Shareholders of GSW Immobilien AG (GIB), Berlin’s largest residential landlord by market value, passed a vote of no-confidence against its chief executive officer following investors’ complaints over how he was hired.
The no-confidence motion for CEO Bernd Kottmann got 63.3 percent of votes at the annual shareholder meeting yesterday in Berlin, exceeding the 50 percent required for passage. A motion to oust Chairman Eckart John von Freyend, who supervised Kottmann’s recruitment, got 69.6 percent of votes, falling short of the 75 percent needed.
“I would have hoped for a different outcome and am sad about the result,” Kottmann said in an interview after the vote. “I would like to continue my work at the company.”
GSW, which owns 60,000 apartments in Berlin, said on March 18 that Kottmann would succeed Thomas Zinnoecker as CEO on April 16. A month later, investor PGGM NV called for votes on the appointment, saying the speed with which Kottmann was chosen raised questions about whether the search was thorough. The Dutch pension administrator also criticized Kottmann and Freyend over their tenure at IVG Immobilien AG (IVG), a German real estate company now in debt-restructuring talks with creditors.
While the vote represents a rebuke for GSW over Kottmann’s hiring, it doesn’t require him to resign.
“This is a very strong statement from shareholders,” Jorrit Arissen, PGGM’s portfolio manager in charge of European real estate stocks, said in an interview at the meeting. “Since the majority of shareholders voted against him, the chairman should reach his own conclusion and step down.”
PGGM owns about 3 percent of GSW, according to data compiled by Bloomberg. Its biggest shareholders are Sun Life Financial Inc. (SLF), BlackRock Inc. (BLK:US) and Singapore’s wealth fund.
The votes were counted after a seven-hour shareholder meeting in which Freyend repeatedly defended himself against accusations that he had failed to cast the net widely for a more qualified candidate and instead hired a former colleague.
Responding to shareholder questions, Chief Operating Officer Joerg Schwagenscheidt and Chief Financial Officer Andreas Segal said they hadn’t been asked if they were interested in the position.
Almost half of GSW shareholders unsuccessfully tried to obtain information from Freyend about the hiring process before motions were filed, PGGM said in a statement at the meeting.
“We will have to make a bigger effort to communicate about this and other processes,” Freyend said after the vote. “I didn’t expect we’d get so much opposition.”
Freyend declined to say whether he or Kottmann would step down.
“We’ll have to discuss the results in a supervisory board meeting to be set soon,” he said.
Freyend and Kottmann worked together at IVG Immobilien, which has lost about 98 percent of its market value since 2008 and is in talks to restructure 3 billion euros ($4 billion) of debt.
GSW has declined 12 percent since PGGM called on Kottmann to quit on May 15, compared with an 8.7 percent decline in the EPRA FTSE/NAREIT index of German property stocks.
The search for a CEO began on Feb. 13 after former GSW CEO Zinnoecker informed Freyend that he was considering leaving, Freyend said at the meeting. On Feb. 26, Zinnoecker asked to be relieved of his contract, Freyend said. On March 11, GSW issued a statement saying that Zinnoecker is leaving, and on March 18 said it had hired Kottmann.
Germany’s financial regulator Bafin is investigating why GSW didn’t inform shareholders about the possible CEO change immediately after the search began on Feb. 13, a Bafin spokeswoman said by phone on May 17.
GSW has received Bafin’s questions and is preparing answers, the company said at the shareholder meeting.
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