· Last Friday saw an unprecedented vote of no confidence with 55.5% of Bayer’s shareholders voting against ratifying management.
· The vote comes in the wake of Bayer’s share price falling 38% since its acquisition of Monsanto and the resulting legal issues surrounding its Roundup products and its links to cancer.
· Although not legally binding, the vote is seen as a call for management to appease shareholders by displaying that the Monsanto integration is working and that they fully appreciate the legal risks regarding glyphosate (Roundup).
Analysis and Comments
· The challenge facing shareholders in situations such as these is that they have no easy options other than to sell their shares.
· Replacing the CEO is a high risk strategy, in a company as complex as Bayer and at a time when it faces considerable challenges (both legal and in terms of integration).
· Shareholders would have to be very sure that change would bring positive mid term consequences before they acted. This is partly why nothing generally happens until the situation gets so bad that any change is better.
· Replacing some of the board would be less drastic, but with a two tier structure this is difficult to achieve in practice.
· The third, and in many cases the best option, is to lobby constructively behind the scenes for change – this can take time, considerable experience & patience, but ultimately it can produce a better outcome than a public fight.