Zetsche Gets Three Years to Improve Daimler Performance Against Rivals

Long the favored brand of executives and heads-of-state around the world, Mercedes-Benz recently is finding itself battling surprisingly strong competitors in the form of fellow German marques Audi and BMW, as well as newer Japanese luxury brands Lexus and Infiniti. Because of perceived weakness against luxury rivals, the Daimler board voted to extend CEO Dieter Zetsche’s contract by just three years. Daimler’s usual CEO contract term spans five years.

According to Reuters, this move was made by the board to appease critics of Zetsche’s performance, which has seen Daimler stock rise just two percent during his seven-year tenure, compared to BMW’s shares more than doubling. Analysts have noted Daimler’s stock has out-performed peers in only two of the past 12 years.

Part of the reason for the shortened term could be due to Zetsche’s age. Zetsche is currently 59 years old. Rival BMW has a long-standing policy of mandatory retirement of top executives once they reach 60. Another management difference between Daimler and BMW that may have had some influence on executive accountability and company performance is that some large shareholders do not have a seat on the board, unlike BMW, where the Quandt family wields significant power, and the board of Volkswagen AG, where the Porsche and Piech families are influential. The Kuwaiti royal family, which holds a significant stake in Daimler, does not have a seat on the Daimler board.

Source: Reuters