VIPsight - May 2012

COMPANIES

BASF buys back its own shares

At the Annual General Meeting in late April, BASF obtained new approval from the shareholders to buy back own shares. The group had in the years 1999 to 2008 collected nearly 29 percent of the outstanding shares, before the programme was briefly interrupted. The buyback will serve to optimize the cost of capital.

Resistance to discharge for the Supervisory Board

Many investors and shareholder associations are bringing motions at the General Meeting on 31 May to deny the Supervisory Board of Deutsche Bank discharge for 2011. British investment company Hermes criticized the occupation of the top positions as “poor”. The mismanagement was unique on an international comparison, Hans-Christoph Hirt, manager at Hermes, told the FAZ. Though Hermes holds only about half a percent of the bank’s capital, it advises many large investors and could thus exert influence on voting behaviour. The investment adviser criticized on the one hand how the succession to Josef Ackermann was regulated - the bank had taken a very long time over the appointment of the Jain/Fitschen board duo. The former chief executive Josef Ackermann, whose direct move to the Supervisory Board, against good corporate governance, had been planned but ultimately failed due to resistance from shareholders, investors and shareholder advisory firms like Glass Lewis and the U.S. ISS (Institutional Shareholder Services), would apparently have preferred Bundesbank Ex-President Axel Weber as successor CEO. This toing and froing, and the public speculation over alleged recruitment decisions, had done the bank’s reputation a disservice. The messy search for a successor for Ackermann had damaged the bank, investor advisors Glass Lewis and Ivox of Karlsruhe also criticized.

Second, no shareholder vote had been obtained for the new management compensation system. At the 2010 Annual General Meeting 42 percent had still voted against it. Hermes is also displeased at the high risks of numerous reputation-damaging legal battles in the United States and Germany, regardless of the outcome of the trials. In addition, the transactions with cluster-bomb producers testified to a lack of environmental and social governance. Glass Lewis also recommends shareholders to vote against the appointment of KPMG. The reason given for this is an investigation by U.S. authorities against the accounting firm where the firm admitted wrongful action. This was reason enough to replace the auditor, says the shareholder advisory firm. Additionally, there are soundly reasoned counter-motions from Legal & General Assurance (Pensions Management) Ltd and the Cologne Vereinigung Institutioneller Privatanleger (Association of Institutional Private Investors) VIP, which also call in question the Supervisory Board’s leadership and consider the discharge issue to be critical. Citigroup shareholders have already refused discharge to the DB’s CEO, against many decades of tradition. Union Investment finds the counter-motions understandable, but wants to wait with the decision. Discussions with the Frankfurt financial institution are ongoing.