1
“‘The persistence of memory’: Corporate governance and identity formation at the
Buna-Werke Schkopau, 1936-2000”
European Business History Association annual conference, Frankfurt, 3 September
2005
Professor Ray Stokes
University of Glasgow
Department of Economic and Social History
**DRAFT: NOT FOR CITATION!**
Introduction
The range and extent of changes in corporate governance experienced by the
management of the Buna-Werke Schkopau in the last two-thirds of the twentieth
century are remarkable. The large chemical factory began its existence during the
“peacetime” period of the Nazi regime as a subsidiary of the chemical giant I.G.
Farben’s Leuna-Werke, but rapidly became important in its own right during the war.
In the post-1945 period, the factory emerged as a linchpin in the autarky and
modernisation policies of the East German communist regime and, corresponding to
this political and economic importance, enjoyed a surprisingly large degree of
independence in policymaking. Following the collapse of East Germany in 1989/90,
the Buna-Werke complex was placed on the market by the German privatisation
agency, the Treuhandanstalt, and eventually became a subsidiary of the American-
based Dow Chemical Company.
This paper explores the formation of identity among the so-called “Bunesen”
in the context of these massive and often abrupt alterations in corporate governance,
focusing in particular on using this case study to investigate: the mechanisms through
which corporate identity is formed; how identity resists alteration despite (and indeed 2
sometimes because of) changes in governance structures; and the gradual and
sometimes subtle impact of such changes on corporate identity.
Initial governance structures and formation of identity
The Buna synthetic rubber plant at Schkopau came into existence in the
context of a confluence of interests of the gigantic chemical firm, IG Farbenindustrie
AG, and the National Socialist state. The IG sought to deploy its considerable
technological capability based on years of experience in synthetic nitrogen and
synthetic fuels development to begin large-scale production of synthetic rubber, called buna. The new product line had considerable technological and commercial potential, although, in the short term, it also would entail considerable financial investment and risk for the firm if the state were not forthcoming with purchase guarantees or guaranteed loans or subsidies. The NS state, in turn, was in dire need of secure domestic rubber supplies in the context of its autarky policy and preparations for war,
and was willing therefore to guarantee purchase of the IG’s production for ten years
on a cost-plus basis.1
Initial preparations for site selection and plant design took place in 1935, and
Otto Ambros, the head of IG’s Division II, assumed overall control of it. A site at
Schkopau, near the massive IG complex at Merseburg, the Leuna Werke, was chosen
because of the possibilities of efficient use of complementary facilities, raw materials,
electrical power, and intermediates between the two factories; because of the
possibilities for expansion at the new site; and because of its remoteness from
potential air attacks. Construction began in early 1936, with first production taking
place in 1937. The Schkopau plant became the most important producer of synthetic
rubber in the Third Reich, although buna plants were also constructed after it was
completed at Hüls, Ludwigshafen, and at Monowitz, in close proximity to the 3
notorious Auschwitz concentration camp (although no production ever took place at
the latter facility).
The Buna Werke at Schkopau was, like most modern industrial production
facilities, completely artificial in some ways, a construct on a greenfield site operated
by workers “imported” from other parts of Germany (and, of course, eventually also
from other parts of German-occupied and –conquered Europe), without any sales or
research facilities of its own. And this very artificiality constituted a major force at
work in shaping identity at the new plant.
But a complex array of other influences—people, ideas, institutions—, some
of them longstanding and others more recent, also played a role in constructing the
new facility’s identity and self-image. Its legal form, for instance, was that of a
limited liability company (GmbH), “owned” initially by the long established,
powerful, and quite closely located Leuna-Werke GmbH. Leuna remained a strong
influence even after Schkopau became more independent in the course of the war and
during the postwar period. IG Farben, of course, was the sole owner of both Leuna and the Buna Werke, although its influence was more abstract and short term.
More importantly, however, the people who managed the plant from the outset
were closely linked to the plants of what had been BASF at Ludwigshafen and Oppau.
Carl Wulff, from Ludwigshafen-Oppau, became the first plant manager at Schkopau, while Wilhelm Biedenkopf, also from BASF, was initially its chief engineer. The
same was true for many others among the top management and engineering staff. The
relationship was, moreover, more than one of mere genealogy. Wulff, along with
sixty-three other key managers and white-collar workers at Schkopau actually
received their paychecks from Ludwigshafen. And the other technical and scientific 4
personnel of the new plants—not just at Schkopau, but also at Hüls—were maintained
in the Ludwigshafen parent factory’s lists of its chemical and engineering staff.2
Not surprisingly, much of the layout of the plant and the actual apparatus of the factory itself came from outside of Schkopau as well. And, because the greenfield site required not only entirely new physical plant, but also housing for managers and
(further afield) the workers, this was done in such as way as to reinforce the deep sense of connection (and perhaps indebtedness) to places further afield: Baden-,
Rheinland-, and Pfalz-Strasse in the worker settlement, for instance, with streets in the settlement for managerial and technical staff named after famous chemists and chemical plants associated with BASF and/or IG Farben such as Ludwigshafen,
Leuna, and Leverkusen.3
In other words, a strong set of human, physical, and psychological forces
conspired to remind those in Schkopau from the beginning of the plant’s existence of
a strong and proud (but also external) heritage, a sense of connection and obligation to
places more or less far away. Nevertheless, it was not long until those in Schkopau
began to think of themselves as “Bunesen”, who belonged together and were different
from those elsewhere, whether close by in Leuna, or further afield in Ludwigshafen or
in other IG plants. How, in the face of such powerful forces arrayed in favor of
conformity with existing and outside institutions and traditions, was a separate
identity formed?
I think we have to distinguish here between the managerial and technical elite
noted above on the one hand and the mid-level management and workers on the other.
The former were much more likely to move from place to place (some of them moved
from Schkopau to IG Auschwitz, for instance, others to the buna factory in Hüls, and,
in the longer term, some moved to Ludwigshafen and other former IG plants). And 5
they were more likely to have a primary allegiance to—and a sense of identity with—
something larger than the Buna plant, i.e. IG Farben, or the former BASF. Even this
elite group, however, was to some degree affected by the fact that what they were
doing at Schkopau was new and different from what was being done elsewhere.
Despite the Buna Werke having no research and development facilities of its own, the
amount of learning by doing, of incremental and on-going innovation, was substantial,
and contributed to a sense of unique identity.
This was also true for the bulk of the workforce at the plant who, unlike those
at the very top of managerial and technical ladder, were more likely to stay put and who, largely for this reason, were more likely to be subject to a range of other
influences which contributed to shaping a distinctive identity. For one thing, it was
and is natural for those living and working in a particular place to define themselves
as distinct from others. In this case, the most prominent “other” was nearby and
powerful Leuna and its workforce. This tendency towards identity formation through
emphasis on “otherness” may have been intensified in this case by the very fragility and artificiality of Schkopau’s existence, its very heavy dependency on other parts of the IG organization for sales, R & D, and technological/design support.
Complementing the shaping of identity through definition of “them” was a
more or less clear definition of “us”, not only by virtue of the geographical boundaries
of the plant, but also through dedicated and clearly defined worker and manager
housing, shopping facilities, and social facilities and programs.
The intensive preparations for war by the plant from the very beginning of its
existence and its eventual role in the German war economy were undoubtedly
extremely important to forging and then reinforcing a distinctive identity for the
Bunesen. The war eventually demanded nearly total commitment of resources and 6
attention to production. The factory assumed an even greater significance in the lives
of its workforce than it had in peacetime. And the eventual threats to it from Allied
bombing and, eventually, invasion helped produce a siege mentality. Within seven or
eight years of its first industrial production, then, owing to a variety of more or less
strong forces at work, the workforce of the Buna Werke had developed a clear and
distinctive sense of identity.
Governance and identity at Schkopau during the postwar period, 1945-1989
The bulk of the Buna Werke’s existence took place during the period from the
end of World War II until 1989 within the context of, first, the Soviet Zone of
Occupation and, then, the German Democratic Republic (GDR). It was a period
during which a number of changes took place, especially in the immediate aftermath
of the war. Some managers, technical staff, and workers went west, while others
(primarily technical and scientific staff) spent time—some well into the 1950s—in the
Soviet Union. The Soviet occupiers carried out a major dismantling action and then,
for a time, seized reparations from production at the plant.4 The fundamental change
in ownership structures through nationalization and the introduction of planning, also
with consequent organizational changes, proved even more momentous in shaping the factory’s development and culture. Eventually, too, new product lines and the
establishment of plastics and rubber research and development capability under
Johannes Nelles, the plant manager from immediately after the war until 1966, also
altered the factory, its workforce, and their identities and self-image in important
ways.
That having been said, however, it can be argued that this entire period was
characterized more by continuity than change, by a consolidation of existing culture than a fundamental alteration of it. This was true for a number of key facets of the 7
factory’s culture and identity. In social terms, for instance, the intimate connections
between the workforce and the workplace developed during the factory’s initial years
in preparation for and conduct of war continued to exist during the postwar period.
After all, the socialist GDR promoted this through the same sorts of institutions and
practices—although for entirely different reasons and to different ends—used during
the National Socialist period, i.e. company housing, sports and leisure facilities,
shopping, sports teams, and so on.
In terms of personnel, too, there was extensive continuity, although in the very short term there were disruptions owing to the dislocation following the end of the
war and during the Soviet occupation. But, even in the short term, continuity
prevailed. For example, Professor Johannes Nelles, the plant manager through 1966,
had been active in the plant before 1945, and he was accompanied by a number of
other mangers and technicians who had been active at Schkopau before the end of the
war as well. The same was true for much of the workforce in the two decades
following the end of the war, and there was thereafter considerable stability in the
geographic and family origins of the workforce.
Thirdly, despite the introduction of new product lines and the establishment of
R & D capability during the GDR period, there was considerable continuity in the
physical plant, the technology, and the output of the factory. As had been the case
from the start of its existence, the Buna-Werke continued during the GDR period
primarily to produce synthetic rubber and related plastics. And unlike the Leuna
Werke, which made some inroads into new petrochemical technologies and
production facilities between the mid-1960s and the mid-1980s, virtually all of
Schkopau’s manufacturing through 1990 deployed pre-1945 coal-based acetylene
technologies and production facilities. 8
Finally, unlike the more diversified Leuna-Werke or many other chemical
works, Schkopau’s range of output was relatively limited, and it remained to a large degree the pure production facility that it had been from the beginning of its existence, not really responsible for sales or marketing, and dependent to some degree on other plants for intermediates and as customers.
Ironically, much of this continuity can be explained by the some of the very
changes in governance structures that Schkopau underwent in the context of the
Soviet zone/GDR. Socialist ideology and the institutions it entailed promoted plant
loyalty in the workforce. The planning system discouraged innovation. Poverty and
lack of foreign exchange dictated the continued existence of coal-based acetylene
chemical production even as this was being abandoned by the rest of the world. A
dearth of investment meant that the buildings, machines, and apparatus of the Buna
Werke were not modernized, so much so that, by the end of the 1980s, something like
15 percent of the workforce were engaged in maintenance and repair. Like the GDR’s
socialist system itself, the plant was not sustainable in the long run, although few
would have predicted that the GDR would end quite so abruptly as it did in 1989/90,
with massive repercussions for Schkopau and its workforce.
Governance and identity at Schkopau after “Die Wende,” 1990-2000
If continuity in culture and identity at the Buna Werke was the dominant characteristic of the period between 1945 and 1989, convulsive change was the primary characteristic of the decade that followed. Again, the dominant characteristic was not the exclusive one. There was in fact a range of important continuities in factors shaping the identity of the factory and the workforce during the period. The physical boundaries of the main factory itself did not change markedly, for instance, while a substantial part of the workforce which remained employed at the plant at 9
throughout the decade had worked there before the fall of the GDR. In the first half of
that decade, too, much of the middle and—initially—upper management personnel
had been engaged at the Buna-Werke during the GDR period. Finally, chlorine-based
chemical products and plastics continued to form important production lines for the
plant.
But substantial change was the dominant force by far, which had many causes.
Three of them stand out, however:
• The introduction of the deutschmark in the former GDR in summer 1990, with the
concomitant loss of markets in the former eastern bloc;
• The introduction of market forces and western notions of “the firm” and what it
should do;
• The introduction of new technologies and equipment, many of which involved
deployment of far less labor and all of which depended on petroleum- rather thand
coal-based feedstocks.
These fundamental causes of the process of change had, in turn, a number of far-reaching effects. One of the most important involved the scale of the factory, which was eventually linked with two other plants—a small production line located at
Leuna and a larger one, primarily for production of petrochemical feedstocks using cracking technology, at Böhlen—into the BSL Olefinverbund GmbH. In 1989, the
Buna Werke Schkopau and its affiliated concerns employed a workforce of 27,700, with over 18,000 at the main Schkopau location alone; when The Dow Chemical
Company took over BSL in 1995, the American-based firm guaranteed a total of just
1,800 jobs at all three sites in Schkopau, Böhlen, and Merseburg.5 Some of this decrease in the workforce had to do with a redefinition of what the firm should be responsible for within a capitalist market-based, rather than a communist, social and 10
economic system (which will be explored briefly shortly). And there were, of course, additional jobs in the surrounding area beyond the 1,800 guaranteed to be employed by Dow, these in the form of service and goods providers to the plants themselves, but also retailers, service providers, and tradespeople serving the workers and managers.
Nevertheless, most of the job losses were gone forever and had a lot to do with the collapse of traditional markets and the introduction of labor-saving technologies. The
effect was a diminished importance for the plant, certainly within the national
economy, but also within the regional economy. It ceased to be a big business. And
the enormous social problems which have arisen from this precipitate decline in
employment should also be mentioned.
If the scale of the factory changed markedly after 1989, so did the scope of its
remit and activities. Under the GDR’s socialist system, the Buna-Werke Schkopau
was a vast unit, with its own capacity not just for production, but also various
logistical and other roles in support of production. Within a capitalist system, these
functions were more likely to be carried out by outside firms contracted for the
services. Thus, after 1989, there was a narrowing of the business/productive side of
the plant and its remit. What is more, the socialist system of the GDR involved firms which had extensive social and political/ideological functions, and the Buna-Werke was no exception in this regard. Again, the introduction of a capitalist system dictated
a narrowing of function in this area. Housing stock was sold off, as were vacation
homes and sports teams. Some parts of the firm which nobody could possibly wish to
purchase were placed in the hands of separate companies which were publicly funded, at least in the short term. Finally, there were eventually changes in the range of products and technologies deployed at the plant, in particular—and indeed almost immediately—the transition to petroleum- rather coal-based processes. 11
The latter development was extremely important in throwing into harsh relief
just how fragile the Buna-Werke factory was within the new market-based order.
When brown coal was the primary feedstock, and within the context of a closed and
highly planned system, the plant could carry on a more or less independent existence.
But a completely landlocked factory without its own oil supplies or cracking facilities,
and also without independent sales or marketing capacity, would have enormous
difficulty competing on the marketplace. These were some of the reasons that the
Treuhand, the privatization agency, could not find a buyer for the factory until 1995.
Indeed, it would probably have been shut down entirely—with perhaps some very
small successor firms for specialized products continuing to exist—were it not for the
intervention of the German Chancellor, Helmut Kohl, in May 1991. Kohl noted that
“The fact that chemistry in the former GDR cannot compete on world markets
without massive aid is certainly not the fault of the people who work and live here.
They actually suffer from it most of all. And they can rest assured, that this region will get support and aid.”6 The continued existence of the factory at Schkopau after
1990 and to the present is thus very much the result of a political decision, much more
than an economic one.
The redefinition and reorientation of the factory and its workforce was carried
out by the staff of the Treuhand, who interpreted their task in various ways in the light
of sometimes conflicting economic and political desiderata. They were aided in this
by an army of consultants, who had a considerable impact by defining the linguistic,
economic, and even political boundaries within which the restructuring of the
business could occur.
Although there were many other influences shaping the identity and culture of
the Buna-Werke in the initial years following the fall of the Wall, three others deserve 12 special attention. The first was the role of the Chemische Werke Hüls, the Buna
Werke’s West German “twin”. The details of this are too complex to go into here. But suffice it to say that Hüls’s chair of the managing board, Carl Heinrich Krauch (a name those familiar with IG Farben will recognize!), arranged for some of his top managers first to advise, and then to be seconded, to the Buna Werke between 1990 and mid-1993. They played a vital role in preparing the firm to participate in the market economy. Although Krauch’s plans to take Schkopau over did not materialize, the preparations undertaken under Hüls’s period of influence were important in the way the privatization ultimately occurred.
The second influence involved Bernhard Brümmer, who was seconded to the
Treuhand in 1993 from Dow Chemical at the request of the head of the agency.
Brümmer, however, soon “went native”, resigning from Dow in March 1994 and taking up the post as managing director of Buna and SOW Böhlen.7 He subsequently became a thorn in Dow’s side not only later in 1994 and during early 1995 during intensive negotiations with the Treuhand for the American firm to acquire BSL, but also after Dow’s acquisition of it in the latter half of the decade.8
Finally, the Dow Chemical Company itself must be mentioned. Armed with its own formidable technological and commercial capability in particular in chlorine- based and commodity chemicals, and bankrolled to an astonishing degree by the
Treuhand and its successor, the BvS, Dow presided over a complete physical and technological restructuring of BSL between 1995 and 2000, when the full privatization process was completed and BSL became a fully fledged unit within the
Dow group. By 2000, the geographical boundaries of the Buna Werke may have been broadly similar to what they had been between the mid-1930s and the mid-1990s, but virtually every building had been torn down and built anew, and virtually all of the 13
physical plant and technology was brand new. Dow also sought to introduce its own
management and personnel methods into the operation of the factory and its related
facilities at Leuna and Böhlen.
Such massive change could not but have a major impact on the culture and
identity of the former Buna-Werke, although even as late as 1999, there were
indications of a sense of identity drawing on the distant past rather than on more
recent developments. So, for instance, thoroughness, technical precision, and accuracy
were long-standing cultural characteristics in which BSL personnel continued to take
pride, as was a collegial style of interaction among employees of all ranks. They
believed that some of these characteristics were not so highly valued under Dow’s
direction. As one participant in a study of workplace attitudes put it: “We have dealt
with the matter with German thoroughness and not with American Fast Food.”9
But changes are no doubt underway, if not necessarily in the direction of
American Fast Food, at least in the direction of integration into Dow’s prevailing
corporate culture, which was very different from that prevailing in Schkopau for most of the plant’s existence. This was accomplished through a range of initiatives, including training and integration programs and introduction of new organizational technologies and quality control procedures.
Conclusions
At this writing, the factory site at Schkopau has been in existence for nearly 70
years. The factory was, however, in full private ownership for only twelve or thirteen of those years (five more if the period of partial Dow ownership is included). The IG
Farben period (1936/7-45) and the Dow period (partial ownership 1995-2000, full ownership 2000-present) share some characteristics. In each case, the plant operated within the context of a complex and powerful organization, which directed investment 14
and technological development. In each case, the upper management involved a
managerial and technical elite with loyalty to and experience with an organization above the plant level, while the general workforce identified primarily with the plant itself.
But, until the very recent past at the very earliest, it has mattered far less
whether the plant was in private or public ownership and far more that the state took
an active role in shaping its objectives and development. The Buna Werke Schkopau
came into existence for political, much more than economic and commercial, reasons.
It became a centerpiece of the proud chemical tradition of the GDR for political and
ideological as much as economic and technological reasons. And its continued existence in the aftermath of German unification was the result of political intervention in the form of a vague “promise” by Chancellor Kohl which was interpreted by the Treuhand and government bureaucrats in a certain way.
The centrality of the political to Schkopau’s culture is undeniable, not least
because political decisions have informed and shaped the technological and
commercial decisionmaking which have molded the factory’s physical structure,
identity, and self-image. Finally, the role of human actors in this process needs to be
highlighted, not just in terms of making the political decisions, but also in terms of
interpreting and extending them into the economic, technological, and social sphere.
The Buna Werke at Schkopau provides an excellent case study in the interplay of
corporate governance, human actors, physical structures, technology in forming,
maintaining, and changing identity and self-image. 15
ENDNOTES
1 Peter Hayes, Industry and Ideology: IG Farben in the Nazi Era, 2nd ed. (Cambridge/NY: Cambridge University Press, 2001), 141-142, 188-193; Peter Morris, “Development of Acetylene Chemistry and Synthetic Rubber,” (PhD thesis, University of Oxford, 1982), pp. 259-261; Fritz ter Meer, “Grundlegende Gesichtspunkte für die Gründung des Werkes Schkopau und den Buna-Vertrag,” 17 February 1937, BASF UA, A 251/1. 2 “Fragebogen für Beteiligungen der I.G. Farbenindustrie: Schkopau,” 18 May 1938; “Fragebogen für Beteiligungen der I.G. Farbenindustrie: Schkopau,” 23 May 1939; both in BASF UA, A 251/1. 3 Gabriele Ahlefeld, Astrid Molder, and Rudolf Werner, Plaste und Elaste aus Schkopau. 60. Jahre Buna-Werke (Pinneberg: Runkel Verlag, 1996). 4 On the transfer of technical and scientific personnel to the Soviet Union from the Soviet zone, see Ulrich Abrecht, Andreas Heinemann-Grüder, and Arend Wellmann, Die Spezialisten: Deutsche Naturwissenschaftler und Techniker in der Sowjetunion nach 1945 (Berlin: Dietz, 1992); on reparations and removals, see Rainer Karlsch, Allein bezahlt? Die Reparationsleistungen der SBZ/DDR 1945-53 (Berlin: Ch. Links, 1993). 5 BSL Unternehmensarchiv, Rep. X, Nr. 1 341, “Synopse des Privatisierungsvertrages”; Amtsblatt der Europäischen Gemeinschaft L 239 vom 19.9.1996. In fact, the number of employees was higher than this, at least in the initial period after Dow’s involvement, and even the latest reports indicate 2,300 employees. See Dow in Mitteldeutschland Public Report 2004, available at URL: http://www.dow.com/publicreport/2004/local/mittel/overview/overview.htm