Bayer faces second investor reckoning over glyphosate litigation

Reporting by Ludwig Burger, Patricia Weiss

Bayer (BAYGn.DE) on Tuesday faces its second annual investor reckoning over its handling of a wave of U.S. lawsuits claiming its glyphosate-based weedkillers cause cancer.

Criticism from investors at this year’s annual shareholders’ meeting - held in a virtual format with gatherings banned due to the coronavirus - will likely be less scathing than it was in 2019.

Bayer shares have plunged by about a third since August 2018, when the company lost the first U.S. lawsuit claiming Roundup - acquired via the $63 billion takeover of Monsanto - causes cancer.

At last year’s meeting, Bayer’s top management was handed an unprecedented show of shareholder disapproval with a 55.5 percent majority of shareholders voting against ratifying the executive board’s business conduct.

Such a vote, which prominently wraps up every German AGM, has no bearing on management’s liability or tenure but it is treated as a key gauge of investor sentiment.

Bayer reacted by stepping up efforts to settle the claims and appointing a veteran litigation lawyer to advise the supervisory board.

“We also took to heart the disappointing voting results at last year’s Annual Stockholders’ Meeting. We ... took on board the criticisms expressed and worked to improve,” Chief Executive Werner Baumann said in prepared remarks addressing investors online on Tuesday.

In the run-up to the event, leading shareholder advisory firm ISS recommended a vote in favour of management and the supervisory board, seeing no evidence that fiduciary duties were breached in 2019.

Glass Lewis, another major proxy advisor, has said investors should abstain because Roundup proceedings were still pending.

Mutual fund firm Deka Investment, one of Bayer’s largest German shareholders, said it would give management a vote of approval this time because Bayer had reacted to investor criticism. Deka had given them a thumbs-down last year.

“But with this vote we make an urgent call to bring clarity soon in the matter of litigation,” said Ingo Speich, Deka’s head of sustainability and corporate governance.

Bayer on March 27 became the first German company to announce a move to hold its AGM online shortly after the German government laid the ground for such a switch.

Shareholders were only able to hand in written question in advance and are stripped of the opportunity to voice their views on management in front of fellow investors as is the norm in a regular meeting.

The AGM will also see the retirement of Chairman Werner Wenning, who strongly supported CEO Werner Baumann’s pursuit of Monsanto. He will be succeeded by Norbert Winkeljohann, a former executive at audit and consulting firm PricewaterhouseCoopers.

Bayer on Monday said the economic downturn and the need to preserve cash means it is taking a tougher stance in talks to settle claims over glyphosate, even as its earnings rose.