Deutsche Lufthansa AG was forced into an ad-hoc search for a new candidate to head its supervisory board after former Chief Executive Officer Wolfgang Mayrhuber surprisingly pulled out one day before he was due to be elected.
Mayrhuber, who was CEO from 2003 until the end of 2010, withdrew his candidacy “due to criticism from shareholders regarding his nomination,” the company said in a statement today. Lufthansa didn’t unveil a new nominee for the post.
The boardroom upset at Germany’s largest airline highlights the growing clout of investors who have become more vocal in their opposition to managers accumulating board seats, a practice that was commonplace in the previously intertwined corporate landscape known as Germany Inc. A voluntary code of conduct requires CEOs wait two years before they ascend to the supervisory panel, and caps the number of permitted mandates.
“This is a surprise, no doubt,” said Jochen Rothenbacher, an analyst at Equinet Bank AG in Frankfurt. “However, for Lufthansa it removes another weapon from the armory of its critics. It’s not the worst of solutions for the company.”
Moving from the executive suite to the supervisory board was previously a natural trajectory at Germany’s largest companies, with long-time leaders such as Siemens AG CEO Heinrich von Pierer seamlessly switching to the panel, whose role it is to sign off on strategy, hire and dismiss executives and set their pay.
Activist investors have since criticized the practice, saying a chairman who until recently ran the company is less likely to agree to necessary changes without undermining his own legacy. Josef Ackermann in November 2011 withdrew plans to immediately head Deutsche Bank’s supervisory board after his time as CEO, bowing to criticism from shareholders.
Mayrhuber’s decision follows a report in Frankfurter Allgemeine Zeitung that Institutional Shareholder Service, a proxy voting service, criticized his candidacy, saying the 66 year-old manager already held too many other supervisory board mandates and was Lufthansa CEO until recently.
Mayrhuber serves as chairman at German chipmaker Infineon Technologies AG, and also sits on the supervisory boards of companies including Munich Re and Bayerische Motoren Werke AG.
As CEO at Lufthansa, he was responsible for acquisitions including BMI, Austrian Airlines Group, and a stake in Brussels Airlines, all of which failed to develop as planned. Critics say he has also been slow to update the fleet of Europe’s second-largest airline, leaving Lufthansa with a fuel bill inflated by outdated models and cabins that are no match for the modern interiors of Gulf carriers.
Lufthansa’s supervisory board will suggest an additional nominee in a meeting today, which will then be made public and voted on by shareholders tomorrow, according to the statement.