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Fast Money & Foreign Objects
By Sheenagh Matthews, Tino Andresen and Alex Webb Oct 14, 2014 10:18 AM ET
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Photographer: Patrick Pleul/AFP via Getty Images
Shooting deer and alpine ibex at ThyssenKrupp AG’s hunting grounds was a privilege enjoyed by the German steel maker’s top executives and guests for more than 50 years.
Shooting deer and alpine ibex at ThyssenKrupp AG (TKA)’s hunting grounds was a privilege enjoyed by the German steelmaker’s senior executives and guests for more than 50 years. Investor pressure is now spoiling their fun.
The company, which has posted three straight annual losses, is not going to renew the grounds’ lease when it expires. It’s also selling its 10-seater Falcon 2000LX corporate jet, slimming down the size of executives’ offices and getting rid of expensive furniture.
The belt-tightening shows the pressure on Germany’s blue-chip companies to justify luxury assets as an influx of international investors and changing attitudes among managers prompt a review of what is acceptable to own. Travel operator TUI AG (TUI1) last year got rid of its Challenger 604 corporate jet, and truck maker MAN SE several years ago sold its Rhine River vineyard. The cuts will not only slash costs, but also instill a necessary cultural change, according to investors.
“How can you restructure your business and expect from your employees a lot of commitment and sometimes sacrifice, when you are aware that top management can go hunting with the company’s private jet?” said Damien Lanternier, who manages a 2.4 percent stake in ThyssenKrupp at the Financiere de l’Echiquier’s Agressor fund. “In terms of corporate culture, these changes are fundamental.”
Photographer: Ralph Orlowski/Bloomberg
ThyssenKrupp Chief Executive Officer Heinrich Hiesinger said last year, “Our old... Read More
Hotels, Theaters
The abolition of capital gains taxes about 12 years ago encouraged German companies to sell cross-shareholdings, allowing foreign investors to increase their stakes. That reduced the ability of Germany’s biggest companies and its executives to protect each other’s interests via reciprocal board seats.
As a result, German companies increasingly face the same scrutiny as rivals in other markets.
In the U.S., activist investor Nelson Peltz in September questioned the strategic fit of DuPont Co.’s country club, hotel and theater, saying they were examples of corporate largesse. Maintenance of the 12-story Italian Renaissance-style building, whose upper floors house the U.S. company’s headquarters, and the nearby DuPont Country Club, are part of as much as $4 billion in “excess” corporate costs Peltz says can be cut.
At 203-year-old ThyssenKrupp, Swedish investor Cevian Capital AB increased its stake to more than 15 percent in February and renewed a demand for a seat on the steelmaker’s board.
Old Boys Networks
That may even help ThyssenKrupp Chief Executive Officer Heinrich Hiesinger, who took over in 2011, to push through his plans to change the company’s culture amid price-fixing and bribery scandals as well as a botched expansion in the Americas.
“When I took over as CEO I didn’t realize how radical the necessary change process would be,” Hiesinger said at the company’s annual general meeting last year. “Our old leadership culture was characterized by old boys’ networks and blind loyalty in many areas. Negative developments were concealed rather than corrected.”
To enforce the cultural change, ThyssenKrupp elevated the post of compliance officer to the executive board.
While shareholder activism hasn’t been as aggressive in Europe as the U.S. so far, the number of campaigns are on the rise and more than doubled between 2010 and 2013, according to a 2014 report by law firm Skadden, Arps, Slate, Meagher & Flom.
Entertaining Clients
Siemens AG, Europe’s biggest engineering company, spent a “high six-figure” euro amount a year for hunting grounds in Austria’s Zillertal, including salaries for two professional hunters, Spiegel magazine said in 2009. The German engineer gave up its 7,500 hectares (18,500 acres) later that year.
Still, many German companies still own assets that are not necessarily tied to their main business. ThyssenKrupp owns the Kieler yacht-club hotel that also houses the club, chemical maker BASF SE operates the country’s ninth-biggest wine cellar and energy company EON SE has a golf course. EON owns Castle Oefte near Essen, which has been rented to a golf club since 1959, and a 19th-century guest house with marble columns and wood-paneled ceilings on the Alster River in Hamburg.
“Firms are under pressure to justify these expenses and the attitude that comes with it,” saidZacharias Sautner, a finance professor at the Frankfurt School of Finance and Management.
BASF’s Wine
How an asset is used may be an argument for keeping it, according to Sautner. An art collection that is open to the public or an asset that helps the company generate business is different than executive perks.
ThyssenKrupp uses its yacht-club hotel in the northern German town of Kiel “for representative purposes and further education of executives,” spokeswoman Nicola Roettger said by e-mail. The company is also a tenant of a 13th-century castle near Essen called Schloss Landsberg, owned by the Fritz-Thyssen Foundation, according to the website of a joint project with Cologne University. The building is used for seminars and conferences.
BASF set up its wine cellar in 1901 to cater to business partners and employees. Today, it sells 900,000 bottles a year, bringing in 5 million euros in wine sales and a further 2 million euros in services such as wine-tasting events. Wine magazine Weinwirtschaft ranks the operations as the 9th biggest wine trading business in Germany. The chemical maker plays host to business partners at its vineyard in the Palatinate wine region west of the Rhine River.
Even if some luxury assets are needed for certain client tasks, shareholders may disagree.
“A manager who cares about status and prestige rather than working really, really hard and increasingshareholder value is more likely to be someone who likes to own things like a vineyard, a golf course or a hunting ground,” Sautner said. “That’s why information about these perks is important.”
http://www.bloomberg.com/news/2014-...l?hootPostID=4c03e5debe6c59fd8c71b3dde3fe1c15
1 Comment Email Print
Save
Photographer: Patrick Pleul/AFP via Getty Images
Shooting deer and alpine ibex at ThyssenKrupp AG’s hunting grounds was a privilege enjoyed by the German steel maker’s top executives and guests for more than 50 years.
Shooting deer and alpine ibex at ThyssenKrupp AG (TKA)’s hunting grounds was a privilege enjoyed by the German steelmaker’s senior executives and guests for more than 50 years. Investor pressure is now spoiling their fun.
The company, which has posted three straight annual losses, is not going to renew the grounds’ lease when it expires. It’s also selling its 10-seater Falcon 2000LX corporate jet, slimming down the size of executives’ offices and getting rid of expensive furniture.
The belt-tightening shows the pressure on Germany’s blue-chip companies to justify luxury assets as an influx of international investors and changing attitudes among managers prompt a review of what is acceptable to own. Travel operator TUI AG (TUI1) last year got rid of its Challenger 604 corporate jet, and truck maker MAN SE several years ago sold its Rhine River vineyard. The cuts will not only slash costs, but also instill a necessary cultural change, according to investors.
“How can you restructure your business and expect from your employees a lot of commitment and sometimes sacrifice, when you are aware that top management can go hunting with the company’s private jet?” said Damien Lanternier, who manages a 2.4 percent stake in ThyssenKrupp at the Financiere de l’Echiquier’s Agressor fund. “In terms of corporate culture, these changes are fundamental.”
Photographer: Ralph Orlowski/Bloomberg
ThyssenKrupp Chief Executive Officer Heinrich Hiesinger said last year, “Our old... Read More
Hotels, Theaters
The abolition of capital gains taxes about 12 years ago encouraged German companies to sell cross-shareholdings, allowing foreign investors to increase their stakes. That reduced the ability of Germany’s biggest companies and its executives to protect each other’s interests via reciprocal board seats.
As a result, German companies increasingly face the same scrutiny as rivals in other markets.
In the U.S., activist investor Nelson Peltz in September questioned the strategic fit of DuPont Co.’s country club, hotel and theater, saying they were examples of corporate largesse. Maintenance of the 12-story Italian Renaissance-style building, whose upper floors house the U.S. company’s headquarters, and the nearby DuPont Country Club, are part of as much as $4 billion in “excess” corporate costs Peltz says can be cut.
At 203-year-old ThyssenKrupp, Swedish investor Cevian Capital AB increased its stake to more than 15 percent in February and renewed a demand for a seat on the steelmaker’s board.
Old Boys Networks
That may even help ThyssenKrupp Chief Executive Officer Heinrich Hiesinger, who took over in 2011, to push through his plans to change the company’s culture amid price-fixing and bribery scandals as well as a botched expansion in the Americas.
“When I took over as CEO I didn’t realize how radical the necessary change process would be,” Hiesinger said at the company’s annual general meeting last year. “Our old leadership culture was characterized by old boys’ networks and blind loyalty in many areas. Negative developments were concealed rather than corrected.”
To enforce the cultural change, ThyssenKrupp elevated the post of compliance officer to the executive board.
While shareholder activism hasn’t been as aggressive in Europe as the U.S. so far, the number of campaigns are on the rise and more than doubled between 2010 and 2013, according to a 2014 report by law firm Skadden, Arps, Slate, Meagher & Flom.
Entertaining Clients
Siemens AG, Europe’s biggest engineering company, spent a “high six-figure” euro amount a year for hunting grounds in Austria’s Zillertal, including salaries for two professional hunters, Spiegel magazine said in 2009. The German engineer gave up its 7,500 hectares (18,500 acres) later that year.
Still, many German companies still own assets that are not necessarily tied to their main business. ThyssenKrupp owns the Kieler yacht-club hotel that also houses the club, chemical maker BASF SE operates the country’s ninth-biggest wine cellar and energy company EON SE has a golf course. EON owns Castle Oefte near Essen, which has been rented to a golf club since 1959, and a 19th-century guest house with marble columns and wood-paneled ceilings on the Alster River in Hamburg.
“Firms are under pressure to justify these expenses and the attitude that comes with it,” saidZacharias Sautner, a finance professor at the Frankfurt School of Finance and Management.
BASF’s Wine
How an asset is used may be an argument for keeping it, according to Sautner. An art collection that is open to the public or an asset that helps the company generate business is different than executive perks.
ThyssenKrupp uses its yacht-club hotel in the northern German town of Kiel “for representative purposes and further education of executives,” spokeswoman Nicola Roettger said by e-mail. The company is also a tenant of a 13th-century castle near Essen called Schloss Landsberg, owned by the Fritz-Thyssen Foundation, according to the website of a joint project with Cologne University. The building is used for seminars and conferences.
BASF set up its wine cellar in 1901 to cater to business partners and employees. Today, it sells 900,000 bottles a year, bringing in 5 million euros in wine sales and a further 2 million euros in services such as wine-tasting events. Wine magazine Weinwirtschaft ranks the operations as the 9th biggest wine trading business in Germany. The chemical maker plays host to business partners at its vineyard in the Palatinate wine region west of the Rhine River.
Even if some luxury assets are needed for certain client tasks, shareholders may disagree.
“A manager who cares about status and prestige rather than working really, really hard and increasingshareholder value is more likely to be someone who likes to own things like a vineyard, a golf course or a hunting ground,” Sautner said. “That’s why information about these perks is important.”
http://www.bloomberg.com/news/2014-...l?hootPostID=4c03e5debe6c59fd8c71b3dde3fe1c15
They will just start a non-for-profit charitable hunting foundation 
