FuW Finanz und Wirtschaft, Board of Directors: How to find the right board member
The election of board members, and in particular of the chairmen, is a central point at every general meeting. This year, several candidates are attracting a great deal of attention, for example at Ascom on 10 April. SBB manager Jeannine Pilloud is seeking the presidency. She lost out in last week's elections at retailer Migros.
There are some problems at Ascom, the specialist in hospital communications. Nevertheless, Pilloud is not expected to face any major opposition in this election. Investor Veraison, the largest single shareholder with 7.3% of the capital, confirmed to the "Finanz und Wirtschaft" newspaper on Friday that it intends to support Pilloud's candidacy as well as the other board candidates.
Shareholdings matter
The support of strong shareholders is crucial. They determine whether someone has a chance of being elected or not, notes Sandro Gianella of Knight Gianella. He is a consultant specialising in board recruitment. "Major shareholders want a candidate who represents their interests and whom they trust," says Gianella.
This can sometimes lead to unusual situations. At steelmaker Schmolz+Bickenbach, for example, former telecoms executive Jens Alder is set to take over as chairman. He has no experience in steel. However, knowing Alder's background and connections casts a different light on his nomination.
The composition of the shareholder base is crucial to the election. "If there are anchor shareholders, we first gauge their sentiments before putting forward a slate of candidates tailored to the company," says Gianella. Ultimately, it comes down to trust in the individual.
"In most cases, there is a structured selection process," says Clemens Hoegl of headhunter Egon Zehnder. It usually takes at least six months or longer before a nomination is made. The current chairman is often the client, sometimes also the chairman of the nomination and remuneration committee. Occasionally, major shareholders also turn to headhunters to suggest candidates with disruptive potential.
"If a board candidate is essential to advancing the strategic interests of an activist investor, he or she will usually come from their network," observes Hoegl. Even if a candidate has the blessing of a major shareholder, the future chairman should not bring a preconceived strategic view, says Hoegl.
In terms of profiles, there have been few surprises in recent nominations. "As long as the business is running smoothly and performance is on track, no unexpected candidates are nominated. The board surrounds itself with similar people," says recruitment specialist Erik Wirz.
Kandidatinnen needed
"It is only when the company is facing problems or significant changes such as an IPO are imminent that the buddy network is no longer sufficient," says the headhunter. Solar equipment supplier Meyer Burger has been struggling for some time. Now the company is also renewing its top management, but is relying on an established figure. Remo Lütolf is to replace lawyer Alexander Vogel. "When drawing up a candidate profile, the starting point is the current composition and skills portfolio of the board," says Hoegl.
Certain requirements are also "externally driven", admits Sandro Gianella. For example, compliance and risk management skills are currently in demand. There are also "constraints", such as the need to propose female candidates, he says. Digital and M&A expertise, as well as a general rejuvenation, are also factors in new appointments.
Five companies making headlines with board elections:
Ascom
The nomination of Swiss Federal Railways (SBB) manager Jeannine Pilloud as successor to multi-board chairman Andreas Umbach came somewhat unexpectedly. Umbach, who is also chairman of Landis+Gyr and SIG Combibloc in addition to Ascom, will step down as chairman of the board at the annual general meeting on 10 April, but intends to stand for re-election to the Ascom board.
Pilloud can count on the support of Ascom's largest shareholder, Veraison (with around 8% of the capital). A graduate of the Swiss Federal Institute of Technology (ETH), Pilloud has extensive experience in the information and communications technology (ICT) sector, having worked for IBM and T-Systems. She will not only continue to drive the transformation process, but will also have to make personnel decisions shortly after taking office.
CEO Holger Cordes is under considerable pressure following repeated misses of annual targets, especially as the medium-term goals originally set for 2020 are also out of reach. Cordes has raised expectations in the financial markets that Ascom is once again unable to meet.
For Pilloud, a strategic assessment is also on the agenda: Is Ascom strong enough on its own to compete as a specialised ICT provider, or does it need a strong partner?
Comet
After 12 years at the helm of high-tech company Comet, Hans Hess has decided not to stand for re-election to the Board of Directors. His resignation comes at a bad time: In 2018, Comet suffered setbacks, partly due to its own actions and partly due to the downturn in the semiconductor market.
Following a selection process, Comet is proposing German physicist and entrepreneur Christoph Kutter as Hess's successor. Kutter is the director of the Fraunhofer Institute for Microsystems and Solid State Technologies (EMFT) and has a deep understanding of the semiconductor industry, which is crucial for Comet.
Major shareholder Veraison is putting forward its own candidate: Heinz Kundert, Vice-Chairman of the Board of Directors of VAT and also an expert in the semiconductor sector.
There will be a contested election at the general meeting (25 April). It is not just about people, but also about strategy. While Kutter stands for continuity, Veraison and Kundert are calling for a "sharpening" of the strategy. Although it is unclear what exactly this means, it is likely that Ebeam technology and the X-ray business would be on the chopping block. Comet opposes this. Kutter seems to have the upper hand. (PM)
Hochdorf
The rebellion came unexpectedly: On 8 March, Hochdorf's major shareholder, ZMP Invest, went public. The investment company, which owns 14.5% of the dairy processor, called for the board to be replaced. At the heart of the accusations, according to the shareholders, is the supervisory board's lack of control over management, in particular Chairman Daniel Suter, and the resulting operational and financial problems at Hochdorf.
For the election of the board of directors at the general meeting on 12 April, ZMP Invest is proposing a new chairman and two new members: Bernhard Merki is to take over. As the former head of the Netstal Group and CEO of 4B, he has the necessary experience, according to ZMP. Merki is also a member of the board of directors of Ems-Chemie.
Hochdorf stands by Suter. The company's situation is not as bad as the major shareholder is making it out to be, they wrote in a letter to shareholders. They also argue that there is a risk of knowledge being lost if several board members and the chairman are replaced at the same time. They are supported by zRating: The shareholder service provider recommends the election of Suter. (GAH)
Meyer Burger
Alexander Vogel has been a member of the board of directors of solar equipment supplier Meyer Burger for almost sixteen years, including almost three years as chairman. This long tenure is a source of concern for the technology company's largest shareholder. Russian billionaire Petr Kondrashev holds around 7% of the share capital (before the recent capital increase) through the investment vehicle Sentis.
In addition to a shake-up of the management team, including the resignation of the CEO - the CFO was forced to step down last August - the active investor is also calling for changes to corporate governance guidelines and a new strategic direction.
Alexander Vogel will not stand for re-election at the AGM on 2 May. His successor is expected to be Remo Lütolf. He is currently Chairman of the defence group Ruag and was previously Country Manager for Switzerland at ABB.
Sentis has not opposed Lütolf and has not put forward its own candidate. If Lütolf is elected, he will ensure the company's continued financial recovery and help steer a more organised dialogue with its largest shareholder. (EM)
Schmolz + Bickenbach
Edwin Eichler will step down as Chairman of the Board of Directors of Schmolz + Bickenbach (S+B) at the 2019 Annual General Meeting. An interesting aspect is the question of Victor Vekselberg (indirect S+B owner, currently around 13%). Eichler was the Russian businessman's representative on the Board of Directors until spring 2018, after which he became an independent member.
Problematic: The former ThyssenKrupp manager is also chairman of the board of the engineering company SMS, which in 2018 received an order for an electric arc furnace from S+B's competitor Voestalpine - a conflict of interest. This is now history.
His successor is Jens Alder. The former Swisscom CEO (until 2006) is Chairman and CEO of the energy company Alpiq. He brushed aside criticism of his dual mandate at Alpiq and concerns that he was taking on too many roles at S+B. He doesn't have any experience in the steel industry to boast about.
But between 2009 and 2018, Alder held several board mandates, including one at US tech giant CA. That closes the circle. Until 2018, AMAG chairman Martin Haefner, who owns 17% of S+B and sits on S+B's board, was a major shareholder in CA. Alder's task at S+B is clear: integrate the acquired units, increase efficiency, turn around the North American operations, reduce debt and cut executive salaries. (BA)
