Bayer CEO Wins ISS Backing But Glass Lewis Withholds Support

(Bloomberg) -- Two influential shareholder advisory groups are split on whether investors should support Bayer AG’s management at its upcoming annual meeting, a year after a damaging no-confidence vote.

Glass Lewis & Co. still sees risks brought about by Bayer’s takeover of agriculture giant Monsanto, advising shareholders to abstain rather than vote to endorse Chief Executive Officer Werner Baumann’s actions in 2019. While Institutional Shareholder Services Inc. recommended backing Baumann and his team, it expressed concern that litigation related to the Roundup weedkiller could further hurt the company’s value and reputation.

Bayer declined to comment on the advisory groups’ recommendations. The meeting will take place online only on April 28.

Concerns linger over Baumann’s strategic choices after he helped orchestrate the $63 billion deal that brought Bayer an avalanche of U.S. lawsuits from people claiming Roundup causes cancer. Three lost trials and at least 48,000 more suits have spurred investor flight, wiping tens of billions of dollars off Bayer’s valuation.

Bayer rose 3% late Tuesday afternoon, while the DAX Index gained 2.2%.

A year ago, both Glass Lewis and ISS recommended against voting to discharge Bayer’s management for its actions in 2018 -- an effective no-confidence ballot. More than half of shareholders did just that, making Baumann the first head of a major German company in decades to lose the non-binding but highly symbolic vote. It’s unclear whether the CEO could survive a second such rebuke.

This year, Glass Lewis had initially recommended voting against support for Bayer’s management team because the company has ignored abstentions. Bayer has now committed to tally “abstain” votes and record them publicly, leading the adviser to change its recommendation, according an update of its note issued Monday.

Bayer acknowledged in February that the losses from Roundup could force it to sell assets, issue new equity or borrow money at unfavorable terms. Bayer insists the herbicide is safe and has appealed the losing verdicts.

The company’s high-stakes talks with plaintiff attorneys to resolve the litigation have been slowed by the coronavirus pandemic. The company recently backed out of tentative agreements to resolve the claims, giving it more time to assess the impact of the pandemic on its business and potentially keeping the total amount of Roundup settlements under $10 billion, Bloomberg reported earlier this month, citing people familiar with the matter who asked not to be identified.

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