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Defeat for Bayer: shareholders vote against board pay

Bayer

The defeat of the council was already evident.

(Photo: imago images / Ralph Peters)

Dusseldorf At Bayer’s annual general meeting, Bayer’s shareholders once again expressed their dissatisfaction with the legal burdens arising from the acquisition of Monsanto, which cost billions. On Friday they raised the board around CEO Werner Baumann with 83%. However, this was below the value achieved in the previous year. They also voted just as clearly against the Remuneration Report, which breaks down the Board’s Remuneration for 2021.

The stumbling block has been the short-term bonus payments to Bayer’s management team, some of which account for more than half of their total pay. The prizes in the millions are expected to be rewarded due to the fact that Bayer achieved good operating results last year. In the end, the short-term bonuses for the Executive Board were well 175 percent above the target values ​​indicated in the remuneration system.

However, it didn’t matter that Bayer paid more than four billion euros for out-of-court settlements to glyphosate plaintiffs in the United States last year. Because in calculating the bonuses for the Management Board, among other things, the cash flow adjusted to these charges was used. But this has been a bad thing for many funds and shareholders, who have been complaining about Monsanto’s weak stock market value and burden for many years.

It didn’t help that Bayer’s management repeatedly referred to the strong share price performance in recent weeks at the Annual General Meeting. The head of the supervisory board, Norbert Winkeljohann, told shareholders that the salaries of the board of directors were heavily based on performance and had suffered from weak stock market value last year. He thinks it makes sense that bonuses do not take into account any one-off effects, positive or negative, after all, the board does not benefit from billions of revenue from partial sales.

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Defeat has no legal consequences

But shareholders did not follow his reasoning and 75 percent rejected the remuneration report that was submitted. Janne Werning of fund company Union Investment assesses the payment outflows associated with the comparisons “as relevant to performance for the board of directors and would have welcomed these outflows while remaining in free cash flow.”

At the same time, several shareholders, such as Sparkassen-Fondgesellschaft Deka, complained that the remuneration of the board was based on too many short-term factors and had to be based on the long-term share price.

It was the first time that shareholders voted on a Bayer compensation report. This year, the new legal regulations will apply to all listed companies for the first time. And shareholders immediately took advantage of the new opportunities to express their opinion clearly.

The defeat has no binding legal consequences for Bayer. But Winkeljohann, Bayer’s chief controller, knows he can’t ignore the shareholder vote. Because the funds expect a reaction to their criticisms and threaten not to lift the supervisory board in the next year. Immediately after the vote, Winkeljohann promised to radically overhaul the compensation system.

Change will not be easy, especially since the general assembly passed the existing system by a large majority two years ago with the details now being criticized. Shareholders now expect that if additional money flows out of the company to settle Monsanto’s legal charges, it will be reflected in future board salaries.

The workers oppose the split

However, the annual general meeting also showed that shareholders see Bayer in better shape than in previous years. Management must now continue along this path, asked Marc Tüngler, general manager of the German Securities Association.

He doesn’t think much about dividing the pharmaceutical and agrochemical group, as does outgoing Bayer General Works Council Chief Oliver Zühlke, who is expected to hand over this post and deputy chairman of the supervisory board to Heike Hausfeld in a matter of days. According to Zühlke, a split would meet with great resistance from employees.

Bayer’s shareholders have high expectations that the US Supreme Court will finally put an end to the glyphosate case. This would be the case if the Supreme Court ruled in Bayer’s favor and then removed the basis for all lawsuits. But despite the first positive signs, it is entirely clear whether this will happen.

If the Court of Cassation accepted the appeal, it would have until mid-2023 to make a decision. In the event of a refusal, Bayer’s Plan B applies to future agreements. For this case the group had previously allocated 3.8 billion euros.

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