At first, I thought the senior investment banker I met at the posh private members club in Mayfair was joking. “Germany has no chief executive,” quipped the M&A consultant.

I wonder if he was referring to the fact that current German CEOs tend to be more humble and less cunning than previous generations of business leaders. Big names like Volkswagen’s Martin Winterkorn, Deutsche Bank’s Anshu Jain and Daimler’s Jürgen Schrempp are often legends who define the entire culture of their corporate empires, but not necessarily for good.

But my lunch date really matters. “I’m serious,” he said, “German CEOs are not real CEOs, and that’s a real problem for German business.” Many Dax 40 companies are embroiled in corporate crises, with management unable to quickly adjust to disruptive changes.

For example: the German auto industry has grappled with the development of electric vehicles for years, software maker SAP is struggling to fend off threats from more nimble rivals, pharmaceutical and agricultural conglomerate Bayer is struggling with its failed acquisition of Monsanto, and Deutsche Bank is working with Struggle to maintain its position as a global investment bank under the threat of nimble fintech firms supply.

The banker argues that while all of these corporate crises have different causes, they also share a common feature – tragic management failures, caused by rigid governance structures that hold companies hostage.

Historically, German corporate leadership in postwar Germany has been the result of teamwork.With the exception of the Winterkorns, Jains and Shremps, the CEOs are not as powerful as the US or the UK

This is one of the important lessons to be learned from the political, moral and economic catastrophe of the Third Reich, which is defined in reverse: there is a strict principle of “Führer” in all areas of society, and subordinates are required to carry out the orders of their superiors. UPS.

Now, under the country’s two-tier board system, the German CEO is not even consulted on board member hiring decisions. The appointment and removal of executives is an important responsibility of the supervisory board, half of which are held by union representatives.

Furthermore, the Executive Board is a collective body: according to German law, its members are jointly responsible for the company’s decisions. German CEOs cannot force board members to do certain things – if the product owner has fundamentally different views than the boss and cannot be swayed by the forces of argument, there is little the CEO can do other than lobby the chairman or threaten to resign.

Because the chairman is balancing the interests of investors and workers, the supervisory board is not necessarily straightforward to resolve the situation, and the result is often a deadlock.

Voluntary decision-making and a “social partnership” between owners and workers have served German companies well for decades. Violent labor riots with prolonged strikes are rare due to mutual respect between workers and managers. Employers in the country invest heavily in the education of young apprentices and gain access to a committed and well-educated workforce.

However, the banker argues that in a world of faster structural change, disruptive innovation and new global competitors, inherent stability has become a burden on Germany’s corporate world.

Disruption always creates losers, and under German corporate governance, management has ample opportunity to fight change to avoid painful adjustments for as long as possible. Executives in departments responsible for structural decline can form a nearly insurmountable barrier to change by forging alliances with union representatives keen to prevent mass layoffs.

Given that changing a corporate governance system that has evolved over decades is no mean feat, addressing the issue would be a stretch. This problem can be solved with a good lunch, but it will definitely take more time to find a solution to the problem.

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