Bayer Mounts Damage-Control Effort After Roundup Verdicts

(Bloomberg) -- Bayer AG has mounted a campaign to reassure staff and shareholders that it can contain fallout over its newly acquired weedkiller Roundup, even as an advisory group urged investors to protest management’s actions and pay.

Chief Executive Officer Werner Baumann held a conference call with employees around the world on Monday, assuring them that the 155-year-old German company will weather the challenge despite a second loss in U.S. courts, according to people familiar with the situation. Investor trust in Baumann is slipping, with proxy adviser Glass Lewis & Co. questioning his bonus and urging a vote of no confidence in him and other executives at Bayer’s annual meeting later this month.

Pharmaceuticals chief Stefan Oelrich held a similar conference call on Tuesday focusing on strategic priorities, said the people, who asked not to be identified because the calls were private. Other divisional managers also conducted briefings, according to one person.

The internal damage-control initiative comes as Baumann prepares for the April 26 meeting of shareholders angry at how the company’s fortunes have faltered since it completed the $63 billion acquisition of Roundup owner Monsanto last June. The shares have dropped about 40 percent since then, wiping out more than 35 billion euros ($39 billion) in market value.

A Bayer representative declined to comment on internal communication. The company has repeatedly said it will defend Roundup vigorously and that scientific studies have shown its key ingredient, a chemical called glyphosate, to be safe. More than 11,200 lawsuits in the U.S. seek to link the herbicide to cancer.

Harsh Rebuke

German shareholder gatherings are popular and occasionally fractious affairs: thousands of investors plunder the buffet, and CEOs are grilled on minute details of the company’s performance for the better part of a day.

In one sign of shareholder protest at Bayer, corporate governance expert Christian Strenger, a former CEO of DWS Investments, has filed a motion proposing that management board members should not be discharged of responsibility for their actions last year. Should it pass, it would have few practical ramifications but would be a harsh rebuke for Baumann and other managers.

Bayer’s supervisory board has backed the CEO, writing in a response on Monday that he and other top managers “discussed the opportunities and risks of the acquisition very extensively and in numerous meetings and carefully weighed them against each other” before agreeing to buy Monsanto in September 2016.

Nonetheless, there’s potential for the glyphosate cases to further erode value for shareholders, Glass Lewis argued on Wednesday. The advisory firm counseled shareholders not to ratify Baumann’s actions, recommending a vote against ratifying the supervisory board’s decisions last year. Glass Lewis criticized the board for not seeking a more independent audit committee and for boosting Baumann’s cash bonus by 28 percent, to 1.7 million euros, for 2018.

“A limited reduction, rather than increase, in the CEO’s cash bonus would have represented a positive signal to shareholders,” Glass Lewis wrote.

Lawsuits Multiply

A Bayer representative declined to comment on the Glass Lewis recommendations, referring to the supervisory board’s previous statement in response to Strenger’s motion.

Bayer supervisory board Chairman Werner Wenning, who mentored Baumann and has been close to the CEO for decades, was also one of the main architects of the Monsanto deal. When Bayer agreed to the purchase in 2016, there were about 120 pending lawsuits over glyphosate, Roundup’s main ingredient, the German company said. That number has multiplied, and the company last month lost its second lawsuit over claims the weedkiller causes cancer.

In that case, a jury in San Francisco federal court awarded compensatory damages of $5.3 million and punitive damages of $75 million to a 70-year-old man who became ill after spraying the herbicide on his property for decades. The verdict followed a similar decision by a state court jury last summer. Bayer has appealed the earlier case and plans to appeal the more recent one.

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