Commentary: Daimler Should Show More Of Its Cards
Jurgen E. Schrempp likes to paint DaimlerChrysler--with its joint headquarters in Stuttgart, Germany, and Auburn Hills, Mich.--as a trendsetter for global companies. And no doubt, the transatlantic giant Chairman Schrempp has created is certainly a model for the auto industry.
But if DaimlerChrysler is creating the mold for other 21st century global corporations to follow, it should rethink an unfortunate precedent it is setting. Rather than adopting U.S. rules for disclosing information to investors, the newly merged DaimlerChrysler is hiding behind the German flag. That means former Chrysler shareholders know far less about their company.
Among other things, DaimlerChrysler can avoid issuing an annual proxy statement that lays out such pertinent data as how much stock directors own, what kind of compensation top executives are receiving, or which shareholders own more than a 5% stake in the company. Without that information, it becomes difficult to assess just how assiduously management is protecting a shareholder's investment and whether managers are putting their own interests first.
The company dismisses such concerns. "I honestly don't believe anybody is selling DaimlerChrysler because of a lack of information," says Sam Messina, DaimlerChrysler's director of investor relations for North America. "We think we are giving investors all the tools they need to make investment decisions."
But investors are right to demand more disclosure, not less. "As global investing becomes more seamless, we'll have a race to the top in transparency," says Nell Minow, a partner at Lens Inc. in Washington. While DaimlerChrysler is following the minimum rules set out by the Securities & Exchange Commission for foreign-based companies issuing shares in the U.S., there's no law stopping it from disclosing more or as much as U.S. companies do. "This course is a mistake," says James Glickenhaus, general partner at Glickenhaus & Co. in New York, which owns about 3.7 million shares. "It is shortsighted."
In 1993, Daimler was moving the other way. To attract U.S. capital, it adopted U.S. accounting standards and subjected the German company to the public scrutiny required to get its American depositary receipts listed on the New York Stock Exchange. Indeed, without such a window into Daimler's finances, Chrysler executives and shareholders probably never would have agreed to merge.
DUMPED. In the end, Minow predicts, the decision to avoid higher U.S. disclosure standards is likely to diminish Daimler's appeal in U.S. equity markets. Already, Standard & Poor's Corp., like BUSINESS WEEK a unit of The McGraw-Hill Companies, dropped Chrysler from its 500-stock index because it became a foreign-based stock. That forced managers of S&P index funds to dump DaimlerChrysler shares.
As more truly global corporations are formed, global-finance rules may be needed--to give investors around the world the same information that Americans take for granted. Until then, leaders such as DaimlerChrysler could be showing the way.