AGM votes

The Trouble With Shareholders

AGMs of DAX-listed firms, such as Deutsche Bank, are experiencing record attendances.
  • Why it matters

    Why it matters

    Increasing shareholder turnout, especially from unpredictable foreign investors, is unsettling big firms used to getting their way in AGM votes.

  • Facts


    • This year, an average of 60.1 percent of voting capital was present at the annual meetings of Germany’s 30 largest publicly traded companies.
    • The record figure is fueled by companies’ growing interest in shareholders and foreign institutional investors’ growing interest in company decisions.
    • Germany has the lowest rate among industrialized countries of small investors holding stocks directly or through funds.
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The diesel scandal at Volkswagen is rattling automakers. The aftershock of the financial crisis has shaken banks and insurance companies. Germany’s energy transition and the sharp decline in electricity prices are putting the survival of power suppliers such as E.On and RWE at risk. Bayer has been caught up in the global wave of mergers in the pharmaceutical industry and plans to acquire controversial seed producer Monsanto for $62 billion (€56 billion).

Together with record-high dividends and the turmoil in the stock markets following Britain’s vote to leave the European Union, companies are currently facing a host of highly charged issues.

This has prompted shareholders to appear in droves at the annual meetings of the 30 companies listed on Germany’s blue-chip DAX index, eager to have their say and influence the future course of their company.

Some 5,500 Daimler shareholders crowded into the CityCube Berlin convention and conference center in April, 500 more than last year. Siemens counted 7,430 shareholders at its annual meeting in Munich’s Olympiahalle arena. Chemical manufacturer BASF, pharmaceutical company Bayer, automaker BMW, Deutsche Post and Deutsche Telekom, as well as electronics giant Siemens, all also saw significant increases. Deutsche Bank experienced a raucous meeting of some 5,000 shareholders for the second year running in Frankfurt.

On Thursday, DAX newcomer Pro Sieben Sat. 1, became the last member of Germany’s benchmark index to hold its annual meeting. The media group reported 67 percent of its voting capital attending, compared to only 42 percent last year, when it was still listed on the smaller MDAX.

Shareholder presence at this year's annual meetings of the 30 largest publicly traded companies was at the highest level ever.

According to Handelsblatt calculations, shareholder presence at this year’s annual meetings of the 30 largest publicly-traded companies, with an average of 60.1 percent of voting capital, was at the highest level ever. Longer-term data is not yet available. The figure was just under 55 percent in 2015.

In addition, more shareholder votes were submitted this year than in any year since 2000 at the annual meetings of sporting goods maker Adidas, stock exchange operator Deutsche Börse, semiconductor producer Infineon, software specialist SAP and automaker Daimler.

Two trends are fueling the boom: the growing interest of the companies in their shareholders and the growing interest of foreign institutional investors in the companies.

“It is especially important to us that the resolutions adopted at the annual meeting are supported by as many shareholders as possible,” said Daimler Chief Executive Dieter Zetsche. A spokesman for Bayer added: “Accidental majorities are being avoided.”

Companies detest accidental majorities, especially when it comes to sensitive draft resolutions, which often include an agenda item called “corporate action.” It relates to the possibility of issuing new shares, a resolution that companies like to have approved in advance; that is, provisionally.

Their hope is that this will make them more flexible, so that they can quickly access their investors’ money during takeovers, as with Bayer and Monsanto, without having to call a shareholders’ meeting.

Residential and commercial real estate company TAG Immobilien failed to obtain approval for this type of resolution at this year’s annual meeting. Many shareholders feared their capital would be diluted if new shares came onto the market.

“If the company had made more of an effort to approach its shareholders ahead of the meeting, and if it had managed to convince them, this important resolution might have been passed,” said Thomas Hechtfischer of the German Shareholders’ Association.

Many companies, such as real estate giant Vonovia, managed to adopt similar draft resolutions. Vonovia achieved a shareholder presence of 69 percent, compared to 52 percent last year.

Given the fact that there were only 260 attendees at Vonovia’s annual meeting, this high level of voting capital seems astonishing. But small German investors, who are discovering the possibility of helping to shape company policy in today’s zero interest-rate environment, do not play a decisive role in these meetings.

In Germany, small shareholders continue to give equities a wide berth. Only 14 percent of Germans hold stocks directly or indirectly through funds – the lowest rate of any of the world’s industrialized countries.

Foreign investors hold the majority of shares in DAX companies. Investors from abroad own at least two-thirds of shares in Adidas, Merck, Infineon and Bayer, and more than 80 percent of Linde and Deutsche Börse.

“Foreign institutional investors, in particular, have reported their share portfolios to a greater extent this year than in previous years,” said a Daimler official, reflecting the situation at most companies.

German companies use professional service providers such as International Shareholder Services to advise on votes. The voting rights representatives hired by companies encourage investors with large share packages in advance to attend annual meetings. They also advise investors, provide analysts on agenda items and issue recommendations on how to vote. Handelsblatt has learned that about 70 to 80 companies listed on the DAX and its offshoots, MDAX and TECDAX, use such voting rights representatives. Their goal is to avoid arbitrary decisions with high shareholder presence.

Record attendances also cause other problems. At Daimler’s Berlin meeting, 12,500 sausages were apparently not enough for one shareholder, who tried to pocket a few from the buffet. A dispute erupted with another shareholder, which had to be settled by the police.

01 p15 Staying Informed-01


Ulf Sommer reports for Handelsblatt on companies and financial markets. To contact the author:

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