* Some shareholders vow to vote against Mayrhuber
* Former CEO in running for board after abrupt withdrawal
* Lufthansa cutting costs after troubled expansion drive
By Peter Maushagen and Marilyn Gerlach
COLOGNE, May 7 Lufthansa urged shareholders to
back the appointment of former CEO Wolfgang Mayrhuber to lead
the German airline's supervisory board on Tuesday after an
embarrassing reversal that saw him withdraw and then resubmit
his candidacy within hours.
The about-face on the eve of the annual general meeting
(AGM) in Cologne exposed flaws in the airline's corporate
governance and angered shareholders, some of whom vowed to
oppose Mayrhuber, the 66-year old Austrian who was chief
executive of Lufthansa for seven years until 2010.
Under Mayrhuber, Lufthansa pursued an aggressive acquisition
drive, buying up BMI, Austrian Airlines and Swiss.
The results have been mixed at best and Germany's biggest
airline has suspended its dividend and is cutting costs as part
of a painful strategic overhaul overseen by his successor as
CEO, Christoph Franz.
"It was exciting until the very end," Franz told
shareholders at the meeting, making light of Mayrhuber's
surprising about-face on Monday. "He did great things during his
time with the company."
Some shareholders disagree. Proxy advisory firm ISS and
German fund manager Union Investment are refusing to support
Mayrhuber, citing his poor acquisition record and the
"excessive" number of board appointments he already holds.
"We are speechless. How can you change your position on
Lufthansa two times yesterday, Mr Mayrhuber?" Ingo Speich, of
Union Investment, told the AGM.
"A withdrawal in the morning, and then in the evening a
withdrawal of the withdrawal. That is already casting a shadow
on your future term."
However, Ulrich Hocker, president of Germany's DSW
association for private investors, said that the Mayrhuber
about-turn was the product of misguided meddling by
Anglo-American shareholders rather than problems at Lufthansa.
"Lufthansa did the right thing," he said. "Insisting on an
independent director is good, but independence can also mean
cluelessness. Mayrhuber is the ideal sparring partner for the
Shareholders are due to vote on members of the supervisory
board later on Tuesday afternoon. If Mayrhuber is voted in, the
board would be expected to appoint him chairman later in the
He is already chairman of Infineon, a chipmaker,
and sits on the supervisory boards of carmaker BMW and
reinsurer Munich Re.
Under Germany's two-tier corporate governance system, the
supervisory board - members of which have non-executive
functions - exerts control over a separate management board.
On Monday morning, Lufthansa announced abruptly that
Mayrhuber was withdrawing his candidacy to become chairman of
the airline because of "criticism from shareholders".
That came after German daily Frankfurter Allgemeine Zeitung
reported that ISS was recommending that shareholders vote
Several hours later however, the airline issued a new
statement saying Mayrhuber was back in the running.
Airline analyst Donal O'Neill of Goodbody stockbrokers said
that as long as Mayrhuber supported the management board's
restructuring programme, his appointment would not be a problem.
"I can understand investor concerns in terms of Mr
Mayrhuber's past performance," he said. "However, I think this
is proving a bit of a sideshow in what is a very positive time
Franz, who took over in 2011, has launched a revamp of
Lufthansa, dubbed SCORE, including job cuts and the merger of
loss-making European short-haul flights with discount carrier
Franz told shareholders on Tuesday that the management board
would take a 5 percent pay cut for the 18-month period ending
December 2014 as its contribution to SCORE.