Schneider Electric, a prominent player in energy management and automation, has taken the unexpected step of dismissing its CEO, Peter Herweck, amid disagreements regarding the company’s strategic direction.
Herweck, who served in the position for 18 months, has been succeeded by Olivier Blum, the head of the company’s energy management division, to propel Schneider Electric into its next strategic phase, which focuses on enhancing its energy management and data center operations.
As a leading company, Schneider Electric holds firm beliefs about how data center electrical systems should adapt to meet the power requirements of AI, as highlighted by Network World in a report last month.
The board explained that “divergences in executing the company roadmap during a time of significant opportunities” were the driving factors behind Herweck’s departure.
“These decisions are effective immediately,” the company stated.
The sudden leadership shift has caught the attention of the industry. Although Schneider Electric has not elaborated on the specifics of the disputes, this action underscores the growing expectations placed on CEOs to achieve robust performance while maneuvering through intricate business landscapes.
“Details concerning the financial implications surrounding the dismissal of Peter Herweck and the appointment of Olivier Blum will be disclosed in accordance with relevant regulations and the corporate governance code AFEP-MEDEF that Schneider Electric adheres to,” the statement further noted.
Analysts expressed their astonishment regarding this decision by the French company.
“Considering the group’s financial results in recent quarters, the distinct strategy and objectives presented during the Capital Markets Day in November 2023, and the performance of the share price, this comes as a significant surprise,” analysts from JP Morgan noted in a client report referenced by Reuters.
The board of Schneider Electric attributed Herweck’s exit to “discrepancies in carrying out the company’s roadmap,” which he had proposed in November 2023, a mere six months after he took on the CEO role. According to sources, it appears he may have been slow in executing his own strategic plan.
“This morning, the CFO and Head of Investor Relations conducted a brief call outlining the Board’s belief that the strategy was not being executed as decisively or collaboratively as anticipated and that the CEO’s management style was not suitable,” JP Morgan remarked, as reported by Reuters.
In fast-paced and competitive environments, the need for speed and agility is paramount, especially in the company’s systems division that caters to the data center industry. This sector is now responsible for nearly a third of Schneider’s revenue and is expanding at 19% annually. The shift towards greener practices also opens new avenues for growth, particularly for businesses with a strong foothold in China.
The specific reasons for the board’s desire for quicker progress from Herweck remain somewhat ambiguous. Discussions regarding the acquisition of engineering software developer Bentley Systems concluded in May, potentially stalled by the family controlling the company’s hesitance to give up control. Like its rivals, Schneider Electric is eager to grow in the swiftly expanding software industry, which has seen significant transactions, such as Siemens’ recent $10.6 billion purchase of Altair Engineering.
Herweck may have encountered difficulties adapting to Schneider Electric’s decentralized governance and decision-making processes. His successor, Blum, has been with the organization for three decades, suggesting a preference for leadership that understands the company’s framework. Herweck’s previous role at Aveva, which was acquired by Schneider Electric in 2022, may have added complexity to his adjustment to working under Chairman Jean-Pascal Tricoire, who has firmly established views on the company’s path forward.
Moreover, Herweck’s brief time in the position was characterized by supply chain issues and recent regulatory scrutiny.
Nonetheless, Blum’s appointment hints at a renewed commitment to aligning Schneider Electric’s growth initiatives with the rapidly changing requirements of energy management and digital infrastructure.
Blum, who has dedicated over thirty years to Schneider Electric, possesses extensive knowledge in managing global operations. Previously, he led the energy management division of the company, which includes vital sectors like data centers. His extensive background in digital and sustainability-focused strategies is anticipated to bolster Schneider Electric’s goals of fostering AI-ready, sustainable infrastructures, such as data centers. His new role follows a successful career encompassing various executive positions, including Group Chief Strategy and Sustainability Officer, Country President for Greater India, and leadership roles in China.
As a prominent provider of energy management solutions, Schneider Electric plays a crucial role in data centers, which are becoming essential to AI and digital transformation efforts across various sectors. The company predicts that within the next five years, the energy needs for AI-enabled data centers will increase to approximately 10% of global electricity consumption, up from the current one percent. However, Schneider Electric faces challenges due to recent operational pressures, such as ongoing supply constraints and regulatory hurdles in Europe.
Earlier this month, French authorities imposed fines on Schneider Electric linked to a price-fixing investigation, though this was not associated with its data center operations. This adds to the company’s challenges as it strives to meet the rising demand for energy-efficient and AI-compatible infrastructure.
Blum’s recent appointment comes amid these challenges, placing the new CEO in a position to guide Schneider Electric through intricate operational and regulatory environments while seizing opportunities presented by the surging demand for data centers.
