.

Dies ist bei uns dramatisch, denn wo können sie noch wachsen? Wenn ich zumBeispiel eine deutsche Firma kaufe, weil eine Familie verkaufen will, dann mussman aufpassen. Denn wenn man in Indien 8-9mal EBITA bezahlt, spielt es fastkeine Rolle, weil es danach wächst.

Auch ein Projekt dass wir untersucht haben bezüglich Akquisitionen war derBereich „Waste Management“. Es gibt eine Firma in den USA, die so heisst, undwir haben vor Jahren diskutiert, ob wir die kaufen sollten und dann das „WasteManagement“ global bedienen und den Abfall in der Zement Industrie verbrennen.

Wir dachten, „Waste Management“ sei Cash Flow azyklisch. Dann kamen wiraber in einen Zyklus der Rezession und mussten feststellen, dass die „Waste Ma-nagers“ viel tiefer gefallen waren als wir. Wir wollten ja etwas, dass dann läuft,wenn es uns schlecht geht, haben wir uns dann entschieden, dass wir das „WasteManagement“ lokal/regional machen. Dies ist heute noch der Fall und läuft gut.

Farsam Farschtschian: Eine Frage bezüglich Ihres Risk Management Tools: DieDue Diligence (DD) haben Sie ja mehrmals angesprochen, da werden finanzielleAspekte, juristische etc. betrachtet. Wie sieht es denn mit dem HR aus?

Oder ist die HR DD in Ihrer Industrie – in der es mehr um ein Produkt gehtals um Services – weniger wichtig? Dass zum Beispiel die Unternehmenskulturenzusammen passen etc . . .

Thomas Schmidheiny: Es hängt sehr stark davon ab, in welcher Dimension mandie Akquisition macht.

Beim Fall „Aggregated Industries“ handelte es sich um eine Milliarden Grösse.Diese Akquisition konnten wir eigentlich in dieser Form nur machen weil wir denCEO seit 10 Jahren gekannt haben. Er hat immer gesagt, dass er am Ende seinerLaufbahn sein Geschäft an mich übergeben würde. Als es dann soweit war, hates hervorragend funktioniert. Denn ihn haben die Leute gekannt und er hat unsgekannt. Wir haben viele Leute ausgetauscht, was sehr gut funktioniert hat. DerCEO beispielsweise ist heute bei uns der Area Manager. Er hat sich völlig nahtlosins System angepasst.

Ein ganz anderer Fall ist der folgende: Die thailändische Familie, die an unsverkaufte, hat dies zuletzt gemacht, weil sie ihr Management ersetzen wollte undes nicht schaffte. Die Familie war einfach nicht stark genug. Als wir die Firmaübernommen haben, ersetzten wir als erstes das ganze Management wofür uns dieFamilie sehr dankbar war. Wir mussten dann von heute auf morgen neue Leute ein-setzen. Unser Konzernleiter Asien ist dann für drei Jahre über Nacht nach Thailand,hat eine neue Crew aufgebaut und hat die Firma geführt.


Indien läuft hingegen hervorragend. Wir haben hier ein enormes Potential akqui-riert: Mannschaft und Material, Ingenieure, Materialwissenschaft etc. Sie geben unsbereits Input hier bei uns in Europa.

Dann gibt es auch die, die nur „schlucken“. Der Libanon hat zum Beispiel nochnie ein Kadermitglied exportiert, obwohl wir seit 1932 dort präsent sind.

Marokko gibt permanent Ingenieure ab. Chef der Technik in Amerika ist einMarokkaner, der Rest sind Mexikaner.

Das Thema HR DD ist also immer verschieden.Aber weil wir die Industrie kennen, kennen wir meistens auch die Leute und die

Schwächen und so können wir uns vorbereiten. In diesem Sinne ist bei uns die HRDue Diligence nicht so dramatisch wie die Market Due Diligence.

Wenn ein Markt in einem Land nicht gut funktioniert, ist das meines Erachtensdas grösste Risiko. Denn eine Fabrik können wir umbauen, das kostet vielleicht 60Millionen, aber wir wissen wie das geht. Aber auf den Markt Einfluss zu nehmenist hingegen schwierig, vor allem wenn das Verhalten der Players nicht rational ist.

Auch der Bereich Ökological DD ist bei uns sehr wichtig, und zwar wegen denEmissionen, dem CO2, den Lastwagenfahrten. Zum Beispiel in Saraburi, Thailand,gibt es keine Eisenbahn, da läuft alles über Lastwagen die gegen 10 Mio Tonnentransportieren.

Dann ist die ökologische Dimension: Gibt es Abfall, gibt es Potential in demSystem?

Die Fabrik in Thailand verbraucht pro Tag 100 000 Tonnen Kalkstein. Es istwichtig, dass Sie sich dort als Ausländer mit der Regierung verstehen und dasManagement eine hohe Kredibilität hat.

Das sind die wichtigen Sachen.Tax, legal, Corruption etc. sind Standards.Wir haben einen Vorteil dadurch, dass wir nicht etliche Produkte haben sondern

nur Zement. Und der CEO versteht soviel von dieser Welt, dass er in kurzer Zeitweiss, ob ein Akquisitionsvorschlag grundsätzlich Sinn macht.

Farsam Farschtschian: Die Integration ist also in Ihrem Business nicht soschwierig wie in anderen Industrien?

Thomas Schmidheiny: Die Integration im Konzern wird natürlich schwieriger,weil wir den Targets mehr Freiheiten wegnehmen. Wir schicken zum Beispieljemanden hin, der die IT aufbaut. Heute wird einfach „eingesteckt“ und allesläuft. Dabei gibt es schon Kulturschocks. Die Integration braucht sehr viel men-schliches Einfühlungsvermögen und gleichzeitig Härte. Dies ist ja schlussendlichdie Integrationsaufgabe. In der Auswahl der Leute ist dies das A und O.

Die Integration der „Aggregated Industries“ ist die schwierigste, die wir durch-geführt haben. Sie ist auch noch nicht abgeschlossen, weil wir dies erst letztes Jahrgekauft haben.

Wenn man in einem Markt zwei Unternehmen besitzt, von welchen eines Kiesverkauft und eines Zement, dann irritiert das den Kunden. In Amerika ist dies beiuns der Fall.

Bei Holcim Schweiz hingegen können Sie alles abrufen: Zement, Kies, etc.


Hier gibt es also zwei Schienen und wie Sie mit dem umgehen ist schwierig. Esgibt dann eine Kieskultur (das sind andere Leute, die müssen „den Franken dreimalumdrehen“) und eine Zementkultur. Wenn Sie nun diese Kulturen zu stark mischen,dann kann dies Probleme mit sich bringen.

Farsam Farschtschian: Die Doppelspurigkeiten bei einer Akquisition (im Sales,Marketing, Administration) rationalisieren Sie ja. Wo werden die Leute unterge-bracht?

Thomas Schmidheiny: Wenn Sie ein funktional integrales Portfolio haben, alsoZement, Kies Beton, dann haben Sie kein Problem. Wenn Sie dann etwas kaufen,wird integriert, Schluss, fertig.

In den USA, wo wir nichts hatten, lässt man die Strukturen bestehen. Der Kieserkauft seine Kiesgrube und integriert sie, und die IT Systeme bleiben eben ihre ITSysteme.

Hauptfrage bei der Integration ist: Stirbt die Initiative der Leute oder kann mansie auf die nächste Stufe hoch nehmen, wenn sie zu etwas grösserem gehören?

Interessant ist, dass bei vielen Mittlerständen die wir übernommen haben, dieLeute nicht aufgeben und sondern sich sagen, sie gehören jetzt zu einer grossenFirma. Es war schon eine Herausforderung, diese zu übernehmen.

Farsam Farschtschian: Aus einem Gespräch mit einem Chairman neulich habeich entnommen, dass vielfach die Probleme bei der Integration von der eigenenSeite herrühren und nicht vom Target, welches die ganze Achtung des Überneh-mers bekommt. Also wie wird das Target integriert, so dass es für die Leute amangenehmsten ist?

Das Problem sei vielfach von der eigenen Seite, denn daher rühren die zukünfti-gen Querelen. Die eigenen Leute hatten ihre eigenen Karrierepläne, sie wussten,wann und wo der nächste Karriereschritt war, sie kannten die Leute, und siewussten in drei oder fünf Jahre werde ich dort sein.

Jetzt aber gibt es einen Konkurrent von der anderen Seite, einen Homologen vomTarget. Jetzt beginnen die Intrigen. Ich muss veranlassen, dass mein Homologirgendwie „aus dem Weg geräumt“ wird, etc. Wie sehen Sie das?

Thomas Schmidheiny: Ich teile diese Ansicht teilweise.Wenn man in ein anderes Unternehmen hinein sieht, in ein Target, entdeckt man

immer wieder neue Sachen, die man nicht gewusst hat. Man sieht, dass die gleichenProbleme anders gelöst werden können: Einen Steinbruch, den das Target andersgemacht hat, oder ein Chemielabor, das intelligenter aufgebaut ist.

Zum Beispiel haben wir eine Firma in der Innerschweiz übernommen, die einganzes Chemielabor hatte. Der Besitzer war ein Chemiker. Wir haben dort enormviel an Know-how gewonnen. Für die ganze Mannschaft des Targets war das auchsehr motivierend, dass wir das alles abgeholt haben. Sie waren am Schluss sogarstolz.

Von unserem Kauf in Thailand zum Beispiel, als wir die Auswechslung gemachthaben, ist eine Person geblieben, der Techniker.


Thailand ist die grösste Anlage, die wir weltweit betreiben. Wir hätten nie denMut, dies alleine zu machen. Die Anlage läuft wie eine Schweizer Uhr. Wir sindnach Thailand gegangen und haben Leute gesandt, um zu verstehen und zu lernen,wie und warum das so gut läuft. Das ist doch motivierend für die Leute im Target,wenn sogar wir zu ihnen gehen, um zu lernen. Heute haben wir in Thailand etlicheLeute trainiert, wie man grosse Öfen betreibt.

Wie viel Potential vor Ort das ist, ist natürlich wieder sehr unterschiedlich. InThailand wie in Indien haben wir enormes Potential gefunden.

Schwierig wird es in Orten, bei denen wir auf Sprach/Kommunikationsbarrierentreffen.

Das war zum Beispiel in China der Fall. China war ein interessanter Fall: Als wirdie erste Akquisition machten, waren uns ein paar Parameter noch nicht bekannt –und wir konnten diese auch nicht kennen. Wir waren zu dritt, mit einem Taiwanesenund einem aus Singapur und wir haben alle hier keinen Erfolg erzielt.

Es gab einen Strukturfehler, den wir nicht erfasst haben. Wir haben den Fehlergemacht, mit „Locals“ zu arbeiten und nicht mit dem „Central Government“. Da-durch stiegen alle Preise: Kalkstein, Strom, Öl, Lohnkosten etc. Alles wurde teuerer.So war die Firma nicht mehr profitabel. Ich hatte genug und habe das Managementausgewechselt. Ich habe das Management an Chinesen delegiert. Heute läuft dieFirma brillant. Wir sind mit den Locals nicht zurecht gekommen. Sie untereinanderhaben dann wieder eine Lösung gefunden.

Wir haben dann einen zweiten Schritt gemacht, und haben aus dem letzten Fehlerund aus der Risikoanalyse gelernt. Wir haben gesagt, die nächste Stufe in Chinamuss eine Public Company sein, denn die hat Arthur Anderson als Auditor undläuft somit wahrscheinlich einigermassen korrekt. Aber das Wichtigste ist, dass einePublic Company direkt am Ministerium für Bauindustrie in Peking angeschlossenist und nicht dementsprechend noch fünf Stufen dazwischen liegen.

Das haben wir gemacht und die „Huaxin“, die wir heute haben, ist quotiert. Im2008 werden 20 000 Millionen Tonnen produzieren. Das ist eine riesige Produktion.

Solche Fälle gibt es natürlich, man kann nur hoffen, dass es kleinere sind.Für Holcim hat das nun nicht viel ausgemacht. Aber das gemachte Learning wardramatisch bei dieser Erfahrung.

Holcim ist meines Erachtens ein atypischer Fall, weil wir einfach permanentakquirieren.

Entscheidend ist wirklich das Sieb, sowohl auf Board Level und auf Konzernlei-tung. Nämlich, was geht durch diese Risikomatrix?

Farsam Farschtschian: Aber im Vergleich zu anderen Unternehmen, die zuerstlernen mussten, hat es bei Ihnen von Anfang an erfolgreich funktioniert. Wardas also industriespezifisch, auch weil es auf breiter Front ein Family Businesswar?

Thomas Schmidheiny: Ja, und seit 1930 hat das Unternehmen permanent akqui-riert, aber über eine lange Zeit. Venezuela hat mich 15 Jahre gekostet bis ich dieMehrheit hatte. Zeit ist eine weitere Stärke von Holcim. Holcim hat die Zeit zuwarten, bis die Familien kommen und verkaufen wollen. In Salvador haben wir 10


Jahre gebraucht, bis wir die Mehrheit hatten. Heute sind wir befreundet. Es warensieben Familien und wir waren dann die Achte. Mit der Zeit haben die Familienimmer mehr abgegeben und wir wussten, dass wir mit der Zeit irgendwann einmaldie Mehrheit haben werden.

Farsam Farschtschian: Gab es bei Holcim nie feindliche Übernahmen?

Thomas Schmidheiny: Ganz feindliche haben wir nie gemacht, das liegt nicht inunserer Kultur. Aber die Problematik bei Hostile Takeovers ist, dass Sie relativ raschin die Position kommen, bei denen Sie nach Kartellrecht viel abstossen müssen.Holcim ist ja nun in 70 Ländern vertreten.

Kleinere feindliche Übernahmen gab es vermutlich schon. Zum Beispiel, dasswir bei einer Kiesgrube einen „ausgekauft“ haben.

In der Industrie gibt es einen grossen Deal, der feindlich lief, nämlich als Lafargedie Blue Circle Industries in England kaufte und dies bis heute nicht verdaut hat.

Die Mitglieder des Blue Circle Management sind praktisch alle gegangen. Auchwir haben relativ gute abwerben können. Es ist auch relativ naiv von Franzosen,Engländer zu kaufen. Das geht nicht ganz einfach. Entweder müssen Sie dann dieFirma mit Franzosen besetzen oder die Firma integrieren. Die haben nun damitbegonnen, aber fünf Jahre haben sie bereits verloren.

Farsam Farschtschian: Bezüglich Ihrem Bottom-up-Approach: Wie gross ist derKreis und wer gehört dazu? Zählen die Geschäftsleitung und die Division Headsauch dazu?

Thomas Schmidheiny: Wenn wir jeweils diskutieren, gibt es ein Risk-and-Strategy-Seminar. Dies dauert zwei Tage, während der man mit der Konzernleitungdurch die Matrix geht. Das sind 2 oder 3 Personen (die Treiber) die das leiten.

Farsam Farschtschian: Wenn ich Sie richtig verstanden habe, dann haben wirhier den Board, den CEO und den Head of Risk, der wieder an den CEOrapportiert. Im Falle einer Akquisition kommen alle diese Personen zusammen?

Thomas Schmidheiny: Ja, und zusätzlich die Mitglieder der Konzernleitung, diedie Akquisition machen. Denn der CEO akquiriert ja selbst nicht. Er steuert und ma-naged den Prozess. Es geht um das Mitglied der Geschäftsleitung der betreffendenRegion, denn er betreibt ja das Geschäft vor Ort.

Farsam Farschtschian: Ich verstehe. Unter anderem auch basierend auf Ih-rem Input, analysiere ich eben die Board/Management Prozesse. Ich habeverschiedene Modelle ausgearbeitet, die theoretisch möglich sind.

Thomas Schmidheiny: (zu Modell 1) Ich kenne Herrn Maucher gut aus verschie-denen Gremien. Ein Vorteil ist die Geschwindigkeit: „Ich“ kaufe sofort. Wenn Siesich in einem Markt positionieren möchten, der sich verändert, müssen Sie auchschnell agieren können. Herr Maucher hatte natürlich auch seine Leute um sich.Der CFO-Posten war gerade bei Nestlé eine relativ gut besetzte Stelle, mit HerrnCorti und aber vor allem mit Herrn Domeniconi.


Also die grosse Stärke ist Geschwindigkeit. Was Herrn Maucher auszeichnet –und auch ich habe versucht das zu leben – ist, dass er trotz all den Erfolgen be-scheiden geblieben ist. Ihm hat man es einfach geglaubt. Er ist glaubwürdig undbescheiden geblieben. Er ist nicht grössenwahnsinnig geworden.

Nachteil gibt es für mich nur einen: Wenn er falsch akquiriert, wo ist die Bestra-fung? Es gibt natürlich den Kapitalmarkt. Aber ein Unternehmen wie Nestlé kannviel wegstecken.

Dieses Modell birgt ein hohes Risiko aber auch hohen Erfolg, wenn Sie dienotwendige Persönlichkeit haben.

Vielleicht gibt es noch eine Schwäche: Bei diesem Modell trainieren Sie keineLeute für Akquisitionen. Bei der Holderbank kann jedes Mitglied der Konzern-leitung Akquisitionen durchziehen, und zwar integral. Bei Modell 1 hingegentrainieren Sie die Crew nicht. Das finde ich extrem schade. Denn die Leute hättendann eine grosse Erfahrung, wie man Akquisitionen angeht.

Nehmen Sie die Japaner als Beispiel: Bis die Japaner sich nur einig waren, wassie wollten, waren wir schon längstens durch. Die Japanische Zementindustrie hatkeine einzige Position in Asien gekauft. Wir sind ihnen zuvorgekommen.

Farsam Farschtschian: Ich möchte nun zum anderen Extrem der Modelle gehen,Modell 6): Der Board entschliesst alleine und lässt den CEO nur umsetzen. DieIdee hier ist, den CEO einzudämmen.

Thomas Schmidheiny: Das müssen Sie erwähnen, nur schon der SystematikWillens. Aber das funktioniert in der Realität nicht, da Sie hier nicht führen können.Der CEO fühlt sich übergangen und steht im Regen.

Ich kann mir nicht vorstellen, dass das funktioniert. Das kann es geben. Zum Bei-spiel haben Markus Ackermann, der jetzt CEO ist, und ich vor 10 oder 15 Jahrenin Mexiko mit Cemex über einen globalen Merger diskutiert. Die erste Runde habeich ganz allein gemacht in Monterrey, weil ich die Person kannte und er mich einge-laden hatte. Dann wäre die ganze Industrie aufgeräumt. Sie gaben damals Signale,dass sie nach so etwas suchen. Wir haben drei Gesprächsrunden geführt. Wenn derMerger gekommen wäre, hätten mindestens drei oder vier unserer Leute gesagt, dasssie nicht mitmachen würden.

Der Merger ist dann auch gescheitert, weil die gesagt haben: „I buy you and I runthe business“. Da habe ich abgelehnt.

Das wäre ein Fall, bei dem wir das unter Ausschluss des VR gemacht haben, nurder Chairman und quasi CEO, also unter Ausschluss der gesamten Öffentlichkeit.

Das hätte einen riesigen Schock gegeben und zu einer Abwanderung des Kadersgeführt. Die Mexikaner haben eine ganz andere Kultur.

In diesem Fall, wenn Sie zwei Firmen einfach zusammenbauen, ist dieses Modellmöglich. Dann kann es sein, dass Sie so vorgehen müssen. In der Geschichte derSchweiz gibt es aber wahrscheinlich keinen solchen Fall.

Wenn persönliche Kontakte involviert sind und es sich um eine Fusion handelt,dann kann es klappen. Dann müssen Sie allerdings den besseren CEO der beidenFirmen nehmen und einer muss gehen.


Farsam Farschtschian: Meine theoretische Überlegung dahinter ist, dass immerUmsatz in den Incentives und Remuneration Systeme vorkommen. Somit mussder CEO Umsatz generieren, umso mehr er auch jung, machthungrig und erfolgs-aspirierend ist. Daher muss der CEO eine Strategie führen, bei der er Umsatzmacht. Akquisitionen sind hier ein treibender Motor. Bei diesem Modell umgehtman das.

Thomas Schmidheiny: Das ist eigentlich schlimm. Bei Holcim ist es EBITA-gesteuert.

Farsam Farschtschian: Aber EBITA ist ja auch Umsatz minus Kosten.

Thomas Schmidheiny: Ja, aber immerhin sind hier die Margen involviert.Im Endeffekt geht es in einer Unternehmung um die Frage: Hat das Unternehmen

eine Akquisitionskultur oder ist die Akquisitionstätigkeit eine Ausnahme?Übrigens, einer der grössten Gegner von Akquisitionen ist Herr Hayek. Er hat

ganz wenige Akquisitionen gemacht, zum Beispiel hat er ein Paar Luxusuhrenüber die Swatch gekauft. Denn er hat jeweils soviel reparieren müssen, dass erschliesslich zu dem Schluss kam, dass Akquisitionen nicht gut funktionieren.

So wächst die Swatch aus sich hinaus, aus eigener Kraft, durch Innovation. Dannmusste er eben diese Luxusuhren kaufen, das ist klar, und er hat es gut gemacht.Aus Omega hat er wieder etwas Geniales gemacht.

Farsam Farschtschian: Um nochmals auf die Remuneration zurückzukommen:Gibt es bei Ihnen im Board einen HR-Spezialisten, oder werden die ManagementIncentives von der Remuneration Committee festgesetzt ohne HR Expertise?

Thomas Schmidheiny: Das ist relativ einfach. Es gibt einen Vertrag, der ausge-handelt ist zwischen der Konzernleitung und dem Nomination and CompensationCommittee. Vielleicht muss der angepasst werden und dann wird dies in diesemKomitee diskutiert und wenn es nötig ist, wird ein ad hoc Experte bei gezogen.Aber der Grundvertrag existiert und der ist gut.

In der Februarsitzung werden die Boni vom Vorjahr ausbezahlt über konsolidierteZahlen und dabei wird nicht lange gerechnet. Das ist also ein schneller Prozess. EinDrittel der Bewertung ist aber durch persönliche Ziele festgesetzt.

Farsam Farschtschian: Um nochmals auf die Modelle, oder genauer gesagt aufIhr Modell zurückzukommen: Sie haben also die Konzernleitung auch in denAkquisitionsprozess involviert, damit sie dahintersteht und somit auch die Umset-zung der Akquisition durchführt. Wie sieht es dann bei der Implementierung aus?Sie haben dann den VR, CEO und Head of Regions, die ja auch dabei sind . . .

Thomas Schmidheiny: Bei der Implementierung sind nur die Head of Regionsinvolviert. Der regionalzuständige der Konzernleitung macht die Umsetzung. EinTeil seines Bonus ist auch hier verankert. Er rapportiert natürlich an den CEO.


Farsam Farschtschian: Und der CEO informiert dann den Board.

Thomas Schmidheiny: Richtig. Er informiert den Board, aber auch die Regional-zuständigen der Konzernleitung. Denn mindestens zwei mal pro Jahr (der Boardtrifft sich 7-8mal) findet das Meeting auch mit den Regional Heads statt.

In zwei bis drei Stunden berichten diese dann dem Board direkt über die jewei-ligen Regionen, die Probleme, das Potential, die Integration von gekauften Firmen,etc. Während diesen Meetings frage ich regelmässig, wie die Akquisitionen laufen.So werden diese Leute direkt ausgefragt und der CEO sitzt ebenfalls am Tisch.

Die Kontrollmechanismen sind so sehr etabliert, durch die direkte Berichterstat-tung aus den Regionen.

Bei grossen Akquisitionen, zum Beispiel „Aggregated Industries“ gibt es ein se-parates Thema im Board, “Integration of Aggregated Industries in Holcim”, mit demIntegration Team. Das sind definierte Köpfe. Während eines ganzen Jahres musstedieses Team bei jeder Sitzung berichten, wie der Fortschritt läuft, bis der Boardsagte, er wisse genug, nun sei es Sache des CEOs.

Bei solchen grossen Sachen braucht es die Überwachung, nur schon auf Grundder Verantwortung gegenüber den Aktionären. Abgesehen davon ist es sehr interes-sant, die Leute in ein Team zu setzen. Es ist spannend, aus welchen Gründen manwen aus welcher Region in ein Team wählt und was für Komitees und Gruppen esgeben soll.

Zu diesem Thema habe ich einen Beitrag zu der Festschrift von Wolfgang Schü-rer geschrieben. Es geht um Risikomanagement. Im philosophischen Teil habe ichversucht, das zu reflektieren.

Bibliography

Achleitner, A. K., & Fingerle, C. H. (2003). Unternehmenswertsteigerung durch managementbuyout. EF Working Paper Series, no. 01-03. München: Technische Universität München.

Ahuja, G., & Katila, R. (2001). Technological acquisitions and the innovation performance ofacquiring firms: A longitudinal study. Strategic Management Journal, 22, 197–220.

Allen, J., Lummer, S., McConnell, J., & Reed, D. (1995). Can takeover losses explain spin-offgains?, Journal of Financial and Quantitative Analysis, 30, 465–485.

Amabile, T., Patterson, C., Mueller, J., Wojcik, T., Odomirok, P., Marsh, M., et al. (2001).Academic-practitioner collaboration in management research: A case of cross-professioncollaboration. Academy of Management Journal, 44(2), 418–431.

Anderson, C. R., & Paine, F. T. (1978). PIMS: A re-examination. Academy of Management Review,3(3), 602–612.

Andrews, K. R. (1980). Directors’ responsibility for corporate strategy. Harvard Business Review,58, 30–42.

Ansoff, H. I. (1981). Corporate strategy: An analytic approach to business policy for growth andexpansion. Harmondsworth: Penguin.

Anson, M. (2004). Trends in private equity in 2004. The Journal of Wealth Management, 7(3),84–92.

Ashby, W. R. (1970). An introduction to cybernetics (5th ed.). London: Chapman & Hall.Auerbach, A. J., & Reishus, D. (1988). The impact of taxation on mergers and acquisitions. In

A. Auerbach (Ed.), Mergers and acquisitions. Chicago: University of Chicago Press.Barkema, H. G., Bell, J. H. J., & Pennings, J. M. (1996). Foreign entry, cultural barriers and

learning. Strategic Management Journal, 17, 151–166.Bathala, C. T., & Rao, R. P. (1995). The determinants of board composition: An agency theory

perspective. Managerial and Decision Economics, 16(1), 59–69.Baumol, W. (1967). Business behavior, value and growth. New York: Harcourt, Brace & World.BBC News. (2007). ‘All Swissair Defendants Cleared’, BBC1, 7th September 2007.Beatty, R., & Zajac, E. (1994). Managerial incentives, monitoring and risk bearing: A study of ex-

ecutive compensation, ownership, and board structure in initial public offerings. AdministrativeScience Quarterly, 39, 313–335.

Becht, M., Bolton, P., & Roell, A. (2002). Corporate governance and control. ECGI – FinanceWorking Paper No. 02/2002, European Corporate Governance Institute.

Bender, C., & Vater, H. (2004). Audit committees – Motor einer ganzheitlichen Unternehmen-süberwachung auch in Deutschland? In H. Vater, C. Bender, & K. Hildebrand (Eds.), CorporateGovernance Herausforderungen an die Management-Kultur (pp. 75–88). Bern: Haupt.

Berger, P., & Ofek, E. (1995). Diversification’s effect on firm value. Journal of FinancialEconomics, 37, 39–68.

Berle, A., & Means, G. (1932). The modern corporation and private property. New York:MacMillan.

243

244 Bibliography

Bettis, R. A. (1981). Performance differences in related and unrelated diversified firms. StrategicManagement Journal, 2, 379–393.

Bettis, R. A., & Hall, W. K. (1982). Diversification strategy, accounting determined risks andaccounting determined return. Academy of Management Journal, 25(2), 254–264.

Biland, S., & Zahn, P. A. (1998). Verwaltungsrat als Gestaltungsrat. Zürich: Weka Verlag.Biland, T. A. (1989). Die Rolle des Verwaltungsrats im Prozess der strategischen Unternehmung:

Führung. Planung, Implementation und Kontrolle von Strategien in der SpitzenorganisationSchweizer Aktiengesellschaften. Unpublished dissertation, University of St. Gallen, St. Gallen.

Bilimoria, D., & Piderit, S. K. (1994). Board committee membership: Effects of sex-based bias.Academy of Management Journal, 37(6), 1453–1477.

Bleicher, K. (1989). Unternehmungsverfassung und Spitzenorganisation: Führung undÜberwachung von Aktiengesellschaften im internationalen Vergleich. Wiesbaden: Gabler.

Böckli, P. (1994). Die unentziehbaren Kernkompetenzen des Verwaltungsrates. Zürich: Schulthess.Böckli, P. (2004). Schweizer Aktienrecht mit Fusionsgesetz, internationalen Rechnungslegungs-

grundsatzen IFRS, Börsengesellschaftsrecht, Konzernrecht und Corporate Governance (3rded.). Zürich: Schulthess.

Boudreaux, G. (2005). Peter Drucker’s continuing relevance for electric cooperatives. ManagementQuarterly, 46(4), 18–32.

Boulton, W. R. (1978). The evolving board: A look at the board’s changing roles and informationneeds. Academy of Management Review, 3(4), 827–837.

Bradley, J. W., & Korn, D. H. (1981). Acquisitions and corporate development. Lexington:Lexington Books.

Bressmer, C., Moser, A. C., & Sertl, W. (1989). Vorbereitung und Abwicklung der Übernahme vonUnternehmen. Stuttgart, Berlin, Köln, Mainz: Kohlhammer.

Brudney, V. (1982). The independent director – Heavenly city or Potemkin village? Harvard LawReview, 95, 597–659.

Buchmann, P. (1976). Organisation der Verwaltungsrate in 20 der grössten Aktiengesellschaftenin der Schweiz. Bern: Haupt.

Bühner, R. (1990). Erfolg von Unternehmenszusammenschlüssen in der Bundesrepublik Deutsch-land. Stuttgart: Schäffer-Poeschel.

Bühner, R. (1991). Grenzüberschreitende Zusammenschlüsse deutscher Unternehmen. Stuttgart:Schäffer-Poeschel.

Cadbury, A. (1992). Report of the committee on the financial aspects of Corporate Governance.London: Gee.

Cannella, A. A., & Hambrick, D. C. (1993). Effects of executive departures on the performance ofacquired firms. Strategic Management Journal, 14, 137–152.

Capron, L., Mitchell, W., & Swaminathan, A. (2001). Asset divestiture following horizontalacquisitions: A dynamic view. Strategic Management Journal, 22, 817–844.

Carpenter, M. A., & Westphal, J. D. (2001). The strategic context of external network ties: Exam-ining the impact of director appointments on board involvement in strategic decision making.Academy of Management Journal, 44(4), 639–660.

Cartwright, S., & Cooper, C. L. (1992). Mergers and acquisitions: The human factor. Oxford:Butterworth-Heinemann.

Chatterjee, S., Lubatkin, M. H., Schweiger, D. M., & Weber, Y. (1992). Cultural differences andshareholder value in related mergers: Linking equity and human capital. Strategic ManagementJournal, 13, 319–334.

Coenenberg, A. G., & Sautter, M. T. (1988). Strategische und finanzielle Bewertung vonUnternehmensakquisitionen. Die Betriebswirtschaft, 48, 691–710.

Comment, R., & Jarell, G. (1995). Corporate focus and stock returns. Journal of FinancialEconomics, 37, 67–87.

Conyon, M. J., Grima, S., Thompson, S., & Wright, P. W. (2001). Do hostile mergers destroy jobs?Journal of Economic Behavior and Organization, 45, 427–440.

Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate governance: Decades of dialogueand data. Academy of Management Review, 28(3), 371–382.

Bibliography 245

Dalton, D. R., Daily, C. M., Johnson, J. L., & Ellstrand, A. E. (1998). Meta-analytic reviewsof board composition, leadership structure, and financial performance. Strategic ManagementJournal, 19(3), 269–290.

Dalton, D. R., Daily, C. M., Johnson, J. L., & Ellstrand, A. E. (1999). Number of direc-tors and financial performance: A meta-analysis. Academy of Management Journal, 42(6),674–686.

Datta, D. K. (1991). Organizational fit and acquisition performance: Effects of post-acquisitionintegration. Strategic Management Journal, 12, 281–297.

Datta, D. K., Pinches, G. E., & Narayanan, V. K. (1992). Factors influencing wealth creation frommergers and acquisitions: A meta-analysis. Strategic Management Journal, 13, 67–84.

Davidson, W. N., Pilger, T., & Szakmary, A. (2004). The importance of board compositionand committee structure: The case of poison pills. Corporate Ownership & Control, 1(3),81–95.

Davis, J. R. II, Schoorman, F. D., & Donaldson, L. (1997). Toward a Stewardship theory ofmanagement. Academy of Management Review, 22(1), 20–47.

Doukas, J., & Travlos, N. G. (1988). The effect of corporate multinationalism on shareholder’swealth: Evidence from international acquisitions. The Journal of Finance, 43, 1161–1175.

Drucker, P. (1974). Management. Tasks, responsibilities, practices. London: Heinemann.Drucker, P. (1981). The five rules of successful acquisition. The Wall Street Journal, Thursday 15

October, 1981.Drucker, P. (1991). The new society. London. (Originalwerk publiziert 1950).Drucker, P. (1993). The new society. New York 1950. New edition, New Brunswick & London

1993.Drucker, P. (2004). The daily Drucker: 366 days of insight and motivation for getting the right

things done. New York: Harper Collins Publishers.ECCH. (2004). Nestlé in 2004. Hyderabad, India: ICFAI Knowledge Center.Economiesuisse. (2002). Swiss code of best practice for corporate governance. Retrieved February

10, 2005, from www.economiesuisse.chEisenhardt, K. (1989). Building theories from case research. Academy of Management Review,

14(4), 532–550.Eisenhardt, K., & Bourgeois, L. J. (1988). Politics of strategic decision making in high-velocity

environments: A midrange theory. Academy of Management Journal, 31, 737–770.Elsner, D. W. (1986). Risiken bei Unternehmensübernahmen in den USA. Zeitschrift für betrieb-

swirtschaftliche Forschung, 38, 317–335.E&Y. (2003/1). Teil 1 Hunter Strategie, E&Y Bericht, Swissair, Detailbericht, Band 2.2.E&Y. (2003/2). Teil 2 Akquisition Flugbetriebe, E&Y Bericht, Swissair, Detailbericht, Band 2.2.E&Y. (2003/3). Teil 3 Akquisition flugnaher Betriebe, E&Y Bericht, Swissair, Detailbericht, Band

2.2.E&Y. (2003/4). Teil A Strategien und Strukturen der SairGroup, E&Y Bericht, Swissair, Unter-

suchungsergebnisse, Band 1.Fama, E., & Jensen, M. (1983). Separation of ownership and control. Journal of Law and

Economics, 88, 279–296.Farschtschian, F. (2004). Closing the funding gap. Doctoral Seminar University of St. Gallen, St.

Gallen.Finkelstein, S., & Hambrick, D. (1987). Managerial discretion: A bridge between polar views on

organizations. In L. Cummings & B. Staw (Eds.), Research in organizational behavior (Vol. 9,pp. 369–406). Greenwich, CT: JAI Press.

Finkelstein, S., & Hambrick, D. (1990). Top-management-team tenure and organizational out-comes: The moderating role of managerial discretion. Administrative Science Quarterly, 35,448–503.

Finkelstein, S., & Mooney, A. C. (2003). Not the usual suspects: How to use board process to makeboards better. Academy of Management Executive, 17(2), 101–113.

www.economiesuisse.ch

246 Bibliography

Forbes, D. P., & Milliken, F. I. (1999). Cognition and corporate governance: Understanding boardsof directors as strategic decision-making groups. Academy of Management Review, 24(3),489–505.

Forstmoser, P. (1996). Schweizerisches Aktienrecht. Bern: Stampfli.Fowler, K. L., & Schmidt, D. R. (1989). Determinants of tender offer post-acquisition financial

performance. Strategic Management Journal, 10, 339–350.Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.Gaughan, P. A. (2007). M&A and corporate restructurings. New York: Wiley.Gerpott, T. J. (1993). Integrationsgestaltung und Erfolg von Unternehmensakquisitionen. Stuttgart:

Schäffer-Poeschel.Gertsen, M. C., Soderberg, A. M., & Torp, J. E. (1998). Different approaches to the understanding

of culture in mergers and acquisitions. In M. C. Gertsen, A. M. Soderberg, & J. E. Torp (Eds.),deGruyter studies in organizations, Bd. 85: International management, organization and policyanalysis (pp. 17–38). Berlin, New York.

Ghoshal, S., & Haspeslagh, P. (1990). The acquisition and integration of Zanussi by Electrolux.European Management Journal, 8(4), 414–433.

Gilbert, M., Ruigrok, W., & Wicki, B. (2008). Research notes and commentaries: What passes asa rigorous case study? Strategic Management Journal, 29, 1465–1474.

Golden, B., & Zajac, E. (2001). When will boards influence strategy? Inclination x power =strategic change. Strategic Management Journal, 22(12), 1087–1111.

Gort, M. (1969). An economic disturbance theory of mergers. Quarterly Journal of Economics,83, 624–642.

Hambrick, D., & Mason, P. (1984). Upper Echelons: The organization as a reflection of its topmanagers. Academy of Management Review, 9, 193–206.

Hambrick, D., Seung, C. T., & Chen, M. J. (1996). The influence of top management teamheterogeneity on firms’ competitive moves. Administrative Science Quarterly, 41, 659–684.

Hart, O. (1995). Corporate governance: Some theory and implications. The Economic Journal,105, 678–689.

Haspeslagh, P. C., & Jemison, D. B. (1991). Managing acquisitions: Creating value throughcorporate renewal. New York: The Free Press.

Hayes, R. H. (1979). The human side of acquisitions. Managment Review, 68, 41–46.Hayward, M. A. (2002). When do firms learn from their acquisition experience? Strategic

Management Journal, 23, 20–40.Hayward, M. L. A., & Hambrick, D. C. (1997). Explaining the premiums paid for large

acquisitions: Evidence of CEO hubris. Administrative Science Quarterly, 42, 103–127.Heidrick & Struggles. (2003). Is your board fit for the global challenge? Corporate governance in

Europe. Retrieved September 29, 2004, from www.heidrick.comHenderson, B. (1979). Henderson on corporate strategy. Cambridge: Abt Books.Hermalin, B., & Weisbach, M. (2001). Boards of directors as an endogenously determined insti-

tution: A survey of the economic literature. Cambridge, MA, USA. NBER Working Paper no.W8161.

Heriott, R., & Firestone, W. (1983). Multisite qualitative policy research: Optimizing descriptionand generalizability. Educational Researcher, 12, 14–19.

Hilb, M. (2002a). Transnationales Management der Human-Ressourcen. Das 4-P Modell desGlocalpreneuring. Neuwied: Luchterhand.

Hilb, M. (2002b). Integrated board management in international companies. St. Gallen: Universityof St. Gallen.

Hilb, M. (2004). Strategic and integrated board management. Doctoral Seminar Paper, SummerSemester 2004, St. Gallen.

Hilb, M. (2005). New corporate governance. Heidelberg: Springer.Hillman, A. T., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency

and resource dependence perspectives. Academy of Management Review, 28(3), 383–396.

www.heidrick.com

Bibliography 247

Hilmer, F. G., & The Independent Working Party into Corporate Governance. (1993). Strictlyboardroom: Improving governance to enhance company performance. Melbourne: BusinessLibrary.

Hitt, M. A., Hoskisson, R. E., Ireland, R. D., & Harrison, J. S. (1991). Effects of acquisitions onresearch-and-development inputs and outputs. Academy of Managment Journal, 34, 693–706.

Hitt, M., Hoskisson, R., & Kim, H. (1997). International diversification: Effects on innovation andfirm performance in product-diversified firms. Academy of Management Journal, 40, 767–798.

Hofstede, G. (1980). Culture’s consequences: International difference in work related values.Beverly Hills: Sage Publications.

Hughes, A., Mueller, D. C., & Singh, A. (1980). Hypothesis about mergers. In D. C. Mueller(Ed.), The determinants and effects of mergers. An international comparison. Cambridge:Oelschlaeger, Gunn & Hain.

Humpert, F. W. (1992). Unternehmensakquisitionen – Erfahrungen beim Kauf von Unternehmen.In W. Busse v. Colbe & A. G. Coenenberg (Hrsg.), Unternehmensakquisition und Un-ternehmensbewertung (S. 357–373). Stuttgart.

Huse, M. (2005). Accountability and creating accountability: A framework for exploring be-havioural perspectives of corporate governance. British Journal of Management, 16, 65.

Hyland, M. M., & Marcellino, P. A. (2002). Examining gender on corporate boards: A regionalstudy. Corporate Governance: The International Journal of Effective Board Performance, 2(4),24–31.

IHT. (2007, January 15). Swissair executives assert innocence at first day of Switzerland’s biggestcorporate trial. International Herald Tribune.

Insite. (2010). Independent firms to dominate M&A scene in 2010. By Stacy Schultz, FinancialPlanning. January 8, 2010. Available at www.financial-planning.com

Jarillo, J. C. (2003). Strategic logic. New York: Palgrave MacMillan.Jemison, D. B., & Sitkin, S. B. (1986). Corporate acquisitions: A process perspective. Academy of

Management Review, 11(1), 145–163.Jensen, M. C. (1984). Takeovers: Folklore and science. Harvard Business Review, 62(6), 109–121.Jensen, M. C. (1986a). Agency costs of free cash flow, corporate finance, and takeovers. American

Economic Review, 76, 323–329.Jensen, M. C. (1986b). The takeover controversy: Analysis and evidence. Midland Corporate

Finance Journal, 4(2), 6–27.Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behaviour, agency cost, and

ownership structure. Journal of Financial Economics, 3, 305–360.Jensen, M. C., & Ruback, R. S. (1983). The market for corporate control: The scientific evidence.

Journal of Financial Economics, 11, 5–50.Judge, W., & Zeithaml, C. (1990). An empirical examination of the board’s involvement in the

strategic decision making process. Paper presented at the Academy of Management Meeting.Keller, H. U. (2003). The determinants and effects on interlocking directorships and board

composition: An empirical analysis of corporate governance in Switzerland. Unpublisheddissertation, University of St. Gallen, St. Gallen.

Kesner, I. F. (1988). Directors’ characteristics and committee membership: An investigation oftype, occupation, tenure, and gender. Academy of Management Journal, 31(1), 66–84.

King, D. R., Dalton, D. R., Daily C. M., & Covin, J. G. (2004). Meta-analysis of postacquisitionperformance: Indications of unidentified moderators. Strategic Management Journal, 25(2),187–200.

Kitching, J. (1973). Acquisitions in Europe, causes of corporate successes and failures. BusinessInternational, 2, 20–35.

Klein, A. (1998). Firm performance and board committee structure. Journal of Law & Economics,41(1), 275–303.

Kogut, B., & Zander, U. (1996). What firms do? Coordination, identity, and learning. OrganizationScience, 7, 502–518.

Kootz, E. (1996). Structural holes, market constraints, and embedding strategies: An empiricalanalysis of mergers & acquisitions in Germany. Hallstadt: Rosch-Buch.

www.financial-planning.com

248 Bibliography

Krystek, U. (1992). Unternehmenskultur und Akquisition. Zeitschrift für Betriebswirtschaft, 62,539–565.

Kusewitt, J. B. (1985). An exploratory study of acquisition factors relating to performance.Strategic Management Journal, 6, 151–169.

Lambrecht, B. M., & Steward C. M. (2007). A theory of takeovers and disinvestment. Journal ofFinance, 62(2), 809–845.

Lang, L. H. P., & Stulz, R. M. (1994). Tobin’s Q, corporate diversification and firm performance.Journal of Political Economy, 102, 1248–1280.

Lawrence, B. S. (1997). The black box of organizational demography. Organization Science, 8(1),1–22.

Leonard-Barton, D. (1990). A dual methodology for case studies: Synergistic use of a longitudinalsingle site with replicated multiple sites. Organization Science, 1(3), 248–266.

Lorsch, T. W., & MacIver, E. (1989). Pawns or potentates: The reality of America’s corporateboards. Boston: Harvard Business School Press.

Lubatkin, M., & O’Neill, H. M. (1987). Merger strategies and capital market risk. AmericanManagement Journal, 30, 665–684.

Luechinger, R. (2001). Der Fall der Swissair. Zuerich: Bilanz.Mace, M. L. G. (1971). Directors: Myth and reality. Boston: Division of Research Graduate School

of Business Administration Harvard University.Macharzina, K., & Wolf, J. (2005). Unternehmensführung: das internationale Managementwissen:

Konzepte – Methoden – Praxis. Wiesbaden: Gabler.Macus, M. (2002). Towards a comprehensive and dynamic perspective on boards: Theory

development and conceptual development. In Doctoral thesis Nr. 2677. Bamberg: Difo DruckGmbH.

Macus, M. (2003). Towards a comprehensive theory of boards. Dissertation, University of St.Gallen, St. Gallen.

Makadok, R. (2001). Towards a synthesis of the resource-based and dynamic capability views ofrent creation. Strategic Management Journal, 22, 387–401.

Malik, F. (2002). Die Neue Corporate Governance. Frankfurt am Main: Frankfurter AllgemeineBuch.

Malik, F. (2003, März). Fragen und Antworten. malik on management – m.o.m. letter.Malik, F. (2007). Management: Das A und O des Handwerks. Frankfurt am Main: Campus Verlag.Malik, F. (2008). Unternehmenspolitik und Corporate Governance. Frankfurt am Main: Campus

Verlag.Manne, H. G. (1965). Mergers and the market for corporate control. Journal of Political Economy,

73, 110–120.Marris, R. (1963). A model of the “managerial” enterprise. Quarterly Journal of Economics, 77,

185–209.Maucher, H. (1992). Marketing ist Chefsache. Düsseldorf: Econ Verlag.Maucher, H. (2007). Management Breviary: A guideline to corporate success. Frankfurt am Main:

Campus Verlag Gmbh.McCann, J. E., & Gilkey, R. (1988). Joining forces, creating and managing successful mergers and

acquisitions. Englewood Cliffs, NJ: Prentice-Hall.Milgrom, P., & Roberts, J. (1995). Complementarities and fit: Strategy, structure, and organiza-

tional change in manufacturing. Journal of Accounting and Economics, 19, 179–205.Milliken, F. J., & Martins, L. L. (1996). Searching for common threads: Understanding the multiple

effects of diversity in organizational groups. Academy of Management Review, 21(2), 402–433.Minichilli, A., & Hansen, C. (2004, May 5–8). The board roles involvement at different life cycle

stages. A contingency perspective. Paper presented at the EURAM, SI. Andrews.Mintzberg, H. (1983). Power in and around organizations. Englewood Cliffs, NJ: Prentice-Hall.Mintzberg, H., Raisinghani, D., & Andre, T. (1976). The structure of “unstructured” decision

processes. Administrative Science Quarterly, 21, 246–275.Mizruchi, M. S. (1996). What do interlocks do? An analysis, critique, and assessment of research

on interlocking directories. Annual Review of Sociology, 22(1), 271–287.

Bibliography 249

Monks, R., & Minow, N. (2001). Corporate governance (2nd ed.). Oxford: Blackwell Publishers.Morck, R., Shleifer, A., & Vishny, R. W. (1990). Do managerial objectives drive bad acquisitions?

Journal of Finance, 45, 31–48.Mueller, D. C. (1980). The determinants and effects of mergers: An international comparison.

Cambridge, MA: Oelgeschlager, Gunn & Hain.Mueller, D. C. (1987). The corporation: Growth, diversification and mergers. In A. Jacquemin

(Hrsg.), Theory of the firm and industrial organization, Chur et al. London: Harwood AcademicPublishers.

Murray, A. (1989). Top management group heterogeneity and firm performance. StrategicManagement Journal, 10, 125–141.

Nahavandi, A., & Malekzadeh, P. (1988). Acculturation in mergers and acquisitions. Academy ofManagement Review, 13, 79–90.

Naman, J. L., & Slevin, D. P. (1993). Entrepreneurship and the concept of fit: A model andempirical tests. Strategic Management Journal, 14, 137–153.

Neary, J. (2007). Empirical research on the resource-based view of the firm: An assessment andsuggestions for future research. Strategic Management Journal, 28(2), 121–146.

Nelson, R. R., & Winter, S. G. (1982). An evolutionary theory of economic change. Cambridge,MA: Harvard University Press.

NZZ. (1998). Honegger als Swissair Group Präsident nominiert, 8.10.1998.NZZ. (2001/1). Rücktritt Philippe Bruggisser, Neuer Zürcher Zeitung, 24.1.2001.NZZ. (2001/2). Wir stehen zu unserer Verantwortung, Neuer Zürcher Zeitung, 10.3.2001.NZZ. (2001/3). Nicht durchwegs schlüssige Swissair Bilanzen, Neuer Zürcher Zeitung, 16.3.2001.NZZ. (2001/4). Keine Schwachstellen?, Neuer Zürcher Zeitung, 16.3.2001.NZZ. (2001/5). Kühles Agieren Cortis, Neuer Zürcher Zeitung, 3.4.2001.NZZ. (2001/6). Das Fiasko der Swissair in der Retrospektive, Neuer Zürcher Zeitung, 23.4.2001.NZZ. (2001/7). Das Debakel, Neuer Zürcher Zeitung, 3.10.2001.NZZ. (2001/8). Nationale Fluggesellschaften – eine Realität, Neuer Zürcher Zeitung, 7.11.2001.NZZ. (2002). Wann wird aus Networking Filz, Neuer Zürcher Zeitung, 23.11.2002.Oliver, R. W. (2000). The board’s role: Driver’s seat of rubber stamp? Journal of Business Strategy,

21(4), 7–9.O’Neal, D., & Thomas, H. (1996). Developing the strategic board. Long Range Planning, 29(3),

314–327.Paine, F. T., & Power, D. J. (1984). Merger strategy: An examination of Drucker’s five rules for

successful acquisitions. Strategic Management Journal, 5, 99–110.Pearce, J. A. II, & Zahra, S. A. (1991). The relative power of CEOs and boards of

directors: Associations with corporate performance. Strategic Management Journal, 12,135–153.

Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource based view. StrategicManagement Journal, 14, 179–191.

Pettigrew, A. (1992). On studying managerial elites. Strategic Management Journal, 13(8),163–182.

Pfeffer, J. (1972). Size and composition of corporate board of directors: The organization and itsenvironment. Administrative Science Quarterly, 7, 218–229.

Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependenceperspective. New York: Harper & Row.

Pic, J-J. (1997). A glance at Corporate Governance around the world. Amsterdam: SpencerStuart.Porter, M. (1980). Competitive strategy. New York: The Free Press.Porter, M. (1987). From competitive advantage to corporate strategy. Harvard Business Review,

65, 43–59.Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business

Review, 68, 79–91.Probst, G., & Mecier, J. (1992). Observing Swissair’s culture. Discussion Paper 11, Université de

Genève, Genève.

250 Bibliography

Provan, J. (1980). Board power and organizational effectiveness among human service agencies.Academy of Management Journal, 23, 221–236.

Puempin, C. (1990). Meilensteine im Management. Basel: Helbling und Lichtenhahn.Rappaport, A. (1998). Creating shareholder value (2nd ed.). New York.Ravenscraft, D. J. (1987). The 1980’s merger wave: An industrial organization perspective. In

L. E. Browne & E. S. Rosengren (Eds.), The merger boom (pp. 17–37). Boston: Federal ReserveBank of Boston.

Ravenscraft, D. J., & Scherer, F. M. (1987a). Life after takeover. The Journal of IndustrialEconomics, 16(2), 147–156.

Ravenscraft, D. J., & Scherer, F. M. (1987b). Merger, sell-offs, and economic efficiency. Washing-ton, DC: The Brookings Institution.

Rhoades, D. L., Rechner, P. L., & Sundaramurthy, C. (2000). Board composition and financial per-formance: A meta-analysis of the influence of outside directors. Journal of Managerial issues,12(1), 76–91.

Richard, O., & Shelor, R. (2002). Linking top management team age heterogeneity to firm per-formance: Juxtaposing two mid-range theories. The International Journal of Human ResourceManagement, 13, 958–974.

Roberts, J., McNulty, T., & Stiles, P. (2005). Beyond agency conceptions of the work of the non-executive directors: Creating accountability in the boardroom. British Journal of Management,16(1), 5–26.

Roll, R. (1986). The hubris hypothesis of corporate takeovers. Journal of Business, 59, 197–216.Rosenstein, J. (1987). Why don’t U.S. boards get more involved in strategy? Long Range Planning,

20, 20–34.Ruigrok, W., Peck, S., & Van del’ Linde, C. (2004). Strange bedfellows: Foreigners on top

management teams and boards. Unpublished manuscript, St. Gallen.Rumelt, R. P. (1974). Strategy, structure and economic performance. Cambridge, MA: Harvard

University Press.Rumelt, R. P. (1982). Diversification strategy and profitability. Strategic Management Journal, 3,

359–369.Salter, M., & Weinhold, W. (1982). What lies ahead for merger activities in the 1980s. Journal of

Business Strategy, 2(4), 66–99.Sanders, W. M. G., & Carpenter, M. A. (1998). Internationalization and firm governance: The roles

of CEO compensation, top team composition, and board structure. Academy of ManagementJournal, 41(2), 158–178.

Scherer, F. M., & Ross, D. (1990). Industrial market structure and economic performance. Boston:Houghton Mifflin.

Schmidt, D. R., & Fowler, K. L. (1990). Post-acquisition financial performance and executivecompensation. Strategic Management Journal, 11, 559–569.

Schumpeter, J. A. (1942). Capitalism, socialism and democracy. New York: Harper.Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(2),

737–783.Singh, H., & Montgomery, C. (1987). Corporate acquisition strategies and economic performance.

Strategic Management Journal, 8, 377–386.Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. Online

publication. Available at www.econlib.orgSmith, K. G., Smith, K. A., Olian, D., Sims, H. P., O’Bannon, D., & Scully, J. A. (1994). Top

management team demography and process: The role of social integration and communication.Administrative Science Quarterly, 39, 412–438.

Steiner, P. O. (1975). Mergers: Motives, effects, politics. Ann Arbor, MI: University of MichiganPress.

Stiles, P., & Taylor, B. (2001). Boards at work: How directors view their roles and responsibilities.Oxford: Oxford University Press.

Straub, T. (2006). Reasons for frequent failure in mergers and acquisitions, a comprehensiveanalysis. Wiesbaden: Deutscher Universitäts Verlag, GWV Fachverlage GmbH.

www.econlib.org

Bibliography 251

Swissair. (1992). Annual-Report, 1991. Zuerich: Swissair.Swissair. (1994). Annual Report, 1993. Zuerich: Swissair.Swissair. (1995). Annual Report, 1994. Zuerich: Swissair.Swissair. (1996). Annual Report, 1995. Zuerich: Swissair.Swissair. (1997). Annual Report, 1996. Zuerich: Swissair.Swissair. (1999). Annual Report, 1998. Zuerich: Swissair.Swissair. (2000). Annual Report, 1999. Zuerich: Swissair.Swissair. (2001). Annual Report, 2000. Zuerich: Swissair.SWX. (2002). Directive on information relating to corporate governance. Retrieved January 10,

2005, from www.swx.comTashakori, A., & Boulton, W. (1985). A look at the board’s role in planning. The Journal of

Business Strategy, 3, 64–70.Teece, D. J. (1987). Profiting from technological innovation: Implications for integration, collabo-

ration, licensing and public policy. In D. J. Teece (Ed.), The competitive challenge. Strategiesfor industrial innovation and renewal (pp. 185–219). Cambridge, MA: Ballinger.

Third Way for Germany. (2005, February 6). Business Week.Trautwein, F. (1990). Merger motives and merger prescriptions. Strategic Management Journal,

11, 283–295.Tricker, R. I. (1984). Corporate governance: Practices, procedures, and powers in British

companies and their boards of directors. Aldershot: Gower Press.UNCATD. (2000). Cross-border mergers and acquisitions. World investment report. New York:

United Nations.UNCTAD. (2002). World investment report 2002. Transnational Corporations and Export Compet-

itiveness. New York; Geneva: UN.Vaara, E. (1993). Finnish-Swedish mergers and acquisitions: An empirical analysis of success.

Helsinki University of Technology, Industrial Economics and Industrial Psychology, ReportNo. 147, Otaniemi.

Vafeas, N. (2003). Length of board tenure and outside director independence. Journal of BusinessFinance & Accounting, 30(7/8), 1043–1064.

Vance, S. C. (1983). Corporate leadership: Boards, directors, and strategy. New York: McGraw-Hill.

Van Hamel, J. A., van Wijk, R. E., de Rooij, A. J. R., & Bruel, M. (1998). Boardroomdynamics – lessons in governance. Corporate Governance: An International Review, 6(3),193–201.

Venkatraman, N., & Camillus, J. C. (1984). Exploring the concept of “fit” in strategic management.Academy of Management Review, 9, 513–525.

Vermeulen, F., & Barkema, H. (2001). Learning through acquisitions. Academy of ManagementJournal, 44, 457–476.

Very, P., Lubatkin, M., Calori, R., & Veiga, J. (1997). Relative standing and the performance ofrecent European mergers. Strategic Management Journal, 18, 593–615.

Walsh, J. P., & Seward, J. K. (1990). On the efficiency of internal and external corporate controlmechanisms. Academy of Management Review, 15, 421–458.

Weber, Y., Shenkar, O., & Raveh, A. (1996). National versus corporate cultural fit in mergers andacquisitions: An exploratory study. Management Science, 42, 1215–1227.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5,171–180.

Wiersema, M., & Bantel, K. (1992). Top management team demography and corporate strategicchange. Academy of Management Journal, 35, 91–121.

Williamson, O. (1984). Corporate governance. Yale Law Journal, 93, 1197–1230.Williamson, O. (1985). Employee ownership and internal governance. Journal of Economic

Behaviour and Organization, 6, 243–245.Yin, R. (1994). Case study research: Design and methods. London: Sage.Yin, R. (2009). Case study research: Design and methods. New York: Sage Publications Inc.

www.swx.com

252 Bibliography

Zahra, S., & Pearce, J. (1989). Boards of directors and corporate financial performance: A reviewand integrative model. Journal of Management, 15, 291–344.

Zahra, S., & Pearce, J. (1992). Board composition from a strategic contingency perspective.Journal of Management Studies, 29, 411–438.

Zahra, S., & Schulte, W. (1992). Four modes of board of directors’ participation in corporatestrategy. American Business Review, 10(1), 78–87.

Index

AAcquisitions, 130

business strategy vs financial, 133–134common unity, 29developing strategy, 135factors for success, 1–2, 130planning vs reacting, 134–135providing HR to target, 144research focus, 1–2timing, 134

American corporate governance, 33Anonymous sources, 53, 54

BBest practice recommendations, 153

acquisition targets, 156–157active board on strategy, 156added value approach, 154–155board/management relationship, 162–164CEO is key, 160full disclosure, 158global outlook, local specificity, 155interests served, 153–154limiting CEO power, 159management proposal, 157–158special expertise, 155–156succession plan for CEO, 160–161target integration, 157–158

Board composition, 40–41diversity, 40–41independence, 40interlocks, 40–41size, 40

Board of Directorsrole, 33, 37

Board processes, 41–42Board stances

active, 163entrepreneurial, 163knowledge, 162Nestle, 164representative, 162Swissair, 163

Board structure, 38–40audit committee, 39–40committees, 39–40one-tier, 38–39two-tier, 38–39

Bornmann, Bettina, 55Boutellier, Roman, 54Bruggisser, 100, 102, 105

dismissed, 107failure to provide HR, 144Hunter Strategy, 106–107

CCadbury Report, 6Case studies, 2–3

period of focus, 59CEO is key, 160Corporate governance

agency perspective, 33–34future challenges, 170–173history, 33inadequacies of law, 173role of board, 170–173role of CEO, 171–173stakeholder/shareholder value theory,

35third approach, 36

Corti, Mario, 113Criticism of Maucher, 78Current corporate governance

Maucher, Helmut, 170

253

254 Index

DDammisch, Peter, 55de Kalbermatten, Bruno, 54

acquisition strategy, 94advisory committee, 71–72monitoring CEO, 72post-merger integration, 93

de Weck, Philippe, 54board committee, 65preparation for meetings, 78

Drucker, Peter, 1–2analysis of casestudies using principles,

146–148discussion of principles, 27first principle & case studies, 146–147principles, 1–2purpose of a company, 36six principles, 27success factors, 27

Dubs, Rolf, 54

EEnvironment, 1, 147–148

board/CEO relationship, 148board’s role, 148–149

Ernst & Young ReportBruggisser, 105–106Corti, 104–106critical remarks, 98failure to provide HR to targets, 144historical background, 97Honegger, 108perception of key figures, 108

FFarschtschian, Farsam, 20Francheschetti, Alberto, 55

GGaps in literature, 48Geginat, Joost, 56Gerber, Fritz, 54

HHilb, Martin, 56

Glocal Approach, 155Hilb’s “integrated corporate governance

perspective”, 42first aspect, 43preconditions, 43second aspect, 43third aspect, 43–44

Hofstetter, Karl, 54

performance measurement, 101Hofstetter, Philippe, 54Honegger, 104Hostettler, Stephan, 56Hunter Strategy

changing strategy, 115–116engineering & approval, 117–119execution, 118failure, 120management resources, 120model & execution, 114–117warnings, 119–120

LLoepfe, Arthur, 55, 102

acquisitions, 120Long-term strategy, 3

MMacus, Marc, 56Malik, Fredmund, 56

board independence, 157customer centred approach, 36–37logic of mergers, 133–134Swissair strategy, 101

Maucher, Helmut, 54acquisition size, 139–140acquisition strategy, 92–93acquisitions & set corporate strategy, 78–79acquisitions to enhance market presence,

79added value approach, 154–155advisory committee, 71–72annual strategy papers, 72–74board committee, 72board composition, 71board culture, 65cashflow, 67CEO, 95, 164committees, 64–65common unity, 142–143communication with board, 83, 87communication with stakeholders, 93criticism of him, 78culture of leadership, 63diversification, 80exact aims, 67external consultants, 65financial analysts, 82–83five acquisition principles, 94function of CEO/chairman, 63gradual integration, 92grounds for dismal, 70

Index 255

importance of personality, 95leadership, 94limits of CEO, 78–79long-term strategy, 94, 134member selection, 66monitoring CEO, 79monthly books, 67organic growth, 9513 pages, 86personality over knowledge, 66price & value, 91, 138–139priority of CEO, 69profits, 83regulations, 173reign, 68–69reinforcing product groups through

acquisitions, 79–80reporting to board, 87respect & trust, 70restructuring, 63role of board, 70Rowntree offer, 72shareholder value, 82social aspects of M&A, 87, 93strategy, 157streamlining production, 82success of acquisitions, 68–69Swissair, 101Swiss boards, 45–46ultimate responsibility, 95understanding target, 141vanity, 172water strategy, 80

McKinsey & Company, 117, 119board liability, 129Shield Scheme, 119

Mergers & Acquisitions, 9agency theory, 24–25changing nature, 167–170concentric merger, 6conglomerate merger, 6credit crunch, 11current corporate governance structures,

169–170definition, 5–6disturbance theory, 25–26efficiency theories, 18–21empire-building theories, 23–24enhanced competition, 20–21explanations for failure & success,

16–17failure, 14financial aspects, 81–83

future, 174history, 167–170history of research, 15–17horizontal merger, 6impetus, 10liquidity, 11monopoly power theory, 21–22post-merger management, 14–15pre-merger management, 12–13process theory, 25product group equilibrium, 180speculation & raider theories, 22success indicators, 15–16theories on motives, 17–26top market position, 80–81valuation theory, 22–23vertical merger, 6

Moelleney, Matthias, 55Bruggisser, 110–111lack of HR considerations, 144Swissair board, 119

Moser, Sepp, 55Mueller-Stewens, Guenter, 56

NNestle

acquisition history, 69–78acquisition strategy, 78–79adapting strategy, 139aims of acquisition, 68assessment of performance, 64board composition & size, 62board culture, 65board preparations, 149–150board’s role, 148–149boycott, 67Brabeck-Letmathe, 61–62branding, 80Bulcke, Paul, 62Coca-Cola joint venture, 68committees, 64–65compensation, 66contracts, 71corporate governance, 63–64creating strategic direction, 63decentralisation, 67description of firm, 60enhancing acquired firm, 140–142five acquisition principles, 94four business rules, 137historical background, 60–61Maucher’s reign, 66–68meetings, 65

256 Index

Nestle (cont.)member selection, 66monitoring acquisitions, 139Nescafe, 68providing HR to target, 144respect for target, 143restructuring, 63, 68role of chairman-CEO, 62–63Rowntree offer, 72soft factors, 83–97strategic business groups, 63visible opportunities for advancement,

146WWI, 60WWII, 81, 98

QQualitative method, 3

RResearch gap, 2–3Research goals, 3–4Research limitations, 174Research methodology, 51–57

case studies, 51company sources, 53E & Y report, 53interviews, 51–52limitations, 56–57quantitative vs qualitative, 51

Research population, 53Research questions, 48–49Role of the board, 2

SSchaerer, Heinz, 56Schenker, Urs, 56Schmidheiny, Thomas, 55

Maucher’s modesty, 72Schorderet, George, 108Schuerer, Wolfgang, 55Suggestions for future research, 174Swissair

9/11, 113acquisition strategy, 109–130adapting strategy, 139advisory board, 102AirEurope, 126–127Air Liberte, 124–125Air Littora, 126AirOne, 126–127Alcazar Project, 110Alcazar talks, 102

AOM, 124assessment of performance, 100–101board composition & size, 101board culture, 102–103board failure, 130board monitoring & decision making,

120–121board preparations, 149–150board’s role, 148–149CEO/board relationship, 113–114chairman’s role, 100committees, 101–102corporate governance structure, 99Corti’s reign, 107–108creating strategic orientation, 100criminal trial, 128–130criticism of Air Liberte acquisition process,

125criticism of AOM acquisition process,

124criticism of LTU acquisition, 123cultural identity, 99description, 98–99Dual Strategy, 114enhancing acquired firm, 140Ernst & Young Report, 97–98false common unities, 142financial strategy, 133–134firms connected to carriers, 128–130Goetz’s reign, 104–106Honegger’s reign, 106–107Hunter Strategy, 109, 197imposing management style, 141inadequate reporting tools, 146interviews, 96lack of respect for target, 143lack of strategy principles, 137–138LOT, 127LTU, 121M&A governance, 113–114meetings, 102member compensation, 103–104member selection, 03monitoring acquisitions, 139national identity, 150no visible opportunities for advancement,

144providing HR to target, 144reactive strategy, 134reasons for collapse, 97receivership, 113recruitment, 148SAA, 127

Index 257

Sabena acquisition, 121–122Sabena acquisition process criticism,

122Sabena Airlines, 110–111strategy, 136strategy not followed, 137–138strategy overview, 109terminology, 96understanding target, 143VolaireGroup, 126–127

Switzerland, 2, 4board system, 44–46Code of Obligations, 44corporate culture, 102law & non-transferable responsibilities,

45–46law, 42legal system, 4militia-system, 101

TTheoretically reasonable board stances, 46–48

active board, 47–48entrepreneurial board, 47knowledge board, 46–47other types of board, 48representative board, 46

TMT, 1definition, 7

Turovsky, Dieter, 56

VVollenweider, Walter, 55

E&Y Report, 97

WWatter, Rolf, 55Wenger, Felix, 129

The Reality of M&A Governance: Transforming Board Practice for Success

Documents

Transcript of The Reality of M&A Governance: Transforming Board Practice for Success