GERMANY Law and Practice Contributed by: Christoph Nolden, Nicolas Ott, Stefan Mendelin and Thomas Glaser, SZA Schilling, Zutt & Anschütz
Aside from this, there are different intensity levels of shareholder activism. To enforce their strategy, activist shareholders usually first reach out to the company’s management directly (eg, by writing letters to the management with certain requests). If this is not suc- cessful, they often try to influence institutional inves- tors and voting rights advisers ( Stimmrechtsberater ) by publicly campaigning against the management’s strategic decisions or by campaigning against the re- election of supervisory board members while placing their own opposing candidates. In this regard, however, it should be noted that the opportunities for influencing personnel decisions in Germany are generally fewer than in the USA. First, supervisory board members in Germany are usually elected for four years. It is therefore possible for no supervisory board member to be due for election at the appropriate time. Furthermore, in accordance with German co-determination law, a portion of the super- visory board members in large companies must be elected by the company’s employees (depending on their number). Moreover, activist shareholders can attempt to appoint a special auditor to examine the company’s management (see 10.2 Remedies Against the Direc- tors ). By way of example, in 2018, US-based activ- ist hedge fund Elliott unsuccessfully tried to appoint such a special auditor at German energy company Uniper. Recently, in 2024, activist shareholders unsuc- cessfully tried to appoint a special auditor at Mister Spex SE. However, thus far, this strategy has been quite uncommon in Germany. Aside from this, activists can threaten to bring claims for damages against the active management. 11.4 Recent Trends In contrast to the previous dominance of ESG activ- ism, governance-focused activism has resurged. There has been a visible increase in shareholder pro- posals targeting board composition, strategic direc- tion and transparency obligations. While climate and sustainability remain important, a broader shareholder rights agenda is again in focus, partly due to macro- economic uncertainty and market volatility. However, activist shareholders still (and increasingly) purport to aim to improve the market value of the target com-
panies (and, therefore, their investment), meaning economically driven shareholder activism still plays a major role. 11.5 Most Active Shareholder Groups The most active groups of shareholders are typically activist hedge funds, such as: • the US-based hedge fund Elliott, which invested in (among others) RWE, ThyssenKrupp, Deutsche Wohnen and SAP; or • Sweden-based fund Cevian Capital, which invest- ed in (among others) ThyssenKrupp and Bilfinger. In recent years, however, activist hedge funds have become increasingly successful in promoting their strategies to institutional investors and proxy advis- ers, who have become more influential. This applies not least to so-called index funds, which have become increasingly popular of late. These funds are man- aged passively and therefore cannot react to negative developments by selling shares. Another factor is that the proportion of investors attending AGMs is declining overall. It should be noted, however, that the ARUG II established new transparency duties for institutional investors, asset managers and voting rights advisers in order to take into account their growing influence (see 11.1 Legal and Regulatory Provisions ). 11.6 Proportion of Activist Demands Met In the past few years, there have been known cases in which activist shareholders have been able to (at least partially) achieve their publicly stated demands. More generally, the relationship between companies and activist investors is increasingly characterised by a readiness to talk and open-mindedness rather than scepticism and hostility. However, there is no empiri- cal data available allowing for a reliable answer as to what overall proportion of activist demands were met (whether in full or in part). 11.7 Company Prevention and Response to Activist Shareholders Companies are increasingly advised to align their governance practices with the updated expectations of institutional investors and proxy advisers. This
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