In Berlin, at Dehomag, all hell broke loose.
IX. THE DEHOMAG REVOLT
JUNE 10, 1940
Memo to Willy Heidinger
Re: Mr. Watson
I am setting up a confidential file in this matter… [and] sending you a copy of yesterday’s edition of the Volkischer Beobachter. It states that Mr. Watson has returned the medal, which the Fuhrer had bestowed upon him…. This stupid step of Mr. Watson’s opens up a number of possibilities. At the moment, we have decided not to start anything ourselves but will wait to see who might approach us, if anybody. It is not improbable that such a step may harm the company, and all of us, very seriously—sooner or later—since it must be considered as an insult to the Fuhrer and therefore the German people.
Mr. Hummel has been deliberating whether we can even continue in the management of the Dehomag in light of this deliberate insult…. I have assumed the position that our first duty and obligation is to place all our strength at the disposal of this enterprise which is so important for the conduct of the war. It is imperative that this company meet all the tasks that the German economy has imposed on it, particularly in time of war. Moreover, there is no reason to cause the Dehomag and its employees any harm merely because of the personal hatefulness and stupidity of one American.
It appears that Mr. Watson is surrounding himself with a group of Jews who fled from Europe…. It appears that the influence of these Jews, in addition to the anti-German Jewish and other lies in newspapers, are beginning to affect his mind and to impede his judgment. Even if he [Watson] should have pretended friendship for Germany and if his true opinion did not become apparent until now, it is evident that this act is terribly inane, looking at it from a purely commercial point of view. It seems Mr. Watson, with great vanity, wants to insult the Fuhrer of the German people, but he does not realize that there can only be one result of this act, if there is any at all, namely, that Mr. Watson’s personal economic interests can be affected.
Nevertheless this step is indicative of the great excitement in America; therefore the danger that America may enter the war is somewhat closer. If this should happen we would have to examine the possibility of separating ourselves from [IBM] America in view of the new conditions. Naturally the Economics Ministry will examine carefully whether Germany receives more royalties from America or vice versa…. we would welcome it if the royalty agreement between Dehomag and IBM could be dissolved entirely. One could assume the position that the mutual contributions should stop with an exchange of patents…. Therefore, if we renounce any further contributions [from IBM NY], no royalties should have to be paid in the future. The IBM interest in the Dehomag would then have to be transferred into German hands in some form or other…. Savings of royalties could be paid into a war fund and at a future time the rentals could be lowered to correspond to the present royalty.
In any case I have the feeling that Mr. Watson is sawing the branch on which he and his IBM are sitting.
The war was on.
Nazism’s favorite capitalist had fallen from the Reich’s imagined cloud line. By returning the medal, Watson had turned on der Fuhrer, insulted the German people, and proved that IBM was no longer a reliable ally of the Third Reich. Everywhere among the insider echelons of Nazidom and German media, Watson’s name was reviled. Hitler’s personal paper, Volkischer Beobachter, declared that the “vultures of profit smell the fry,” adding with regret, “it might have been expected that… Thomas Watson would have a broader outlook than the hate-blinded Jewish editors and journalists.”2
Nazi castigation was not limited to the Greater Reich, but was broadcast by German radio and newspapers in the invaded countries as well. Quickly, IBM managers in occupied Czechoslovakia, Poland, Norway, and other Nazi-dominated lands learned of Watson’s affront. They felt the impact immediately as their German customers, corporate and government, expressed displeasure. Fascists in other Axis countries were equally offended. Mussolini’s people in Rome were furious with Watson Italiana, summoning the subsidiary’s director to a formal reproach.3
All the suppressed but long festering resentment at Dehomag now coalesced into a unified list of grievances. Dehomag was a German company that Watson stole. IBM NY represented foreign domination and therefore the very antithesis of National Socialist doctrine. The American parent company was charging exorbitant royalties and reaping huge profits, thereby exploiting the German nation. Most of all, Heidinger hated Watson. It all became a single impetus for open corporate rebellion.
The backlash was immediate. In Dehomag’s Lichterfelde office, Watson’s picture was removed from the wall. Stuttgart employees did the same. In the Hamburg, Frankfurt, and Vienna branches—and ultimately in every one of the German subsidiary’s offices—the pictures of Watson were quickly taken down.4 That was only the beginning.
Spurred by equal parts personal greed and Nazi fervor, Heidinger and Rottke began scheming to completely eliminate IBM NY’s influence from Dehomag’s realm. Step-by-step, they would now pressure IBM either to sell the subsidiary to German nationals, or at least reduce the foreign ownership from a majority to a minority. Ousting his personal representatives from the Berlin subsidiary’s board of directors would also end Watson’s micro-management of Dehomag operations. Plain and simple: Heidinger, Rottke, and Hummel now saw Thomas J. Watson and IBM NY as little more than a foreign nemesis—a nemesis they were determined to cast off.
To begin his putsch, Heidinger retreated into a precise reading of German corporate law. On July 1, 1940, he sent a registered letter to IBM Geneva convening a special board meeting to discuss the crisis caused by Watson’s insult to Hitler and to expel IBM NY’s representative, Geneva-based John Holt, from the three-seat board.5
Using charged language, the meeting agenda declared that Holt would be “eliminated” by a vote of the local board because he was an absentee director and thereby “prevented from fulfilling his obligations.” IBM responded to the challenge with coolness. Geneva cabled a power of attorney to IBM’s local representative, Albert Zimmermann, authorizing him to discuss the issue, of course, but then to vote IBM NY’s majority against replacing Holt.6
Insufficient, declared Heidinger. Under a strict reading of German corporate law, a power of attorney required a certain sworn written form, and an authorizing cable alone was legally unacceptable. On July 15, Heidinger convened a brief sixty-minute board meeting, disallowing Zimmermann’s dissenting proxy. Then the two resident board members, Heidinger and his brother-in-law, Dr. Gustav Vogt, voted Holt out. “All persons present agree that it is advisable to straighten matters,” the rebellious German board resolved by “the elimination from the board of directors of Mr. Holt…. Considering the present situation… all persons present propose a personality [as a replacement] who is also esteemed by the German [authorities].” Technically, however, with Zimmermann’s proxy disqualified, a voting quorum was not present. Therefore, while Holt could be voted out by the board alone, his replacement could not be properly voted in under German law except by the stockholders themselves. IBM was the largest, holding percent.7
Knowing Watson’s proclivity for hiring lawyers to defend hairsplitting legal positions, Dehomag adhered to the explicit letter of the law. Heidinger scheduled another immediate meeting, just two weeks later, on July 29, to elect the “replacement of the eliminated member, Mr. Holt,” as the board minutes phrased it. Under German corporate law, the minutes noted, if IBM declined to provide a proper written proxy for the second meeting, then the token minority 15 percent ownership—that is, Heidinger, Rottke, and Hummel—could vote in whomever they wished to replace Holt.8 Doing so would neutralize Watson.