Ethos will participate today in the annual general meeting of LafargeHolcim and recommend shareholders not to discharge the board, in particular due to the under-performance of the share price in comparison to the main competitors of more than 50% since the announcement of the merger in July 2014. Ethos also recommends voting against the 2015 remuneration report in light of the special remuneration granted to the chairman and the management for the merger. Finally, the board of 14 members lacks independence. Ethos therefore recommends not re-electing three members.
Premature discharge
One year after approval of the merger by the extraordinary general meeting of Holcim, shareholders have suffered a considerable loss of value. The balance sheet of the new group has become much more volatile: it includes close to CHF 16 billion in goodwill which carries a write–off risk, in particular in certain markets inherited from Lafarge. Ethos estimates that as long as the value added of the merger has not been demonstrated, the shareholders should not discharge the board.
Higher remuneration
Ethos notes that the board has granted merger premiums to certain of its members and to the members of the executive management. Ethos considers that these grants are inappropriate, in view of the negative impact of the merger on shareholders. Ethos also notes that the board has revised the remuneration policy and has included a performance based share plan that considerably inflates the potential variable remuneration. In case that all objectives are met, the new CEO could receive up to CHF 7.9 million, while the maximum remuneration of the former CEO could not exceed CHF 4.2 million.
Board not sufficiently independent
Since the merger with Lafarge, the board consists of 14 members. Fewer than 50% are considered independent, of which only one among those proposed a year ago by Lafarge. For this reason, Ethos recommends voting against the re-election of three members.
