Munich An important preliminary decision has been made on whether Allianz boss Oliver Bäte’s contract will be extended or not. The supervisory board headed by Michael Diekmann gave Bäte the best rating of all Allianz board members for his performance last year.
Resistance to a new contract is therefore no longer to be expected from this body. This emerges from the annual report for the past year, which Allianz published on Friday. Bate’s current contract expires in September 2024.
With the so-called Individual Contribution Factor (IBF), an assessment of personal performance based on financial and non-financial goals, which the group’s supervisors distribute every year in a range between 80 and 120 percent, this time Bäte received 116 percent.
His salary for 2022 thus adds up to a total of 6.78 million euros. That is 2.5 percent less than in the previous year, which was mainly due to the mixed development of the share price.
The Allianz boss had been under massive pressure last year because of failed hedge fund speculation by the subsidiary AGI in the USA. Under the name Structured Alpha, major investors lost large sums at the beginning of the corona pandemic.
“Fast” and “Cautious” Approach to Structured Alpha Scandal
In May last year, the insurer pleaded guilty and agreed with the US authorities to pay a total of $5.8 billion in penalties and damages. Most of it went to aggrieved customers.
He has not yet succeeded in making the big leap. Steffen Weyl, fund manager at Union Investment, on Bäte’s achievements in digitization
As a result of this approach, the members of the Supervisory Board not only praised the renewed operating record result and the best performance in terms of brand strength, customer and employee satisfaction, but also emphasized Bäte’s role in overcoming the Structured Alpha scandal: “The rapid overcoming of the Structured Alpha Proceedings in the USA and the establishment of the partnership with Voya Investment Management to strengthen the US business of Allianz Global Investors are not least due to his prudent actions.
In the coming months, the Allianz boss will probably have to convince the supervisors of his vision of how he can lead the group with its almost 160,000 employees worldwide beyond the middle of the decade into the future. This question should be discussed in the coming months, according to the house.
By the turn of the year at the latest, a decision will be made as to what further cooperation could look like. “Bäte should further increase the focus of the business areas and profitability during a new term of office,” demands Andreas Thomae from the fund provider Deka, one of Allianz’s major shareholders. He sees high inflation as a major challenge for Bäte.
“Perhaps Bäte wanted too much when it came to digitization”
Other investors see a need to catch up with the three-year strategy presented at the end of 2021 entitled “Simplicity at Scale”. The main focus is on technological advances, more capital efficiency and simpler processes. Some things are still not working here.
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“With digitization, Bäte perhaps wanted results too much and too quickly,” says Steffen Weyl, fund manager at the cooperative Union Investment, evaluating what has been achieved so far. “He hasn’t yet managed to hit the big time.” In addition to the supervisory board, the major investors are important spokesmen when it comes to important personal details.
There are currently many indications that Bäte’s contract will be extended – but the duration is questionable. Because Bäte would be 59 years old at the end of his previous employment contract and would reach the age limit for Allianz board members of 62 three years later. So actually only a new three-year contract is possible. With another term in office, the current Allianz boss would then be in office for just as long as his predecessors Michael Diekmann and Henning Schulte-Noelle.
What would then still be possible after reaching the age of 62 is a further extension of the board activity by one year at a time – provided that both sides agree. This was the case for Sergio Balbinot, who left the Allianz board at the turn of the year at the age of 64. The Italian was valued for his great expertise in the Asian markets and was given a rating of 115 percent for his performance in the past year by the Supervisory Board.
age limit
62
Years
After that, it is only possible to extend your position on the board of Allianz in 1-year increments – theoretically up to the age of 67.
In the case of CEO Bäte, however, observers consider an annual extension from the age of 62, which could theoretically be continued up to the age of 67, to be unrealistic. Because, it is said, filling the position of CEO requires long-term planning security.
Hardly any competition in-house
However, it would also be possible that the insurer would question its age regulation when it came to extending Bäte’s contract. Deka fund manager Thomae advises this. “The age limit of 62 years is no reason why the contract with Bäte should not be extended by five years,” he says.
Both Deka and Union Invest are positive about a contract extension by three or five years. In contrast to the situation a year ago, when the effects of structured alpha investments were unclear, there is now little resistance from investors to a contract extension.
“He solved the problem of structured alpha in a solid way, his operational performance is good,” says Union fund manager Weyl, summing up positively.
The Allianz head of human resources is considered ambitious and also did very well in the assessment by the supervisory board.
(Photo: Alliance)
Finally, the question remains to be clarified as to whether there is competition from within the company to fill the chief post. But within the board, which was recently reduced to nine members, there is no one who openly intervenes against Bäte and even shows his ambitions.
Board members such as Renate Wagner or Andreas Wimmer are considered ambitious, but are keeping a low profile in view of the extremely agile Oliver Bäte. At least that’s what employees say.
Wagner received 114 percent from the supervisory board for her performance in the past year. The supervisors praised further improvements in strategic personnel planning and the support for employees through more flexible and modernized working environments. They also highlighted the consistent improvement in corporate governance and successful support for complicated transactions, such as the strategic partnership with Voya Investment Management.
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Wimmer was rated 112 percent for his performance. He not only received a lower grade than Wagner, but also compared to his board colleague Klaus-Peter Röhler (114 percent) as well as Giulio Terzariol, Christopher Townsend and Günther Thallinger, who each achieved 113 percentage points. So far, Wimmer has been considered more of an outsider when it comes to a possible Bäte successor. Nothing has changed with this rating.
“Oliver Bäte is perceived better abroad than in Germany”
It also remains unclear what Bäte wants after his previous contract has expired. “We all enjoy our work,” he said when asked about his personal future at the presentation of the balance sheet in February. Please wait. This leaves room for interpretation on all sides.
Employees report that Bäte really enjoys the large economic and political stage, such as that recently seen at the World Economic Forum in Davos. Appearances on American and English stock market stations are always a home game for the CEO, who speaks perfect English. It would therefore be quite conceivable that he would try to start again at international level.
“Bäte’s perception is better abroad than in Germany, for a German CEO he looks above average there and his international nature puts him well ahead of the curve,” says Union fund manager Weyl. The statement also suggests that Bäte’s perception in Germany is often different. It is not uncommon for outsiders to perceive him as “arrogant” because of his direct and sometimes quite brusque nature.
A move to the supervisory board after two years of cooling off is not ideal, and we would not welcome that in the case of Bäte either. Andreas Thomae from fund provider Deka
However, the idea that Bäte will resign as Allianz boss in the coming year in order to return as head of the supervisory board after the two-year cooling period required by law should be off the table. The resistance, especially from US investors, who are skeptical about this, is now too great, according to the company.
In the meantime, major German investors are also expressing concerns. “A change to the supervisory board after two years of cooling is not ideal, we would not welcome that in the case of Bäte either,” says Thomae von der Deka.
Supervisory Board Chairman Diekmann has been visiting investors in recent weeks and sounding out their opinions. He was particularly surprised by the fierce resistance of major Anglo-Saxon investors to such a solution, confidants report.
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