(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Olaf Storbeck
LONDON, May 7 (Reuters Breakingviews) - Europe's largest
airline in the last 24 hours has gone through a series of
self-inflicted turbulences that raise doubts about the quality
of its governance. On Monday morning, the nominated new chairman
of Lufthansa (LHAG.DE), a former chief executive of the company,
unexpectedly announced that he would not be available for the
task. One day ahead of the annual shareholder meeting, Wolfgang
Mayrhuber, 66, seemed to cave in to pressure from international
investors unhappy with his candidacy. Then, a few hours later,
he changed his mind once again, and decided to run after all.
In the short term, his retreat from the retreat saves
Lufthansa from a public embarrassment. The handover from
outgoing Chairman Jürgen Weber, 71, to Mayrhuber has been
planned for more than a year. It would have been all but
impossible to present another qualified candidate within a day.
From a broader perspective, however, the farce marks another
governance low point in Germany. Right from the beginning, a
number of strong arguments spoke against the appointment of
Mayrhuber as Lufthansa's next chairman. As the company's chief
executive from 2003 to 2010, he was responsible for many
strategic decisions that still hobble the airline. He led
Lufthansa in unfortunate acquisitions of ailing peers, did not
sort out the company’s loss-making short-haul business, and
neglected the modernisation of its fleets.
Despite a cooling-off period of two years – in line with the
German corporate governance codex – Mayrhuber is still deeply
entrenched with a company he joined in 1970. He also has many
other commitments. Among other duties, he is chairman of
Infineon (IFXGn.DE), a chipmaker, and a member or the
supervisory boards of carmaker BMW and reinsurer Munich Re
Those points were raised by institutional shareholders
months ago. For too long, however, both Lufthansa and Mayrhuber
refused to take them seriously. A recommendation of influential
shareholders advisory body Institutional Shareholder Services
not to vote for Mayrhuber seems to have taken the company and
the candidate by surprise.
Such capacity for misjudgement is unsettling. Europe's
largest airline is in the middle of a painful and controversial
strategic turnaround. It needs strong, credible and decisive
supervisors. Mayrhuber's bizarre flip-flopping, and eleventh
hour brinkmanship, confirm all the doubts that he would be right
man for the job.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Lufthansa's shareholders are set to vote for a new
chairman on May 7 at the company's annual shareholder meeting in
Cologne. The nominated candidate, the company's former Chief
Executive Wolfgang Mayrhuber unexpectedly announced on May 6
that he decided against running for the job. A few hours later,
he recanted that decision.
- Mayrhuber's withdrawal came after daily newspaper
Frankfurter Allgemeine Zeitung reported proxy advisory firm ISS
had recommended that shareholders vote against Mayrhuber.
- In 2012, Lufthansa Group increased its revenue by 4.8
percent to 30.1 billion euros. Operating profit fell 36 percent
to 524 million euros. In February, the German airline announced
that it will suspend the dividend payment, and plans to
accelerate cost-cutting measures.
- Reuters: Mayrhuber back in running for Lufthansa
supervisory board [ID:nL6N0DN386]
(Editing by Pierre Briançon and Sarah Bailey)
Keywords: BREAKINGVIEWS LUFTHANSA/
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