Executive strife Linde to Extend CEO Contract

Industrial giant Linde has been beset with problems among its top executives, but sources told Handelsblatt that contrary to rumors suggesting otherwise, its new chief executive Wolfgang Büchele will have his contract extended next year.
Wolfgang Büchele, Linde CEO.

It is never easy to take over from a legend. And it is even harder to be cheerful when that particular legend comes back to keep an eye on how you are doing the job he used to do so well.

But Wolfgang Büchele, the beleaguered boss of German industrial giant Linde, must do just that.

Two years ago, he took over from Wolfgang Reitzle, who had turned Linde into a byword for steady, continuous growth. That reputation took a battering as Mr. Büchele issued one profit warning after another, sending shares into a nose dive.

Now, two years later, Mr. Reitzle has returned to head up Linde's supervisory board, the German non-executive board that oversees management and must sign off on crucial decisions.

Linde is in turmoil after two profit warnings in as many years and the loss of its market-leading position to Air Liquide. Investors and employees alike are spooked by stories of envy and resentment from deep within the ranks of the company.

There have been suggestions that Mr. Reitzle did not actually want to extend the contract of chief executive Mr. Büchele, which is due to expire in May 2017.

Supervisory board sources have told Handelsblatt, however, that the current plan is to extend Mr. Büchele's contract at the next regular meeting of the board in late September.

“There is no reason not to extend the contract,” one of the sources said.

Many also say Mr. Büchele did not push his staff hard enough to improve results after the 2014 profit warning. His critics claim that Mr. Reitzle would have been more demanding.

The source said saying that Mr. Reitzle and Mr. Büchele have now developed a constructive working relationship.

At the start of his stint, Mr Büchele had chosen not to seek advice from Mr. Reitzle, but that situation has now changed, according to the sources.

During Mr. Reitzle's 11-year tenure, Linde broke record and after record and always met its earning targets, encouraging many investors to buy into Linde as a conservative investment. But that confidence has crumbled after the two profit warnings during Mr. Büchele's time at the top.

The share price still hasn't recovered from its post-profit warning dive in early December; the stock lost as much as 14 percent in one day. During Mr. Reitzle's tenure, Linde was the most highly valued gas company in relation to its earnings but now its valuation has tumbled.

Linde has been hurt by the weak economy and sliding oil prices, which have impacted its plant construction business. But industrial sources claim that some of its problems are homemade.

Alongside rumors about Mr. Büchele's contract extension, an anonymous letter recently circulated in the company claiming Mr. Büchele had been disloyal.

According to a number of Linde managers, Mr. Büchele and finance chief Georg Denoke have a frosty relationship. According to Handelsblatt sources, the two men shouted at each other loudly in the corridor when talking about the 2015 profit warning.

Numerous people within the firm dispute whether that last profit warning, which referenced the company's mid-term goals, was really needed. Some think Mr. Büchele may not have a good grasp of the budgets and was pushed into the profits warning by Mr. Denoke.

This spring, Mr. Denoke and Mr. Büchele made a united stand, saying they work together as a team. Internally, however, sources say Mr. Denoke is not so sure.

The ambitious Mr. Denoke is said to have had an eye on the position of chief executive. “He knows our shop well and is on top of the numbers,” one insider said.

But now he is suspected of being disloyal. According to one insider, Mr. Denoke believes he would make a better boss and has never given up on his hopes to climb to the top of the company.

“When two people tend to work against one another rather than with one another, it is time to separate,” said Andreas Föller, of the human resources committee.

Some members of the Linde supervisory board wonder if Mr. Denoke will leave the company entirely in a couple of months.

Many are now curious to see how the relationship between Mr. Büchele and Mr Reitzle will develop. Since taking the job, the new chief executive has made many adjustments to the organizational structure, sparking resistance from some leading employees. “He has changed too much too soon,” said one insider.

Many also say Mr. Büchele did not push his staff hard enough to improve results after the 2014 profit warning. His critics claim that Mr. Reitzle would have been more demanding.

Sources also say it was unhelpful when Mr. Büchele suggested that all was not perfect under Mr. Rieitzle, an opinion he aired during public events. That is thought to have riled Mr. Reitzle, who has now installed Michael Diekmann and Ann-Kristin Achleitner on the supervisory board to keep the company on track.

But Mr. Büchele has since proven himself to be able to learn on the job, one advisor said. He corrected many of his own decisions and brought a close confidante of Mr. Reitzle back on board.

And it is widely thought that his contract will be extended in September. “To get rid of a supervisory board boss after such a short time would be very unusual for a DAX company,” said a source close to the supervisory board.

And Linde, while having gone through a rocky time, is not in crisis. “The business model doesn't wobble so quickly,” said one employee. In the first quarter the business revenues sank 3 percent to €4.3 billion (or $4.78 billion), but when adjusted for currency fluctuations, the fall was slight.

Meanwhile, its operating profits climbed slightly. But now it is up to Linde to keep turning solid quarterly earnings in a bid to win back the investors who once flocked to Linde as a safe-haven stock.


Axel Höpner is head of the Handelsblatt office in Munich, focusing on the state of Bavaria's companies, including Allianz and Siemens. To contact the author: [email protected]