Shareholders blast DaimlerChrysler CEO
7 April 2004
BERLIN – Shareholder groups sharply criticised DaimlerChrysler chief executive Juergen Schrempp at Wednesday’s annual general meeting in Berlin, but had some words of praise for the company’s reforms of its rewards to top managers.
Coming off a year when DaimlerChrysler’s profits plunged to EUR 400 million from EUR 4.7 billion in 2002, Schrempp was on the defensive in talking about the tough car market conditions last year and other problems facing the company.
He also cautioned that operating profits this year were expected to just barely surpass the EUR 5.68 billion of 2003.
But Schrempp predicted that the company would show strong earnings growth in 2005 and 2006 when the full range of new DaimlerChrysler models were on the market.
Company financial officer Hilmar Kopper unveiled to shareholders the group’s plans to do away with stock options benefits to top executives starting in 2005 and in its place reward upper management with new performance-oriented package of salary and bonuses.
Kopper outlined a three-tier system of basic salary, annual bonus and remuneration based on long-term company performance in providing greater transparency about what top managers are paid.
The company will pay its top managers in virtual shares and then conduct a review after four years to determine their bonuses based on various components like return on equity and on comparisons made with such competitors as Toyota, General Motors, Ford, Volkswagen, BMW and Honda.
The rewards system will also require top managers to spend one- fourth of their bonuses to buy company shares which they will then be required to hold onto, Kopper said.
He noted that the new system is oriented along the recommendations of Germany’s new Corporate Governance Code.
Despite last year’s sharp drop in earnings, which came as overall vehicle sales fell by some 190,000 and DaimlerChrysler was involved in the costly effort to restructure the Chrysler division, the company proposed an unchanged dividend of EUR 1.50.
Shareholders vented their dissatisfaction with the company’s performance.
Klaus Kaldemorgen of the DWS Investments company charged that Schrempp and company management had reacted to slowly to problem areas, specifically citing Chrysler and Mitsubishi Motors.
“The early warning system consistently failed,” he charged while 8,000 shareholder applauded.
Kaldemorgen called DaimlerChrysler’s share performance disappointing, with the company’s share having lost 47 percent over the past five year at the same time that BMW shares had risen by 49 percent.
Thomas Meier, of the Union Investment company, said blame for the disappointing operating results and loss of share value had to be placed with DaimlerChrysler’s top management.
But Meier said the company’s new rewards system for top-level executives was a step in the right direction.
Subject: German news