OREANDA-NEWS. The rapid development of energy technology in Germany during the 1880s and 1890s was accompanied by the appearance of numerous new electrical engineering companies, while existing companies expanded their activities. After almost 40 years of continuous market leadership, Siemens & Halske was now being challenged in particular by the Electricitats-Aktiengesellschaft vorm. Schuckert & Co. (EAG) and the Allgemeine Elektricitats-Gesellschaft (AEG).

The expansion of the new competitors was primarily due to so-called “entrepreneurial business.” Many local authorities, skeptical about the new power generation and transmission technologies and inexperienced with the costs of major heavy current projects, were hesitating to award contracts for the electrification of municipal infrastructure. As a result, an increasing number of suppliers were being forced to function as general contractors and invest large sums in the building and operating of electric railways, power plants and lighting systems. In a letter to his brother Carl in May 1890, Werner von Siemens complained that, “A lot of money is necessary for business now […]. The good times when we were awash in state money are unfortunately over.” The need for considerable amounts of long-term capital conflicted not only with the security-oriented financial policy of the firm’s founder, with an emphasis on entrepreneurial independence, but also with the limited financial means of the owner family.

In order to expand the capital base, Carl von Siemens proposed turning Siemens & Halske into a stock corporation. The entrepreneur, who lived in Russia, was convinced that “a stock corporation […] would be much more powerful than a private business. This is because it would have numerous associes, who would all have a certain interest in protecting it and directing business to it. Without the help of its shareholders, the Allgemeine [the AEG] would have been unable to become so large and powerful in such a short time.” He repeatedly urged Werner von Siemens to think “the matter over seriously.” Without success. Right up until the end of his life, the firm’s founder resisted the idea of changing the legal form of the company. His fear that the family’s overriding influence could diminish with the transition from a general partnership to a stock corporation was simply too great.

Internal memorandum to the employees of Siemens & Halske, June 18, 1897

In 1890, the 74-year-old pioneer of electricity officially withdrew from the company. When he handed the company over, it was changed into a limited commercial partnership. His brother Carl and Werner’s sons Arnold and Wilhelm von Siemens became personally liable partners, in other words the proprietors of the business. The latter finally took the advice of his uncle and converted the company into a stock corporation. The stimulus for this decision however came from Emil Rathenau’s plans to merge AEG and the “Union Elektricitats-Gesellschaft” which had been founded in 1892, which would have led to Siemens & Halske losing the support of almost all the large Berlin banks. The Deutsche Bank was prepared to thwart the merger by refusing to cooperate, but only on condition that Siemens & Halske was converted into a stock corporation.

Official notification of the conversion into a stock corporation, July 3, 1897

The formal founding of Siemens & Halske AG took place on July 3, 1897 with effect from August 1, 1896. The assets and liabilities of Siemens & Halske were converted into shares of the new stock corporation valued at 28 million marks. Further shares at a nominal value of seven million marks were taken over by individual members of the Siemens family, who thus held the entire share capital. The first meeting of the Supervisory Board took place on July 2, 1897 - “sole members: Uncle Carl, Arnold, [Carl’s son] Werner, me” as Wilhelm von Siemens noted in his diary. The “senior head” of the company, Carl von Siemens, was appointed chairman of the Supervisory Board, and was to remain in this position for seven years. In 1904 he withdrew from the company for health reasons.