ThyssenKrupp’s non-executive board blocked Bodo Uebber from becoming its chairman because the Daimler CFO wanted the double to board’s pay. That puts the steelmaker back in leadership limbo.
Published on November 23, 2018 8:00 am
After losing its CEO and its chairman in July, ThyssenKrupp, the loss-making producer of steel, elevators and warships, thought it had finally found a new chairman for its non-executive supervisory board. Bodo Uebber, finance executive of Mercedes-Benz maker Daimler, was slated to join the board until labor representatives killed the plan. The money man wanted too much money.
At a supervisory board meeting on Tuesday, employee representatives voted against Uebber, because he called for all non-executive salaries to be doubled, Handelsblatt learned. “The company is currently in the middle of a savings program. We can’t sell it to staff if we raise pay,” a labor representative told Handelsblatt. The voice of employees is powerful, because labor fills half of the positions on the non-executive board under Germany’s corporate governance system.
ThyssenKrupp is still reeling from the aggressive entry of activist investors who brought about a major change in its strategy which triggered the departure of several executives. The steelmaker is now struggling to complete a major merger and will then alter its corporate structure.
Continued instability at the leadership level is unfortunate. But executive pay is a delicate topic. Germany is a relatively egalitarian society where salaries at the top are usually far lower than what British or American managers are paid. Currently, the chairman of ThysssenKrupp’s non-executive board, earns a base salary of €200,000 ($228,000). Regular supervisory board members make €50,000 a year plus fees for attending meetings. That’s in contrast to Nucor, a US steel company, where a non-executive director made $100,000 in cash plus $140,000 in stocks in 2016. Most directors at United Technologies, maker of Otis elevators, earn $300,000 or more, including stock awards.
Uebber, who earned millions during his 14 years as Daimler’s CFO, wanted to double his ThyssenKrupp remuneration to €400,000. However, his call for higher pay wasn’t because he had taken the job for personal gain, said people familiar with his thinking. He wanted to make it more attractive for potential candidates to serve on ThyssenKrupp’s board, given the lengthy period of upheaval the company is facing, and due to the legal risks involved in spinning off some of its businesses.
There is also the imminent merger of its steel operations with Tata Steel Europe. The move to divest the industrial operations department, which makes elevators, assembly lines and car components, will require a new set of directors in the medium term. Furthermore, the sum that Uebber wanted was in line with the average level of pay for managers on supervisory boards at Germany’s 30 blue-chip companies listed on the DAX.
ThyssenKrupp’s labor representatives weren’t interested in the argument about attracting future candidates. They said raising executive salaries at a time when hundreds, if not thousands of employees will lose their jobs was unacceptable. In addition to preparing the split of the company, ThyssenKrupp is also cutting administrative jobs to raise earnings. Figures released on Wednesday revealed a €170 million loss for the company’s fiscal fourth quarter ending in September, on €11.6 billion of revenue.
The company’s ongoing operational problems – ThyssenKrupp almost went bankrupt in 2010 – come on top of its boardroom power vacuum. Then-CEO Heinrich Hiesinger and non-executive chairman Ulrich Lehner resigned in July after their views on strategy differed from those of some supervisory board members and shareholders. These included Swedish activist investor Cevian.
For now, ThyssenKrupp’s future lies in the hands of non-executive chairman Bernhard Pellens, who will retire in 2020, and Guido Kerkhoff, the new CEO since September. Bodo Uebber is not willing to change his mind, even if the board reconsiders its stance, according to people close to him.
Martin Murphy covers industry for Handelsblatt. Kevin Knitterscheidt covers steel and machinery. Gilbert Kreijger adapted this story into English for Handelsblatt Global. To contact the authors: [email protected] and [email protected]
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