SAP Ousts Co-CEO Jennifer Morgan


4/23/2020

by Michael Pearson

April 20 Announcement Comes as a Surprise To Analysts And Industry Observers

SAP announced that Jennifer Morgan is departing SAP as Co-CEO after only six months in the position.

Morgan and fellow Co-CEO, Christian Klein, took over the reigns at SAP after the departure of Bill McDermott in October 2019.

The news came as a surprise to analysts and commentators, who assumed that the dual CEO structure would last at least several years.

The SAP press release cited "the current environment requires companies to take swift, determined action which is best supported by a very clear leadership structure" as the reason for the departure. The press release adds that the decision to eliminate one of the Co-CEO's "was taken earlier than planned to ensure strong, unambiguous steering in times of an unprecedented crisis".

Commentator Den Howlett of Diginomica pointed out the "unusually blunt and direct form of wording" in the announcement, in his Blog on April 21. Howlett seems to imply that he, and others, feel like there is more to this than meets the eye. The official explanation of one CEO being better than two in a time of crisis just doesn't seem to hold water.

So what did precipitate the demise of Jennifer Morgan at SAP?

Non-disclosures and golden handshakes will probably ensure that the whole story never sees the light of day, but a few recent events are notable.

Mad About You

Morgan appeared on Jim Cramer's Mad Money about three weeks before the announcement of her departure, which seems to indicate that her demise was sudden and swift. Morgan took to the airwaves to talk about what SAP is doing to help companies through the current crisis and promised "no significant layoffs for 90 days". This policy of "no layoffs" was announced by Morgan on March 30 in the interview with CNBC's Cramer, however, interestingly, SAP has made no reference to this outside of the interview.

Perhaps Morgan's announcement was not approved by SAP's board. At the very least, it would have been very unpopular with activist investor Elliot Management, who recently took a significant stake in SAP.

SAP was widely panned in the press for a brutal round of layoffs last year and is likely under pressure from Elliot Management to perform more cuts; crisis or no crisis. As the global economy continues to deteriorate and company's profits are slashed, including SAP's, it will be interesting to see if SAP holds to this as its policy.

Politically Incorrect?

Another curious development was the fact that last week Jennifer Morgan was appointed to President Trump's economic revival task force. Morgan, along with CEO's from many major tech companies including Apple's Tim Cook, Oracle's Larry Ellison and Microsoft's Satya Nadella, joined a team tasked with working with the White House to outline how the U.S. can reopen its economy.

Also interesting is that this appointment was not announced by SAP, nor has any mention been made in any official publication or news release. Perhaps Walldorf did not approve of Ms. Morgan's collaboration with the President or the current U.S. Administration?

If Morgan was planning on leaving SAP a week later then it would be a strange move to accept such an appointment which is predicated mainly on her position and the power and influence she holds (or held, as of a week ago). Conversely, if SAP was planning on forcing Morgan out a week later, then why would they approve this appointment? The logical conclusion seems to be that Morgan didn't know she would be gone from SAP a week later, and she didn't ask for board approval before accepting the position on the White House task force.

An Heir But No Spare

Now SAP is led by a sole CEO, Christian Klein, who is 39 years old and has limited experience in managing sales or products. His experience comes mainly from the financial side of the business.

As many SAP customers face increased pressure to reduce costs and delay investments, the company is being led by a young and relatively inexperienced CEO to traverse these difficult times ahead. It's probably not what SAP would have had in mind when they did their succession planning leading up to McDermott's departure last year.



Author

About the Author: Michael Pearson

Michael is President of CONTAX and claims to be one of the few people in the western world who understands SAP licensing.