Lufthansa said on Monday it would press ahead with moves to install Wolfgang Mayrhuber, the airline’s former chief executive, as chairman, just hours after saying he had withdrawn his candidacy in the face of investor opposition.
In two statements on the eve of the shareholder vote to appoint Mr Mayrhuber, the airline first said Mr Mayrhuber had chosen to withdraw his candidacy “due to criticism from shareholders regarding his nomination”. Less than 12 hours later, it issued another statement saying Mr Mayrhuber had changed his mind.
The dispute about Mr Mayrhuber’s appointment highlights an ongoing schism between German and foreign shareholders on the importance of independent voices among non-executive directors. A similar debate in 2011 at Deutsche Bank led Josef Ackermann to abandon plans to step up to the board.
Institutional Shareholder Services, the corporate governance adviser, had advised shareholders to vote against the Lufthansa appointment.
In its second statement, Lufthansa said Mr Mayrhuber was asked by the supervisory board to press on with his candidacy and he had won the backing of “key investors”.
“The initially different indications were caused by voting recommendations that are unsuited to Germany’s two-tier corporate governance system,” Lufthansa said. Half of supervisory boards at big German companies are made up of employee representatives, with the other half elected by shareholders.
The practice of switching from chief executive to chairman of the supervisory board used to be commonplace at German companies, but corporate governance reforms have introduced a recommended two-year “cooling off” period for executives that want to make the jump.
Although Mr Mayrhuber, who stepped down as chief executive in 2010, had completed such a period, he serves on the supervisory boards of several other large companies, including BMW, the carmaker, Munich Re, the reinsurer, and chipmaker Infineon, where he is chairman.
ISS said in its voting advice, dated April 15, that it considered a five-year cooling-off period reasonable and that Mr Mayrhuber held too many board positions.
Hans-Christoph Hirt, a corporate governance expert at Hermes Equity Ownership Services (EOS), said the episode showed that German companies had yet to learn to involve major shareholders in discussions about changes to the board at an early stage.
“Companies should have learnt this by now,” he said. “In the UK, a chairman would come and visit major investors when thinking about the profile of candidates and putting a list together. That doesn’t happen in Germany, even when there could be controversy, unless you ask.”
In contrast to ISS, Hermes EOS, which advises a group of investors holding a stake in Lufthansa, had decided to support Mr Mayrhuber’s nomination after talking to the outgoing chairman, Jürgen Weber, about the composition and renewal of the board in November. It decided that Lufthansa’s restructuring and industrial action problems meant that the company needed a chairman who knew the operation very well.
Mr Mayrhuber stood down this year from the board at UBS, the Swiss bank, where he headed the corporate responsibility and pay committees, apparently in preparation for the new Lufthansa role.
Mr Weber, 71, has been at Lufthansa for 46 years and served as chief executive before becoming chairman in 2003.
ISS also advised Lufthansa shareholders to vote against the appointment of Werner Brandt, chief financial officer at software group SAP, to the Lufthansa board since he would then hold three supervisory board seats alongside his SAP job. ISS also noted that Lufthansa was an SAP customer and sold SAP software and services through its Lufthansa Systems subsidiary.
In the last big shareholder rebellion in Germany, Mr Ackermann had been chief executive at Deutsche Bank for almost a decade when it announced he wanted to become supervisory board chairman.
Additional reporting by James Wilson in Frankfurt
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