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Note: Hermes, the U.K. institutional investor leading the activist campaign reported below, had supported the organization of the Forum's 2006 program addressing executive compensation issues, and is now represented on the Forum's current Program Panel addressing "Say on Pay" issues that developed from the earlier program.


Financial Times, January 28, 2010 article


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Investors agitating for change at the top of Infineon yesterday claimed an important victory for corporate governance in Germany when they forced the chipmaker's chairman-designate to promise to step down early.

The climbdown represents a significant moment in German corporate governance as Infineon caved in to the demands of foreign shareholders led by Hermes, the UK activist fund, for a new start on the supervisory board.

Klaus Wucherer, Infineon's choice for chairman and a current non-executive director at the struggling chipmaker, offered to serve only one year instead of five if elected as chairman.

The offer was the latest round in the first big proxy fight in Germany led by institutional investors before Infineon's annual meeting next month.

Hans Hirt, Hermes' head of European corporate governance, welcomed Mr Wucherer's offer but said the investors would carry on the fight to ensure that their candidate - Willi Berchtold, the finance director of one of Germany's largest private companies - gained a seat on Infineon's board at the annual meeting.

"Any compromise has to involve him becoming a supervisory board member," he said.

Hermes' campaign received a further boost yesterday as Glass Lewis, the investor advisory company, added its support for Mr Berchtold and against Mr Wucherer, joining the similar recommendation of RiskMetrics . Together the two groups are followed by significant numbers of shareholders, often a third or more of shareholders at annual meetings.

No shareholder has publicly backed Mr Wucherer but the chairman-designate told the Financial Times: "I had very positive feedback from every investor I have spoken to. But there has been the danger that it would become a tight race - regardless of who will win."

Mr Wucherer wants to use the year to lead a dialogue with shareholders to find a new chairman. He warned that support inside Infineon for Mr Berchtold was weak and that he could not expect to become chairman: "The chairman needs the support not only of the shareholders but also of the supervisory board. I have signals that the supervisory board does not support Mr Berchtold."

Shareholders can nominate board members but,in Germany, the members of the supervisory board itself choose the chairman. Mr Hirt said more discussions "cannot be the solution" and warned that Mr Wucherer serving just one year would lead to "a lame-duck chairman, which will cause uncertainty at the company".

The fight is a novelty in Germany and suggests that foreign shareholders, supported by big German funds such as DWS, are becoming more assertive in their dealings with companies.

© Copyright The Financial Times Ltd 2010.




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