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Who calls the shot over at Infineon?

Posted: 01 Jul 2008 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor company German? chairman supervisory board head?

Here's the question shareholders and investors in Infineon Technologies AG would like to have answered: Who really is the boss at the German semiconductor company, the chairman of the supervisory board or the head of the management board?

On June 3, Peter Bauer, freshly appointed as head of Infineon, presented his vision for the company to investors at a conference in Frankfurt and found himself having to defend his ability to lead the company without a hand guiding his actions behind the scenes.

Infineon's supervisory board would neither decide policies nor remotely manage the company, Bauer insisted.

It was highly unlikely that supervisory board chairman Max Dietrich Kley would publicly oppose Bauer's statement. That is not Kley's style. But anyone who believes Kley would take a backseat to a group of managers at the IC vendor isn't familiar with the intense power struggle unfolding at the company since being spun off from Siemens AG nine years ago.

Kley, a lawyer, a veteran manager and the consummate businessman, knows how to play the corporate power game. In 2004, he ousted Ulrich Schumacher, founding CEO of Infineon. After a brief stint as interim CEO, he appointed Wolfgang Ziebart to replace Schumacher. Ziebart lasted until May, shown the door after clashing with Kley over the future direction of the German chipmaker.

Despite his protestations in Frankfurt, Bauer and his three top executives should have expected Kley to be involved in shaping decisions and policies about Infineon's future, especially at this critical moment when it is trying to dump its loss-making DRAM division while reorganizing to return to profitability after three consecutive years of losses.

Just in case Bauer had other ideas, on the day of Ziebart's ouster the supervisory board also took the unusual action of affirming its vote of confidence in Kley. Though little noticed by most observers, the bold assertion of confidence in Kley was perhaps one of the more telling signs of the power struggle that resulted in Ziebart's early resignation.

More importantly, it also reveals the broader role Kley has so far played in the company's evolution and the influence he is likely to have as Infineon continues its reorganization.

Infineon's statement announcing Ziebart's departure and support for Kley was itself couched in typical corporate-speak. Infineon's "supervisory board has unanimously declared its vote of confidence for" Kley, it said, using words similar to those embattled CEO's require when facing negative press.

No direct senior officer
Infineon's vote of confidence was highly unusual because Kley holds no direct senior executive management position at the company. He was neither the company's president nor CEOand he wasn't the head of any of its core business units. As chairman, Kley isn't directly responsible for day-to-day management functions and policy formulation.

Yet Kley must have felt he needed the endorsement of Infineon's 16-member supervisory board, split equally in typical German style between representatives of the company's investors and employees. Since becoming chairman at Infineon in August 2002, Kley has worked with three CEOs and presided over the early dismissal or resignation of two of them.

Both Ziebart and Schumacher left Infineon under a cloud due to questions about their performance and the strategic direction of the company. Though unconfirmed, there were numerous reports that disputes over the company's future between the departing CEOs and chairman Kley eventually forced the supervisory board to demand their resignation.

Ziebart's reign was especially fractious. He joined the company in September 2004 from automotive components supplier Continental AG. He had previously worked at BMW, where he started his career. Ziebart's main offense, according to reports, was that he couldn't quickly offload Infineon's loss-making memory semiconductor division Qimonda AG.

It's a problem even Bauer would have a hard time resolving considering continued problems in the DRAM market. In April, Infineon reclassified Qimonda as a "discontinued operation," a clear admission that the company expects it would not be able to sell the memory business at a profit.

Despite the appointment of a new top executive, Infineon's problems are far from over. On Wednesday (June 25), Infineon disclosed that Erk Thorsten Heyen, its VP for strategy, would be leaving after five years with the company.

Heyen headed the company's key mergers and acquisition operation, and would have been expected to play a major role in any potential tie-up Infineon might be contemplating.

Regardless of who occupies whatever executive role at the company, Kley's firm hand won't be too far away, at least until his current term expires in 2010. Infineon's supervisory board has five major committees to help define the company's strategic direction and set principles by which the management board operates. Kley holds key positions on four of the five groups, including the executive, the investment, finance and audit, mediation and the nomination committees.

Those positions, in addition to his leadership of the supervisory board, give Kley control over major areas of the company's policy formulation. Hence, Bauer might find himself unable to lead major initiatives without consulting with or even deferring to his chairman.

The two seasoned executives may find it necessary to put aside any differences, though, because of the pressing problems facing Infineon. The company's future now lies in the hands of a lawyer and an engineer who despite not having a doctorate degreemanaged to advance rapidly through the ranks to the top of Infineon.

- Bolaji Ojo
EE Times

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