Introduction
Headquartered in Leverkusen, Germany, Bayer AG is one of the largest life sciences companies, and it was founded in 1863 through the partnership of Friedrich Bayer and Johann Friedrich Weskott. The company has a wide range of products covering areas, such as pharmaceuticals (prescription drugs, specialty therapeutics, and radiology), consumer health (dermatology, nutritionals, analgesics, digestive health, allergy, cough and cold, and cardiovascular drugs), crop science (seeds, chemical and biological pest management, and agricultural support services), and animal health (companion and farm animals). Its markets are spread all over the world with operational regions divided into Europe, the Middle East, Africa, North America, Asia Pacific, and Latin America. By the end of 2019, the company had 103,824 employees working in different areas of specialization spread around the world in its various locations. The organizational structure is designed around three major divisions – crop science, consumer health, and pharmaceuticals. The Board of Management is made of the chairperson, Warner Baumann, and representatives from crop science (Liam Condon), finance (Wolfgang Nickl), pharmaceuticals (Stefan Oelrich), and consumer health (Heiko Schipper). The 2019 financial statements indicate that the company has assets worth €70.5 million. It had net sales of €14.8 billion, with a gross profit of €6.9 billion, which was an improvement from €6.4 billion in 2018.
Supervisory Board
Corporate governance at Bayer AG comprises the entire system involved in the management and running of the company. Bayer AG has established the Supervisory Board, which is made up of 20 members drawn from 5 committees – “the Presidial Committee, the Audit Committee, the Human Resources Committee, the Nominations Committee and the Innovation Committee” (Bayer, 2020). The work of the Supervisory Board is to advise and oversee the Board of Management. Half of the members of this board are elected by the company’s employees, while the other half by the stockholders, according to the German Codetermination Act. The Supervisory Board is “directly involved in decisions on matters of fundamental importance to the company and confers with the Board of Management on the company’s strategic alignment” (Bayer, 2020). Additionally, it meets regularly with the Board of Management to discuss the company’s business strategy and assess the status of implementation of various projects.
The board’s chairperson, Werner Wenning, coordinates its activities together with presiding over the meetings. The Presidial Committee is made up of four individuals – the chairperson, the vice-chairperson, and two representatives (employee and stockholder representatives). The function of this committee is to serve as a mediation committee where it makes proposals to the Supervisory Board concerning the appointment of the Board of Management members among other functions. The Audit Committee has three employee representatives and three stockholder representatives (Bayer, 2020). The chairperson has to be an expert in accounting or auditing, as a regulatory requirement. The work of this committee is to oversee the financial reporting process, assess the effectiveness of the internal audit system and audit financial statements. It advises the Supervisory Board on audit and accounting matters.
The Human Resources Committee is made up of the chairperson of the Supervisory Board and three other members, and its main duty is to make personnel decisions, especially the appointment of members of the Board of Management. It also makes all the important decisions concerning human resources management across the entire organization. The Nominations Committee prepares for the election of stockholder representatives to the Supervisory Board when necessary. It proposes the appropriate dates for the holding of the Annual Stockholders’ Meeting and recommends suitable candidates to the board. Its members include the chairperson of the Supervisory Board and representatives from the Presidial Committee. The Innovation Committee is made up of the chairperson of the Supervisory Committee and seven other members of the board. Its main work is to create innovation strategy and management and protection of intellectual property laws among other related duties. Members of the Supervisory Board are compensated based on the existing provisions in the Articles of Incorporation. Each receives a fixed annual pay of €132,000 on top of reimbursement of their expenses (Bayer, 2020). The chairperson and the vice-chairperson receive additional compensation for chairing the board and taking part in different committees.
Board of Management
The Bayer AG Board of Management has five members including the chairperson, Werner Baumann, and the other four – Liam Condon from crop science division, Wolfgang Nickl from finance, Stefan Oelrich, and Heiko Schipper from the pharmaceuticals and human health sections. These members are appointed by the Supervisory Board, through proposals by the Human Resources Committee. Every member of the board is expected to serve for a five-year term, which is renewable. The primary duty of the Board of Management is to define “the long-term goals and the strategies for the company and the Group and set forth the principles and directives for the resulting corporate policies” (Bayer, 2020). It also coordinates and monitors the major activities of the company including defining portfolio, developing and deploying managerial employees, and resource allocation to ensure that the organization meets its financial obligations.
The Board of Management works as a team; hence, it bears the overall responsibility of running the company. However, each member is expected to manage his or her allocated area based on the written schedule detailing what every person should accomplish. The full board meets regularly to make important decisions on fundamental business aspects under the leadership of the chairperson. Decision-making is done through a simple majority vote, with the exception of cases where consensus is required by law. The chairperson holds the casting vote in instances where members’ votes tie (Bayer, 2020). The chairperson also represents the company when dealing with third parties and other special responsibilities within the organization, such as being part of the finance, innovation, and human resources, technology, and sustainability divisions. Within the Board of Management, only one committee has been formed – Deal Committee and it specifically deals with making final decisions on all matters concerning acquisitions, licensing transactions, and divestitures.
Executive compensation of members of the Board of Management is divided into five major sections – fixed annual earnings, fringe benefits, short-term variable cash, long-term stock-based cash, and pension service cost. The level of executive compensation is adjusted annually or as a need-basis according to the development of the consumer price index. In 2019, the total amount was adjusted to €6.6 million, which was a slight increment from €6.3 million in 2018 (Bayer, 2020). In addition, if a member’s services to the Board are terminated, he or she receives a severance package based on different variables. For instance, in 2019, Kemal Malik mutually agreed to terminate his contract with the company because his position on the board had been scrapped in a restructuring exercise, and he was paid €8.7 million in severance benefits (Bayer, 2020).
Shareholders
Bayer AG is listed in the Frankfurt Stock Exchange with a capital stock of €2,515,005,649.92, which is divided into 982,424,082 no-par registered shares (Bayer, 2020). Based on the company’s Articles of Association, one ordinary share is equivalent to one vote. By the end of December 2019, 403, 340 stockholders were listed in the share register. Most investors in the company are private entities, with the majority of them spread across Germany. Employees in the organization own 1 percent of the capital stock, while private investors own 11 percent. Bayer’s ownership is spread across the globe with 33.2 percent of stock owners based in North America and 19.9 percent in Germany. Stockowners from the United Kingdom (UK) and Ireland account for 15.6 percent of the company’s ownership (Bayer, 2020). Others include France, Italy, Spain, and Portugal with 5.4 percent, Denmark, Finland, Norway, and Sweden – 4.6 percent, Singapore -4.6 percent, Austria, Switzerland, and Lichtenstein – 2.6 percent, Benelux – 0.7 percent, and other countries account for 6.7 percent of ownership.
Voting rights are based on the German Securities Trading Act, also known as Wertpapierhandelsgesetz. According to this law, those holding voting securities of a listed German company “must notify that company of the level of their holding whenever it reaches, exceeds or falls below specified thresholds, i.e., 3, 5, 10, 15, 20, 25, 30, 50 and 75 percent of the company’s outstanding voting securities” (Bayer, 2020). Therefore, when changes to these thresholds occur, stockholders with more than 3 percent of voting rights are obligated, under the law, to inform the company about the new developments.
Reference
Bayer: This is Bayer. (2020). Web.