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DECEMBER 30, 2005 • Editions: Edition Preference
By Jack Ewing Of Management and MoralityWhen it comes to corporate values and social welfare, author and influential social theorist Fredmund Malik swims proudly against the currentWhen German sports-car maker Porsche in October bought an 18.53% stake in mass-market carmaker Volkswagen, foreign investors were beside themselves. U.S. fund manager Tweedy, Browne & Co. even launched a campaign to limit Porsche representation on Volkswagen's supervisory board and unseat Chairman Ferdinand Piëch, a former VW chief executive who's a member of the family that controls Porsche. .gif){kind=spacer} Not just foreigners worried that Porsche would steer VW in its own interests rather than those of other shareholders. Officials of the state of Lower Saxony, which owns 18.2% of VW shares, have also been critical of the move. So Swiss-based management thinker Fredmund Malik is definitely going against the mainstream when he calls Porsche's move "splendid." To Malik, Porsche is protecting VW from aggressive U.S. hedge funds. "It's keeping the German auto industry in German hands," Malik argues. "With the threat of a hostile takeover, it wouldn't have been possible to get VW back on its feet." Such sentiments may leave foreign investors shaking their heads in wonder, but in the German-speaking world, Malik's views find a ready audience. In one recent poll, Malik ranked as the third-most influential management thinker in the German-speaking world, behind the late Peter Drucker and Bonn-based management consultant Hermann Simon. Malik, a fit-looking 60, speaks for the vast number of managers in Germany, Austria, and Switzerland who are deeply skeptical about the U.S. and British fixation on profit and growth. MULTINATIONAL SIGNIFICANCE. His views, described in 10 widely read books and taught at his Malik Management Center in St. Gallen, Switzerland, help explain the mentality that still permeates vast tracts of the German-speaking business world. "He's the European Peter Drucker for me," says Dieter Brandes, a former executive at the Aldi grocery chain and now a Germany-based author and consultant. And Drucker himself once called Malik "a commanding figure in theory as well as in the practice of management." Malik is dismissive of the multinationals in Germany's blue-chip DAX 30 Index, many of which have modeled themselves on U.S. and British management practices. "When you look at the DAX, you get a false picture of the German economy. Those companies are important, but not as important as the media portrays," Malik says. His maxim is that the aim of a company should be to create a happy customer. Profits, yes, but not obscene profits. "When companies such as Infineon (IFX ) or Deutsche Telekom (DT ) give their managers higher salaries while they're firing people -- that shouldn't happen." ADDRESSING SOCIAL UNREST. To Malik, the strength of the German economy lies with family-run enterprises such as media company Bertelsmann, chainsaw maker Stihl, or cake-mix and frozen-pizza maker Dr. Oetker. "That's what's really decisive in Germany. They are entrepreneurially led enterprises. Shareholder value, stakeholder value -- they were never infected by these terms," Malik says. He even defends Germany's much-maligned social welfare system. Only by paying generous benefits to laid-off factory workers can Germany avoid social unrest, Malik maintains. "You can't make a steelworker into a computer operator. That doesn't work," he says. "The problem [of unemployment] has to be absorbed politically. Society must pay benefits to the unemployed, or we will repeat the 1930s." Malik, who keeps in shape by mountain climbing and, as a young man, played Beatles songs in a local rock band, doesn't mind being seen as a contrarian. In fact, he enjoys it. "I'm completely against the mainstream," he says, adding, "I think my views have been confirmed." MORAL VALUE. That remains to be seen. But Malik, the married father of two, has certainly earned a following. His management center, which evolved from an institute at the University of St. Gallen, has trained thousands of business leaders. Some are top managers, but Malik is most proud of his role in teaching middle managers and even executive secretaries. "Business is not made by top shots. It's middle management." As a young man, Malik was accepted at the University of California, Berkeley, he says, but realized he wouldn't be able to afford Bay Area tuition and living costs. So, instead, Malik, a native of Austria, studied at St. Gallen, a leading European university that focuses on business, then stayed on to teach. Whether a California education would have produced a different kind of thinker is a matter of speculation. As it is, Malik is critical of many aspects of U.S. management. Of private-equity firms and hedge funds, he says, "For the most part, their outlook is short term. There is no moral value." There's one group of U.S. managers he admires, though: the people who run nonprofit organizations. They are "exemplary," he says. DISSOLVING GERMANY INC. That's not to say Malik is uncritical of all things German. For example, he predicts carmaker Daimler will have to undo its troubled merger with Chrysler (DCX ). "An American car is different than a German car. You can't put Chrysler parts in a Mercedes." And he's in favor of continuing to unravel Germany Inc., the web of cross-shareholdings that in the past gave institutions such as Deutsche Bank or insurer Allianz (AZ ) broad influence in the German economy. "It's wrong for the bank barons to have the say-so in supervisory boards," Malik says. Some of Malik's titles have appeared in English, including Managing, Performing, Living-Effective Management for a New Era, published in 2003 by Deutsche Verlags-Anstalt (Stuttgart and Munich). U.S. readers may not agree with much of what Malik has to say, but at the very least his writings will help explain why German managers, such as Porsche CEO Wendelin Wiedeking, make the decisions they do.  Ewing is BusinessWeek's Frankfurt bureau manager BW
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