OpinionRenewal of contract for Zipse

BMW's extraordinary move

With the contract extension of BMW CEO Oliver Zipse, the company's supervisory board takes an unusual step considering the age limit of 60 years. There are specific reasons behind this decision.

BMW's extraordinary move

BMW rarely deviates from its rule regarding the age limit of 60 years for board members. When this threshold is reached, incumbents must make way for younger executives, as per BMW's statutes. Exceptions to this rule at the Munich-based automaker are few and far between. Therefore, the decision of the supervisory board to extend the contract of CEO Oliver Zipse by two years until August 2026 is noteworthy. At that time, the CEO would be 62 years old. He will turn 60 in February next year.

Given this context, the board of directors, headed by former CEO Norbert Reithofer, is taking an unusual step. Extending contracts to this degree for CEOs nearing retirement age has been a rare event at the prestigious DAX member in its long history. Under the current chairman's leadership, only the CFOs Friedrich Eichiner (until early 2017) and Nicolas Peter (until April 2023) were allowed to stay a bit longer after surpassing the age limit.

Succession plan postponed

In Zipse's case, the supervisory board has implicitly chosen to postpone a succession plan. What are the reasons? There are plenty of internal candidates within the company who have the qualifications to succeed him at the helm of BMW when his current contract expires in August 2024. Production chief Milan Nedeljković, for instance, is considered one such candidate. BMW usually fills vacant CEO positions with top executives from manufacturing.

The decision to extend the Zipse era beyond the mid-decade probably stems from the fact that both the capital and employee representatives on the supervisory board want to play it safe in generally tense times. Reithofer's statement after the regular board meeting suggests that the supervisors believe Zipse is capable of navigating a critical phase of the transformation towards electric mobility and autonomous driving in an orderly manner. Alternatively, they would have risked changing the CEO in the midst of this process.

Clarity in advance

The supervisory board currently has no patience for the orientation phase that a new corporate leadership needs. BMW is on the verge of launching a fresh generation of vehicles designed to rival Tesla and other competitors. A reorganization of the corporate leadership could be a hindrance in this crucial phase. Therefore, Reithofer and the two major shareholders, Stefan Quandt and Susanne Klatten, prefer to provide clarity in advance.