Merck’s Dr. Frank Stangenberg-Haverkamp Speaks at CEIBS

December 2, 2013. Shanghai – CEIBS today welcomed Dr. Frank Stangenberg-Haverkamp, Vice Chairman of the Executive Board of E. Merck KG, the holding company of the Merck Group, the world’s oldest pharmaceutical and chemical company, who gave a talk entitled “Merck: Family History, Corporate Governance and Family Governance”. The visit was co-organized with the German Chamber of Commerce in Shanghai. CEIBS faculty, students and staff turned out to hear Dr. Stangenberg-Haverkamp’s talk.
Merck’s Dr. Frank Stangenberg-Haverkamp Speaks at CEIBS
Vice Chairman of the Executive Board of E. Merck KG Dr. Frank Stangenberg-Haverkamp

In his welcome address, CEIBS Dean and Vice President Prof. Hellmut Schütte explained that Dr. Stangenberg-Haverkamp is not just the representative of one of Germany’s oldest enterprises he is also part of the 11th generation of the Merck family which founded the company 345 years ago.

Merck’s Dr. Frank Stangenberg-Haverkamp Speaks at CEIBS

CEIBS Dean and Vice President Prof. Hellmut Schütte

Dr. Stangenberg-Haverkamp began his talk by introducing some of the unique management aspects of family businesses, and gave a brief history of the company, which was founded in 1668 when Friedrich Jacob Merck bought the Angel Pharmacy. Emanuel Merck began large-scale production of pharmaceuticals in 1827, and in the late 19th century the company began expanding globally by establishing subsidiaries in three cities: London in 1883, New York in 1887, and Moscow in 1899.

Non-family members were first admitted to the top management of the company in 1920 and the company went public in 1995, with a share structure that allows the family to retain control of the company. Total company revenue for 2012 was 11,173 million euro. Merck will celebrate its 350th anniversary in 2018, and by then Dr. Stangenberg-Haverkamp expects that the company’s centralized management model will change to reflect more independent operations among its overseas subsidiaries.

Dr. Stangenberg-Haverkamp attributes the company’s success to its style of family management. He explained that the ownership and corporate governance structure have been set up to balance the interests of family members, partners, and the overall company.

Dr. Stangenberg-Haverkamp also elaborated on the way the 155 Merck family members participate in the success of the company. The company has an Executive Board of Partners, which includes five family members are elected to their posts every five years. Only family members with sufficient business experience are allowed to stand for election to a seat on the board. Other family members are not involved in the day-to-day operations of the company, own no shares, and merely earn dividends from the holding company. All family members are tied to a 30-year contract, which helps ensure cohesion among family members.

Merck’s Dr. Frank Stangenberg-Haverkamp Speaks at CEIBS
Dr. Stangenberg-Haverkamp also emphasized that business interests always come before family interests. Family members have no guarantee of employment with the company. Any family member wants to join the company after graduation from college must go through an evaluation process, and work outside of the company for 10 to 15 years to gain appropriate experience before they will be allowed to take a management position at Merck. Other guidelines the company has set up to ensure proper corporate governance at the company include:

- Strict separation of operational management and owners;
- Non-family members on the Executive Board of Partners have the same legal rights as family members;
- The Partners should see themselves as trustees of the family wealth, which they will pass on to the next generation;
- Transparency of processes within the family;
- The partners share a common set of values, which are the same as those set down in the early 19th century by Emanuel Merck.
Merck company values attach great importance to innovation and the long-term, sustainable development of the company. “We are a value-based company, and every single person is taught to obey the values,” said Dr. Stangenberg-Haverkamp. “We are thinking in generations, and our business has continued for many years. We invest for the long-term.”

Dr. Stangenberg-Havekamp concluded by pointing out the unique paradox of the company: the family does not intervene in operational management, yet the family can still exercise its influence on the company. He also stressed that corporate governance and family governance must interact in a conflict-free manner.
Merck’s Dr. Frank Stangenberg-Haverkamp Speaks at CEIBS
Dean Schütte presented Dr. Stangenberg-Havekamp with the book

The event concluded with a lively Q&A session in which Dr. Stangenberg-Havekamp fielded questions on a variety of topics, including the similarities between managing a family business and governing a country, how to allocate dividends between family members and the company, and taxation issues. Dean Schütte then presented Dr. Stangenberg-Havekamp with a copy of the book Wise Management in Organisational Complexity co-edited by CEIBS Visiting Professor of Management Practice Mike J. Thompson to thank him for his visit.

Writer: June ZHU
Editor: Janine Coughlin
Photo editor: Juana Zhou