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Financial Times, January 8, 2010 article


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Siemens, Europe’s largest engineering company, faces resistance at its annual meeting this month to its plan to settle damages claims with former executives, according to a survey of shareholder sentiment.

Investor resistance to Siemens’ plans could prolong a dispute with former managers over damages, after it paid billions to regulatory authorities to settle bribery allegations uncovered in 2006.

At the meeting, Siemens hopes that shareholders will approve compensation deals that the company has struck with 11 former executives to settle damages claims in the wake of the bribery scandal. The settlements will be rejected if shareholders holding at least 10 per cent of the shares object, forcing Siemens to pursue what could be a long legal battle with its former staff.

The survey by the US-based Shareholder Forum, which provides investors with information to decide on votes at companies, also suggests that Siemens could be defeated by a shareholder proposal to limit the pay given to the supervisory board, while facing a significant number of votes against its executive compensation plan.

The meeting on January 26 will be one of the first times in Germany that investors in a blue-chip company will have a “say on pay” regarding executive compensation since the country introduced a law to that effect last year.

While an investor rebellion on executive pay would not be binding, it would prove an embarrassment for the company, which is chaired by Gerhard Cromme, a former chairman of the commission that drew up Germany’s corporate governance code.

“Current ratios of ‘for’ and ‘against’ inclinations suggest that shareholders could reject the proposed settlements and approve the shareholder counter-proposal to revise board compensation,” said the forum.

Gary Lutin, chairman, also reported indications of differences between large and small investors that could increase the number of actual shares voted against management positions: “There are certainly indications that larger investors are significantly less supportive [than small investors] of management’s proposed settlement of corruption claims and also more supportive of the shareholder counterproposal to change the compensation of supervisory board members.”

Siemens declined to comment but people close to the company said that it was confident it would win approval for the measures.

© Copyright The Financial Times Ltd 2010.



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