Infineon proxy contest opens new chapter in German corporate governance

Hermes, the fund manager owned by British Telecom Pension Scheme, has filed a shareholder countermotion in which it calls for shareholders not to elect Klaus Wucherer as the Chairman of the Supervisory Board but to appoint Willi Berchtold instead.

Mr. Wucherer has served on the Supervisory Board since 1999 and hence contributed to its work and decisions, which, according to Hermes are one of the main cause of the company’s difficult situation and the destruction of shareholder value. In Germany, the Supervisory Board is responsible for strategic and investment decisions as well as for appointment of the Management Board.

Moreover, Wurcherer is a former Executive Vice-President of Siemens, and has agreed to pay €500,000 to Siemens (his former employer) as out-of-court damages over an alleged breach of supervisory duty relating to a bribery scandal at Siemens. This, however, according to Hermes, does not play any role in the proposal.

The alternative candidate, Willi Berchtold is a member of the Management Board of ZF Friedrichshafen AG, responsible for finance, controlling and IT. He is also Chairman of Supervisory Board of Bundesdruckerei GmbH, and a member of the Supervisory Boards of Lufthansa Systems AG, Software AG, SupplyOn AG, ZFSachs AG and of several companies of the ZF Friedrichshafen Group.

Infineon has not yet commented on Hermes’ action, it limited itself to the statement that the documents received from Hermes were forwarded to the legal department, where they are now being reviewed.

Taking into account that at the previous AGM, the Supervisory Board was discharged from liability by only a marginal majority (52.9%), Hermes stands a good chance to have its countermotion approved. Additionally, as reported by Financial Times Deutschland, although Hermes holds less than a 3% stake in Infineon, it has excellent relations with major investors. The proposal is gaining broad support from investors and shareholder organisations, including DWS Investments (a subsidiary of Deutsche Bank) and Vereinigung Institutionelle Privatanleger (VIP – Association of Institutional Shareholders). VIP has also filed a countermotion, which is almost identical to the Hermes’ one (similarly to the Hermes’ proposal, Infineon has not yet disclosed the VIP’s motion on its website). Hermes has avoided entering binding agreements with other shareholders in order not to be considered to be acting in concert.

Hermes’ action opens a new chapter in German corporate governance. Not only are countermotions from institutional shareholders extremely unusual, but there has never previously been a “proxy fight” at a DAX30 constituent over the appointment of a member of a Supervisory Board.

Further Reading

Hermes – Press Release

Hermes Countermotion – Willi Berchtold – CV

Hermes Countermotion – English

VIP Countermotion

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