Bayer Faces Turbulent AGM

25.04.2019 -

Bayer’s annual general meeting on Apr. 26 is likely to be one of the most turbulent in its history. Shareholders have a number of reasons to be dissatisfied, and at the first meeting since the $63 billion acquisition of Monsanto last year at least two influential institutional investor groupings have signaled they will not vote to discharge CEO Werner Baumann or the supervisory board of responsibility for the decisions made in 2018. Others have called for a vote of no confidence.

Despite saber rattling, votes against management are rare at German shareholders’ meetings, so that most observers do not expect any threats to Bayer’s executive or non-executive directors. Depending on how high the heat is turned up verbally, however, it could get uncomfortable in the former German capital of Bonn.

No one as yet has called for the CEO’s resignation, but an approval rating below 80% would be “damaging to the reputation of Bayer’s management,” Ingo Speich, head of Deka Investment, one of the company’s top ten shareholders with an estimated 1% of its capital, commented in a newspaper interview.

With the company facing challenges on several fronts beyond the Monsanto litigation, a new leader from outside would need too much time to get oriented, Speich added.

According to the Reuters news agency, citing people familiar with the matter, Bayer’s largest shareholder, the Blackrock fund – which manages from 6.4% to 7.2% of the company’s capital, depending on who is counting – intends to abstain from the vote over discharging the boards.

Most of the dissatisfaction with Bayer’s current course stems, as could be expected, from the Monsanto acquisition and its fallout.  Investors are unhappy in the first place about the two first-instance losses in US lawsuits alleging that Monsanto’s Roundup herbicide causes cancer. If the verdicts stand, despite appeals, this could cost the company almost $160 million.

With negative publicity from the litigation already having shaved €35 billion ($40 billion) off Bayer’s corporate price tag, the supervisory board’s vote to increase the CEO’s bonus by 28% to €1.7 million has not gone down well.

Some investors have criticized the board for passing the increase without a shareholder resolution at a time when one grouping said Bayer faces “unprecedented potential financial and reputational damage.”

As if that were not enough, management has also announced a broad-sweeping plan to cut a tenth of the company’s workforce, with most of the job losses planned to hit Germany. This would diminish Bayer’s imprint in Germany while raising its profile in the US.

“A little more empathy (from Baumann) could be helpful to soften the impact of the Monsanto deal on shareholders,” said Christian Strenger, former CEO of Deutsche Bank’s DWS investment arm.

Another verdict against Monsanto in France

Amid the unrest over the ongoing litigation in the US, a recent Monsanto-related development in France has flown somewhat under the radar.

In mid-April, a French court upheld a 2012 guilty verdict against the US company in a lawsuit brought by a grain farmer, Paul Francois. The farmer reportedly suffered neurological damage after accidently inhaling fumes from a vat containing the company’s monochlorobenzene-based Lasso herbicide in 2007.

Francois, who sought damages equivalent to $1.13 million, has been embroiled in litigation with Monsanto for 12 years, reports said. The 2012 decision, in the third instance, was the first to go against the company worldwide.

In a second session, the French court will decide on the amount of damage Bayer, as Monsanto’s legal successor, must pay. It has already ordered the company to cover the farmer’s legal fees of €50,000.

The herbicide was legal in France at the time but had been banned in 1985 in Canada and in 1992 in Belgium and the UK. Francois argued that Monsanto was long aware of Lasso's dangers long before it was withdrawn from the French market

In its verdict, the French court said the US agrochemicals giant should have clearly indicated on Lasso's labeling and instructions for use "a notice on the specific dangers of using the product in vats and reservoirs. A farmer is not a chemist,” it added.

Bayer is believed to be weighing an appeal to the Cour de Cassation, Frances highest court.