February 15, 2007 7:27 AM PST

SAP to keep its chief a bit longer

SAP has extended its chief executive's contract by 17 months, the company said Thursday, temporarily quelling concerns about the future leadership of the world's largest enterprise software company.

Chief Executive Henning Kagermann, whose career at the software giant has spanned a quarter of a century, will now continue his job through May 31, 2009. Previously, his contract was set to expire at the end of this year.

Henning Kagermann Henning Kagermann

"The supervisory board again has expressed its confidence in Henning Kagermann and recognized his extraordinary achievements in leading SAP's successful strategy of organic growth during his tenure," Hasso Plattner, chairman of the SAP supervisory board, said in a statement. "Under his guidance, SAP has significantly extended its global market leadership in the business software space while delivering breakthrough innovation in the software industry."

The decision to extend Kagermann's contract by more than a year, however, generated some heated debate among SAP's 16-member supervisory board. Some members wished to extend it by several years, according to sources familiar with the situation. The supervisory board, among other things, is responsible for selecting and renewing contracts of the company's top executives.

The sources said directors wanted Kagermann to extend his contract beyond a year partly because they have been pleased with his performance and partly because it's been difficult to choose a clear successor.

Leading candidates for the position include Shai Agassi, a fast-rising star responsible for SAP's global technology development, and Leo Apotheker, SAP's longtime worldwide sales and marketing executive.

Concerns were also raised that extending Kagermann's contract for a year would do little to minimize the distractions that a possible leadership change has created for employees.

But one source noted that the May 2009 extension, in practical terms, gives the company another two years with Henning before his contract expires. The source noted that the May 31 date for the contract's expiration coincides nicely with the company's annual shareholders' meeting. That's in contrast to the current practice of timing contracts to expire in December, possibly before executives have fully executed on the items and areas where they hold responsibility.

Henning has not indicated whether he plans to seek another contract extension beyond May 2009, but it is expected discussions on that issue will begin in earnest a year from now, sources said. SAP's executives and its supervisory board typically begin talks a year before a contract's expiration. As a result, a successor for Henning and accompanying succession plans have yet to be determined.

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