Siemens Picks a Fight

A protest vote at Osram achieves little

Siemens CEO Joe Kaeser is injecting some U.S.-style investor activism into sleepy corporate Germany -- but he needs to be careful not to overreach.

Kaeser dispatched a representative to former subsidiary Osram's annual general meeting on Tuesday to orchestrate, effectively, a vote of no confidence in the lightbulb maker's CEO, Olaf Berlien. Berlien survived, but his leadership has been badly undermined by Siemens' stunt.

So just what is Kaeser up to?

Osram unveiled a strategy in November to invest 1 billion euros ($1.1 billion) in a new light-emitting diode chip plant in Malaysia -- prompting a 28 percent slide drop in the stock. Investors are concerned it won't deliver returns if Asian competitors also build competing plants, and many shareholders would prefer the company to focus on profitable niches like automotive LEDs.

Lights Out

Osram shares have tanked since November's strategy plan

Source: Bloomberg

Some annoyance on Kaeser's part is understandable: while Siemens now only has a 17 percent stake in Osram and a seat on the supervisory board, the value of its stake has dropped by almost 300 million euros since Berlien's announcement.

Evidently Kaeser feels his right to interfere in Osram's affairs didn't end when he decided to spin off the company in 2013, rather than continue to invest in its future.

The AGM intervention was largely symbolic -- votes to approve or disapprove of the actions of management board members don't carry any legal weight in Germany. Berlien won more than 70 percent of the votes cast at the AGM. The low turnout at the AGM suggests Siemens's move won little support from other shareholders.

But if history is any guide, Berlien may be in dangerous territory: Deutsche Bank co-CEOs Anshu Jain and Juergen Fitschen received the thumbs down from almost 40 percent of investors in May 2015. The following month, they said they would step down.

It's still hard to fathom why Kaeser is quite so angry. Siemens board member Roland Busch has a seat on Osram's supervisory board, which approved the strategy last November. Berlien said in an interview with Handelsblatt that Busch had "actively supported" the strategy.

Although supervisory board members are obliged to keep their discussions private, it seems hard to believe Kaeser was unaware of Osram's strategic deliberations.

Siemens has also been looking to offload its Osram stake, perhaps to a Chinese buyer, according to German magazine Wirtschaftswoche. So it can hardly claim long-term value creation at Osram is its primary concern. Short-term asset price maximisation seems just as plausible.

Kaeser's assertion of power at Osram certainly chimes with his record as Siemens CEO up to now. Naysayers on the management board have departed and corporate functions like investor relations and M&A (once the domain of the CFO) have been centralized under his control. Some investors may view this as concerning.

Siemens Sliding

The German industrial giant's stock is down almost 14 percent over the past year

Source: Bloomberg

And Kaeser's claim to be the defender of shareholder value also looks shaky. His decision to pay $7.6 billion -- 28 times trailing operating profit -- for oilfield equipment maker Dresser-Rand just before oil prices took a dive could end up destroying at least as much value as Berlien has.

Siemens shareholders would be better served if Kaeser put his own house in order before picking public fights with other CEOs. Otherwise one day Siemens could find itself at the receiving end of some shareholder activism.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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    Chris Bryant in Frankfurt at

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    Edward Evans at

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