Bayer's CEO Expected to Face Tight Shareholder Vote on Friday

(Bloomberg) -- Bayer AG Chairman Werner Wenning threw his support behind embattled Chief Executive Officer Werner Baumann, defending the Monsanto takeover as shareholders upset with the deal air their concerns ahead of a crucial confidence vote.

Wenning and his protege Baumann sought to reassure stockholders even as hundreds of protesters outside of the annual meeting erected the CEO’s effigy from bales of hay and shouted “shame on you.” Inside, investors demanded explanations, with one likening the company to “a pile of broken glass.”

“The supervisory board is convinced that the strategy of management, including the takeover of Monsanto, was the right path,” Wenning said. “We have the fullest trust that Bayer under the leadership of Mr. Baumann will be very successful.”

Bayer is confident it will be able to reduce the legal uncertainty clouding Roundup, the controversial weedkiller inherited in last year’s $63 billion Monsanto acquisition, the CEO said. He vowed to continue to fight against the mounting wave of U.S. lawsuits claiming that glyphosate, the herbicide’s main ingredient, causes cancer.

Giant to Dwarf

The legal turmoil related to Roundup wiped away some 35 billion euros ($39 billion) in shareholder value. The impact on the stock has been “disappointing and painful,” Baumann said before facing hours of grilling from irate shareholders.

“Mr. Baumann, what have you done with our stable company,” said Joachim Kregel, a representative of German shareholders association SdK. In just two years, “the erstwhile pharma giant has mutated into a dwarf,” said Ingo Speich, chief of sustainability and corporate governance at Deka Investment.

The building hosting the event in Bonn, about 26 miles south of Bayer’s headquarters, was so crowded that latecomers were taken to an overflow space to watch the proceedings on screens.

There’s a 50-50 chance that a majority of investors at the end of the day will vote against absolving Baumann and other managers of responsibility for their actions last year, according to a person familiar with the matter, who asked not to be identified because the situation is private.

Baumann’s Future

A growing number of influential shareholders and proxy advisers have backed the protest vote. A loss in this traditional nod of confidence wouldn’t be legally binding, but would raise questions about Baumann’s future. Similar rejections have cost German CEOs their jobs.

“The Monsanto takeover represents a rupture in Bayer’s corporate history,” said Janne Werning, an environmental, social and governance analyst at Union Investment, which won’t back management in the vote. “It’s reasonable to question whether it can turn into a success story. Because even as the industrial logic of the deal remains to be proven, the legal and reputation risks have already materialized.”

Even an approval rating below 80 percent would be a blow to Bayer’s management. Former Deutsche Bank AG co-CEO Anshu Jain stepped down in 2015 after a 61 percent approval vote from investors.

A spokesman for Bayer declined to comment on shareholder votes. The company has defended the Monsanto acquisition and said its executives diligently reviewed the risks connected with Roundup. It has consistently said there’s no scientific proof that glyphosate causes cancer.

Bayer said a majority of shareholders voting not to endorse its managers’ actions at such a meeting hasn’t happened in at least 20 years, and possibly for its entire history.

Top shareholders have stopped short of calling for Baumann to be replaced. A new leader from outside Bayer would need too much time to get oriented, according to Deka’s Speich.

The supervisory board is facing a similar no-confidence ballot Friday, but may find more shareholder support, because proxy advisers split on whether they should be discharged of responsibility. Wenning, a former Bayer CEO and Baumann’s mentor, was also an important architect of the Monsanto deal.

To contact the reporters on this story: Tim Loh in Munich at tloh16@bloomberg.net;Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade

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