Deutsche Telekom shares plunged in value yesterday in anticipation of today's showdown between chairman Dr Ron Sommer and Telekom's supervisory board.
Shares in Frankfurt fell 14 per cent to €10.45 as expectation grew that the board would try to fire the company's chief executive who has run up debts of €67 billion and overseen a 90 per cent collapse in company share value.
Dr Sommer's future took on a political dimension last week when the federal government, the largest Telekom shareholder with a 43 per cent stake, withdrew its support for the chief executive.
The boardroom battle, unusual in the gentlemanly world of German business, could turn ugly today if, as reports suggest, Dr Sommer refuses to resign.
In that case, he would have to be removed by a two-thirds majority of the supervisory board.
The board comprises 10 employer representatives drawn from German industry and 10 employee representatives.
German government claims of a secure majority began to ebb away yesterday as opposition grew to the proposed new chief executive, Mr Gerd Tenzer, head of the company's technological arm.
Mr Tenzer (59) has worked at Telekom for 30 years and was the only candidate that was acceptable to the board's employee representatives.
But some employee representatives expressed unhappiness yesterday at the decision facing them today.
"It has not been made clear to us why exactly Dr Sommer has to go now," said one worker representative.
Dr Sommer received a boost yesterday when Goldman Sachs, one of Telekom's leading investment banks, criticised the plans to replace him.
"The essential element of the successful execution of [future plans] is the continuity of Deutsche Telekom's management," said Mr Henry Paulson, chief executive of the bank.
If the board fails to achieve a two-thirds majority to fire Dr Sommer, the chief executive could turn the tables and replace the board members. Already some board members have threatened to resign if Dr Sommer goes.
Yesterday, Chancellor Schröder denied that he had intervened in the search for a new Telekom chief executive.
"Chancellor Schröder remains convinced that responsibility for personnel decisions belongs solely to the responsible supervisory board of Telekom," said Mr Uwe Karsten-Heye, the government spokesman.
But there is little doubt that the government took a renewed interest in Dr Sommer's fate after the opposition Christian Democrats (CDU) turned Telekom shares into an election issue.
Some 70 days before the general election, the Social Democrat-led government decided that getting rid of Dr Sommer was the best way to appease around three million small investors whose Telekom shares have slumped below the 1996 issue price.
The CDU, leading by 4 per cent in opinion polls, continues to make political capital out of the affair.
Yesterday, Ms Angela Merkel, the CDU leader, said Mr Schröder had handled matters in an "amateurish and bungled way".
Telekom took a swipe at the federal government in a full-page newspaper advertisement yesterday. In the first quarter of 2002, Telekom revenues grew by 15 per cent, "much stronger than German economic growth of just 0.9 per cent", the advertisement said.
