Major shareholder Klaus-Michael Kühne insists on having a say at Lufthansa

So far, Gernandt, who also heads Kühne Holding, has not had a seat on the Lufthansa Supervisory Board. With the block of shares behind them, Kühne and Gernandt have become a counterweight for the power-conscious chief controller Kley. This raises doubts in business circles as to whether he will stand for re-election next year.

The 71-year-old is considering extending the contract again. But it’s not just Gernandt who’s having trouble with the chief inspector. It can also be heard among employee representatives that it is time for a change at the top of the supervisory board. Lufthansa has been the scene of numerous labor disputes between pilots, cabin crew and management for months. The pilots of the subsidiary Eurowings are currently on strike.

The examination board is the control center

For Lufthansa Supervisory Board Chairman Kley, the first meeting with Kühne must not have been very refreshing, even if afterwards everyone reported that the conversation had been good. Before the meeting, Kley had spread internally that he initially wanted to keep the new major shareholder and his emissary out of the inner circle of power, as reported by people familiar with the process.

Kley is of the opinion that new members of the supervisory body should only take on tasks in supervisory bodies after a certain “training period”. That’s why he was against Kühne’s confidante Gernandt coming straight to the audit committee. But in the course of the conversation, Kühne and Gernandt made it clear to him that they would not accept that.

Kühne wants to get into the control center of the aviation group. Gernandt will join the control committee and the audit committee at the latest at next year’s annual general meeting. The most important figures are discussed in the committee and the financial framework for the strategy is defined.

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In the corporate environment, it cannot be ruled out that Gernandt will even take over the management of the committee, even if this was probably not discussed at the meeting with Kley. This position has so far been held by the former BMW boss Krüger, who, according to unanimous statements from the supervisory board, is doing an excellent job. It is therefore also conceivable that Krüger can forward the committee.

The foreseeable dispute with the major shareholder puts a question mark over whether Kley will remain on the supervisory board. He has not yet decided on an extension, he says through a spokesman for the company. In anticipation of a possible extension, the previous age limit for inspectors was changed from 70 years at the time of the election in September last year. The requirements profile now states: “In principle, no persons should be proposed for election to the Supervisory Board who have already reached the age of 72.”

In staff circles, this change is called “Lex Dr. called Kley. The chairman of the supervisory board will be 72 years old on June 11 next year. Lufthansa’s Annual General Meeting is scheduled for May 9, 2023, before that. From the point of view of investors, an extension would still be possible, at least with a shortened term of office.

Union Investment and Deka Investment make their approval dependent on the candidate not being older than 75 during their term of office. “If Mr. Kley wanted to hold office for another five years, he would not be eligible for us next year unless he declares that he does not want to serve the full term of office,” says Ingo Speich, Head of Sustainability and Corporate Governance at Deka Investment.

However, Speich has problems with leading Kley at general meetings. “The way the shareholders were treated at the virtual Lufthansa general meeting was not right,” he says. The criticism applies not only to Lufthansa, but also to Eon. “Here, Mr. Kley’s handwriting can be clearly read. He heads the supervisory board in both companies.”

Investors want quick clarity about the future leadership of the supervisory board

In addition, the investors warn that clarity about the future management of the control body will soon be provided. The office of chairman of the supervisory board is a particularly important function, says Vanda Rothacker, ESG analyst at Union Investment: “The shareholders therefore need transparency at an early stage about what is planned here.”

There are potential candidates to succeed Kley. In the context of the supervisory board, the names of former Airbus boss Thomas (Tom) Enders and ex-BMW boss Harald Krüger have been mentioned for a long time. Both are already members of the committee. So far, Krüger has been reluctant to comment on the idea of ​​becoming chief inspector, it is reported.

So far, employee representatives have had concerns about Enders’ election. Enders is considered tough, not least towards unions. He was also the only one who voted against the rescue of Lufthansa through state aid in 2020. A refusal would have resulted in immediate bankruptcy. Enders cannot be enforced against the votes of the employee bank in the control committee. However, according to the workforce, the first employee representatives can now get used to the idea that Enders will take over.

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The employee representatives are obviously finding it increasingly difficult to deal with the chief inspector. “Mr. Kley guided Lufthansa through the company’s most serious crisis with a steady hand. But it’s time for a change at the top of the supervisory board,” says one employee representative, describing the mood.

A few weeks ago, at the annual strategy meeting of the board of directors and the supervisory board in Zurich, there was a heated argument between Kley and employee representatives. According to the stories, Kley had stated that the board had made no mistakes in the failed restart. These are mistakes. Management made decisions based on forecasts that later turned out to be wrong.

This caused irritation and opposition among employee representatives. Jörg Cebulla, flight captain and employee representative on the supervisory board since the end of 2015, is said to have spoken. It is reported in pilot circles that he explained from the perspective of a pilot how important it is to practice a culture of error. The discussion was said to be irritating for Lufthansa boss Spohr, who is a pilot himself.

Kley confirms the discourse on request. He wanted to address the fact that employee representatives who accused the board of directors of making mistakes during the restart did not address them at any time during the crisis in the control committee, he said through a spokesman. There was agreement that the management had guided the company well through the crisis.

Disputes like this show that Kley is now finding it difficult to get his views across to parts of the control committee. In addition, there are also problems with projects that the chief controller played a key role in initiating. The Lufthansa Group was to be converted into a holding company, with a structure that was also clearer for investors.

Holding restructuring will not come

But the project is off the table. A spokesman confirms this. The conversion turned out to be too complicated, mainly because of the traffic rights. The Lufthansa core brand is now to be given more independence as planned, but it will remain part of the Group. In contrast, the other flight operations such as Swiss, Brussels, AUA and Eurowings are independent companies located below the group.

In the end, the decision about Kley’s future on the supervisory board should be in the hands of Kühne and Gernandt. As the largest shareholder, Kühne will have the greatest influence with his votes at the next general meeting. “Two very power-conscious people meet, it can’t really go well,” says one manager.

In any case, from an investor’s point of view, there is nothing to be said against a reorganization of the control body of “Hansa”. “Basically, we are of the opinion that a shareholder who holds a correspondingly large stake in a company can also be represented on the supervisory board,” says Rothacker from Union Investment: “But it is important that the board as a whole is independent. That means at least 50 percent of the shareholder representatives must be independent.”

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