Buried in BMW's press release on March 11 announcing the company's 2020 financial results was an important announcement that shareholders have been waiting for since last year's annual meeting -- the proposal of new directors to the supervisory board.
Here is why this is so important.
Chairman Norbert Reithofer's decade-long run as CEO from 2005 to 2015 remains one of the most profitable eras of growth the automaker has ever seen.
He was also among the first car executives to sense the trend towards zero-emissions cars, championing the development of the BMW i3 battery-powered compact hatchback that launched in 2013, just one year after the Tesla Model S.
Despite this, support for Reithofer's reelection at last year's annual general meeting was unusually tepid, prompting him to promise reform of the board. This governance body, approves strategic plans and appoints top executives. While it has no operational role, it represents the interests of key stakeholders, including most importantly, minority investors.
While fund managers may take a back seat to the two Quandt family siblings who together control nearly half the company's stock, that did not stop them from attacking a perceived lack of robust oversight. What is good for the Quandt family, is not deemed to be necessarily in the interest of the rest.
Of the 10 non-executive directors elected by shareholders, only three were actively involved and they have been in their jobs too long to be considered sufficiently independent.
These are Reithofer, Stefan Quandt, the youngest son of the industrialist who rescued BMW in 1959, and Karl-Ludwig Kley, Chairman of Lufthansa and E.On, who was once dubbed "Germany's most powerful director."
Kley sat on four of the board's five committees before relinquishing his post as head of the important audit committee last May in a concession to institutional investors.
The rest were largely warm bodies in chairs collecting their annual compensation just for showing up to the five regularly scheduled meetings to fulfill the legal quorum for key decisions. Whether they exercised any influence to act on behalf of institutional investors was doubtful, according to experts.
Since three directors, two of whom have been on the board for more than a decade (Kley included), have agreed not to seek re-election, Reithofer can now fulfil his reelection promise. The company's annual meeting on May 12 will be asked to vote in favor of newly proposed candidates to replace them. These are:
- Marc Bitzer, CEO of white goods manufacturer Whirlpool and a German national
- Rachel Empey, finance chief of German blue chip health care group Fresenius
- Christoph Schmidt, President of the RWI-Leibniz Institute for Economic Research
Whether this will fundamentally change anything in the governance of the company remains to be seen. But the injection of fresh blood means that Reithofer will likely have placated investors, at least for now.