The EconomistOctober 26th 2019 Business 59Warning signsSources: Goldman Sachs Global Investment Research; Conference BoardUnited States, CEO business confidence
100=maximumS&P 500 companies’ performance relative to
average,by dominant use of cash, Dec 29th 2017=100*Estimate †To October 17th2009 10 11 12 13 14 15 16 17 18 1930405060↑ Optimistic^70↓ PessimisticS&P 500, earnings per share
% change on a year earlier2016 17 18 19-5051015202530To t a lMedian
company*Capital expenditure/
research & developmentMergers &
acquisitions2017 18 19859095100105
Share buybacks
and dividendsS&P 500 companies’ capital usage, $trn0 0.5 1.0 1.5 2.0 2.5 3.020182019†Capital expenditure/research & development
Mergers & acquisitions
Share buybacks and dividendsDespite a good run of profits and the longest economic expansion in history, the mood
in corporate America is darkening. The latest survey of bosses’ confidence is plunging.
That gloom is reflected in forecasts for the third-quarter earnings season, which is now
under way. While the median firm will still see rising profits, earnings per share for the
S&P 500 index are expected to fall when compared with the previous year, dragged
down by a small number of Goliaths (such as Apple, Exxon and Boeing). Companies
continue to splash out on share buybacks, though less zealously than last year. Since
2017 firms that favour buybacks have outperformed the index, according to analysis by
Goldman Sachs. But those that used their cash on mergers and acquisitions did even
better. Discouragingly, those that ploughed money into capital expenditure and R&D,
which are necessary to boost long-term growth, fared far worse.America Inc’s profits are under pressureI
t has happened before and will almost
certainly happen again. Offspring of Ger-
mans who were adults during the 12 years
of Nazi rule shied away from asking too
many questions about their elders’ rela-
tionship with the regime. Many parents did
not want to talk about it. And when they did
so, most children went along with whatev-
er version of the family’s past was present-
ed to them. Sometimes that was not the
whole truth. Few, however, have told their
father’s story of defiance as frequently and
publicly as Roland Berger, a celebrated
management consultant. It was thus a
shock for Mr Berger when a newspaper in-
vestigation revealed that his father, Georg,
was a profiteer from the Nazi regime rather
than the committed Christian hounded by
the Gestapo as he had always claimed.
The account given in interviews and
speeches by Mr Berger, who set up Ger-
many’s largest consultancy and advised the
government of Helmut Kohl on the privati-
sation of companies in eastern Germany,
was one of an inspirational transformation
of a former member of the Nazi party.
When Georg witnessed the horrors of Kris-
tallnacht in 1938, he tore up his party-mem-
bership card and became an opponent of
the regime. He was even sent briefly to Da-
chau, a concentration camp.
The reality, as revealed on October 17th
by Handelsblatt, a German newspaper, was
the story of a careerist with a penchant for
the good life. Berger senior joined the Nazi
party in 1931 and not, as he claimed, in 1933,
after Hitler came to power, for reasons of
political expediency. He paid his member-
ship fees until 1944. Such was his alle-
giance that he was promoted to become a
ministerial adviser in 1937 and later sent to
Vienna to run Ankerbrot, Austria’s largest
bakery. In Austria’s capital Berger lived in
an elegant villa confiscated from a Jewish
family. He then clashed with the Nazis but
not because of his scruples. He fell foul be-
cause he hoarded groceries illegally and
renovated the Viennese villa at lavish cost.
Handelsblattfound no records of his im-
prisonment in Dachau.
The younger Mr Berger, who is 81, ad-
mits that he unintentionally deceived him-
self by readily believing the stories his par-
ents and relatives related about his father’s
past. He now vows to find out the truth and
has commissioned two respected histori-
ans, Michael Wolffsohn and Sönke Neitzel,
to research his family’s history.The revelations are the latest in a series
of discoveries of entanglements with the
Nazis of the forebears of owners of large
German businesses. (Mr Berger’s father
was not involved in the founding of his
consultancy firm.) Earlier this year histori-
ans examining the history of the Rei-
manns, a super-rich clan that owns Krispy
Kreme, Panera Bread and other consumer-
goods brands, revealed that the family pa-
triarch at the time, Albert, as well as his
son, were early and enthusiastic suppor-
ters of Adolf Hitler.
Werner Bahlsen, the head of a biscuit
empire, said in May the family will hire a
well-known historian to examine their
Nazi past after Verena, his 26-year-old
daughter, caused a stir when she blurted in
response to a question about Bahlsen’s ex-
ploitation of forced workers that they were
treated well. The Quandts (bmw), Krupps(steel), the owners of Bertelsmann (pub-
lishing) and others have grappled with
similarly tainted legacies.
Two decades ago 6,500 German compa-
nies including Siemens, Deutsche Bank
and Volkswagen, created a foundation
that, along with the German state, raised
more than €5bn ($5.5bn) for survivors of
Nazi atrocities and slave labour. Mr
Berger’s firm did not participate but 11 years
ago he set up a foundation endowed with
€50m to help disadvantaged youth. The
foundation also hands out an award for hu-
man dignity every year. Though initially
insisting this year’s awards ceremony
would go ahead, the Roland Berger Founda-
tion announced on October 21st that it
would be postponed until next year. This
year’s recipients, a Polish human-rights ac-
tivist and a German anti-racism initiative,
both said they would decline the prize. 7BERLIN
A star management consultant
discovers his father’s Nazi pastGermany’s painful historyGenerations at war