Changing Shareholder Climate in Germany:
Foreign Shareholders gain greater Control Bayer's Annual Shareholder Meeting illustrates this trend A complex system of interlocking shareholdings, characterised by German banks and insurers owning shares in each other and in much of German industry, has defined corporate Germany since World War II. The result was a highly stable corporate structure that sheltered companies from competition and aggressive shareholders. For decades, the system worked well, providing German companies with two things: stable sources of capital and patient shareholders looking to the long term. Now, the Wall Street Journal (21 June 2001) reports, intensifying foreign competition and the elimination of a steep capital-gains tax next year (among a few other changes) are compelling banks and insurers to unwind those cross-shareholdings. As foreign competition mounts, firms are turning away from their traditional lending relationships with the banks toward cheaper sources of financing, such as the growing eurobond market. As these changes ripple through the world's third-largest economy, hundreds of small and medium sized German cities are trying to bridge the divide between a comfortable past where all stakeholders – employees, the local community and shareholders – had a say, and an uncertain future where just shareholders, many of them foreign, are gaining control. "We come from a stakeholder society," says Roland Berger, a prominent Munich-based consultant. "Now the pendulum is swinging toward a shareholder society." At the annual shareholder meeting of Bayer, Thomas Shrager stands in contrast to the thousands of gray-haired, local retirees who usually attend. Dressed in a dark-blue suit and a shirt with mushroom-shaped gold cufflinks, the Romanian-born American is managing director of New York money manager Tweedy Browne, one of the foreign shareholders own 44% of Bayer. That percentage is expected to grow if Bayer's main shareholder, Allianz, sells its 5% stake. Mr. Shrager, 44, delivers a potent message when he gets his turn at the podium: The company should carve itself up into three parts. He argues that by keeping its drug, chemical and agrochemical businesses bundled into one company, Bayer has suppressed its market value at a time when the stocks of pure drug makers are soaring. Mr. Shrager's motion fails, but he knows his time will come. "Companies like Bayer are going to have to deal with US investors who are a lot more aggressive than I am," he says. source: Wall Street Journal, 21 June 2001 http://www.eiu.edu/~dr-davis/Trouble%20Brewing.htm