Some shareholders still chafe at him and his work.
(Photo: imago images/sepp spiegl)
Dusseldorf The Bayer board of directors around CEO Werner Baumann should be spared another vote of confidence from the shareholders. In current reports, the two leading Anglo-American shareholder advisors ISS and Glass Lewis have spoken out in favor of relieving the management of the group at the upcoming annual general meeting. However, both oppose the compensation package for Bayer management.
The discharge of the Board of Management and the Supervisory Board is justified because there are no indications that the two bodies have not fulfilled their fiduciary duties in 2021 – even if this is not without concerns, writes ISS in the analysis of the Bayer Annual General Meeting on April 29. Glass Lewis made a similar statement.
Although the judgment of the two proxy advisors is not binding, experience has shown that many foreign fund companies follow their recommendation. The vote of ISS and Glass Lewis is therefore decisive in corporations with a wide range of shares and a high proportion of Anglo-Saxon shareholders.
The Bayer Board of Management and especially CEO Baumann felt this at the shareholders’ meeting in 2019, when the discharge did not find a majority and the owners thus lost their confidence in the management. In doing so, shareholders vented their anger at the huge drop in the value of Bayer stock after the Monsanto takeover and the subsequent legal risks from the glyphosate lawsuits, which cost billions.
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Alatus Capital has submitted a corresponding counter-motion
The Bayer supervisory board backed the board of directors at the time, allowing Baumann to remain in office. But some of the shareholders are still rubbing against him. The Swiss fund company Alatus Capital is opposed to the discharge at the upcoming general meeting (AGM) and has submitted a corresponding counter-motion.
The debate about the Bayer boss was recently fueled primarily by statements by Bayer’s major shareholder Temasek, who owns four percent of the shares. According to financial circles, the sovereign wealth fund from Singapore made its criticism of the board of directors and Baumann in particular clear to Bayer supervisory board chairman Norbert Winkeljohann a few weeks ago and apparently called for a new appointment to the top management.
The move came as a surprise because Temasek describes his investments with an investment horizon of decades. The portfolio managers are currently still in the red with the Bayer investment. The sovereign wealth fund increased its stake in 2018 at a time when the share was trading between 80 and 90 euros. In the meantime, the price has fallen to 45 euros.
However, Bayer stock has been one of the strongest values on the European markets for a few weeks, has gained 40 percent in value since the beginning of the year and is currently trading at EUR 67. Bayer’s supervisory board recently renewed its “unreserved confidence in the work of the board of directors under the leadership of the chairman of the board” in a letter.
Temasek may vote against the discharge, and a report by the Bloomberg news agency even spoke of a vote of no confidence. So far, no such application has been submitted for the AGM at the end of next week.
Finally getting rid of the legal risks of selling glyphosate
Success would be very uncertain. Because even before ISS and Glass Lewis, leading German fund companies have spoken out in favor of exonerating the Bayer board of directors, including Union Investment and DWS. The small shareholder representative DSW also expressed the same opinion. They all currently see no point in a change in leadership.
However, this is linked to the order to Baumann that Bayer finally eliminates the legal risks arising from the sale of glyphosate in the USA. The Group settled most of the existing lawsuits from private users with an out-of-court settlement. It costs the company more than ten billion dollars.
In the current report, ISS also criticizes Bayer for handling the lawsuits. The group dealt too late with out-of-court settlements. The voting rights advisors therefore combine their support for the board of management with conditions: In future, a vote against the Bayer management could be recommended if the company does not make any progress towards ending the legal dispute.
Both proxies are clearly opposed to the compensation report for Bayer executives and recommend that shareholders vote against it. The adjustments to short-term bonus payments have resulted in payouts that do not accurately reflect company performance, ISS said.
Glass Lewis criticizes that the remuneration system does not take into account possible fines from pending glyphosate lawsuits. A rejection of the remuneration report by the shareholders would have a signal effect, but no direct consequences, as their vote is not legally binding.
More: “That would only bring chaos” – shareholders against dismissal of Bayer boss Baumann