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The management and board of the German conglomerate Bayer are under enormous pressure to regain the confidence of shareholders after a staggering vote of censure Friday against the leaders of the company, unprecedented in the history of the German company after the war .
Investors have expressed dissatisfaction with the 38% fall in Bayer share price since the conclusion of its agreement on the acquisition of US rival Monsanto last year. Formerly one of the most profitable companies in Germany, Bayer only represents the $ 63 billion it paid to the US seed giant.
The German group of chemicals containing aspirin and culture has been facing growing legal problems regarding glyphosate, a herbicide marketed by Monsanto under the brand name Roundup. Last month, a San Francisco jury discovered a direct causal link between glyphosate and cancer. At the last count, Bayer was facing 13,400 lawsuits related to glyphosate.
Ingo Speich, head of sustainable development and corporate governance at Deka Investment, one of Bayer's top 10 shareholders, said the company should now "touch investors".
"They have to prove that they are in control of the situation, that the integration of Monsanto is working and to achieve better results in the pharma division," he told the Financial Times. Bayer must also, he said, clarify more clearly the extent of potential legal damages incurred by glyphosate. "If they stick to the status quo, shareholder pressure will only grow."
Janne Werning of Union Investment, another Bayer shareholder, said investors were "extremely unhappy with the legal and reputational risks and the massive decline in [Bayer’s] price of the action ". But he added that the management and the board had "a second chance to control the risks and bring the company back to a path of stable growth".
In a rare act of insubordination, the majority of Bayer shareholders at Friday's AGM refused to "resign" from management. The vote against "Entlastung" or the discharge is one of the most powerful forms of protest for investors under German law. Bayer's director, Werner Baumann, is the first serving executive of a company listed in Dax to undergo such a vote of confidence.
Normally, the discharge vote is a formality, the management regularly obtaining the support of more than 90% of the shareholders with voting rights. If they collect much less than that, they often have problems. Shortly after 39% of investors voted against the resignation of Deutsche Bank's management in 2015, co-CEOs Anshu Jain and Jürgen Fitschen were forced to step down.
On Friday, 55.5% of investors voted against the ratification of Mr. Baumann and his team. Bayer executives were also affected by the revolt: only 66% of those polled voted in favor of the resignation of the council.
The vote is not legally binding and few observers expect a change of direction after the revolt. At an extraordinary meeting on Friday night, Bayer's board of directors said it "sank unanimously behind" management, according to a company statement.
The statement acknowledged that a number of shareholders had asked if Bayer management had properly assessed the legal risks related to glyphosate, but the board of directors "is satisfied that this is the case".
Others have agreed that Mr. Baumann should not lose his job. "It would plunge society into chaos," Speich said. "The next CEO would take a long time to learn the basics of the business, at a time when they need to integrate Monsanto and their pharmaceutical pipeline is coming to an end."
Mr Werning, of Union Investment, also said that a change of management would "increase the risk of break-up" of Bayer and "therefore would not be in the long-term investor interest".
Baumann defended the Monsanto acquisition on Friday, saying it had turned Bayer into the world's most influential agribusiness. The company was also starting to benefit from synergies of one billion euros a year, he said. He insisted that glyphosate was safe, "if used correctly".
But he acknowledged after the vote of discharge that he had some work to do to restore investor confidence. "We understand the mood of our shareholders and share their disappointment at the changing course of our company's action," he said in a letter to staff quoted in the German press. . "Of course, we will work very hard to regain the confidence of shareholders."
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