Boston, New York The influential voting rights advisor ISS stands against the millions of bonuses for Goldman Sachs boss David Solomon and other top managers of the bank. Goldman Sachs ISS increased the bonus for CEO Solomon sharply, although some important key figures would have deteriorated in 2019 compared to the previous year, ISS criticized in a Reuters report on the night of Friday.
Solomon earned nearly $ 25 million in 2019. ISS recommended that shareholders vote against the salary package at the Annual General Meeting next Thursday. The shareholders’ vote is only of an advisory nature and is therefore not binding. Many funds and large investors follow the recommendations of voting rights advisers such as ISS and Glass Lewis.
Solomon succeeded Lloyd Blankfein at the top of Goldman Sachs in October 2018 and was able to look forward to a substantial salary increase in 2019. He collected a total of $ 24.7 million, of which 7.65 million were bonus payments. Solomon thus received 19 percent more money than in the previous year, although the investment bank’s profit plummeted 19 percent to $ 8.47 billion.
However, the highest-paid US banker remained long-time JP Morgan boss Jamie Dimon in 2019, who received $ 31.5 million after a record profit from the bank – 1.6 percent more than in the previous year.
A Goldman Sachs spokesman defended the salaries for top managers around Solomon. Goldman rewards long-term growth and does not place undue emphasis on short-term results. Income for 2019 reflected the significant long-term success of the top management.
More: How the corona crisis will weigh on US banks’ businesses.
Bank of America suffered a slump in profits due to high provisions for bad loans.
new York The profit of the US investment bank Goldman Sachs has halved in the Corona crisis due to impending credit defaults and increased costs. Earnings fell 49 percent to $ 1.12 billion in the first quarter, the institute said on Wednesday.
In contrast, earnings decreased only one percent to $ 8.74 billion. Provisions for bad loans quadrupled to $ 937 million at the end of March, from $ 224 million a year earlier.
Despite short-time working and an extended production stop, the Munich-based automaker wants to stick to its planned dividend payment.
Munich On BMW is reliable. While other Dax companies had to postpone their shareholders’ meetings as a result of the corona pandemic, BMW is holding its 100th general meeting on May 14, as planned. The car manufacturer from Munich wants to maintain continuity even in times of crisis.
As the invitation to the event, which the company sent out on Monday, shows, the owners are asked not to appear in person. You should attend the Annual General Meeting digitally via livestream. Health protection comes first.
The BMW shareholders’ meeting is therefore taking place virtually for the first time, i.e. without a physical presence. Otherwise, everything is as usual. The board of directors and the supervisory board also propose to distribute a total dividend of 1.64 billion euros to the shareholders. Because the vehicle manufacturer has applied for subsidized short-time work for a good 20,000 employees at the same time, the Bavarians stand just as much Daimler or VW in criticism.
“Short-time work allowance is state aid. Those who rely on state aid cannot simultaneously distribute profits to shareholders. That is the ugly face of capitalism. In these cases, I am therefore in favor of a general dividend freeze ”, Carsten Schneider tweeted, parliamentary manager of the SPD parliamentary group, last week.
Dietmar Bartsch, chairman of the Die Linke parliamentary group, recently called in the “Financial Times” to suspend bonus payments and dividend payments if German companies make use of short-time work or other state benefits in the crisis.
Profit sharing of BMW employees linked to dividends
Many companies have already canceled their planned dividend. The German Protection Association for Securities Ownership expects that even in the best case, the 160 listed companies in Dax, MDax and SDax will only distribute 44 million euros to their shareholders this year due to the corona crisis.
That would be 14 percent less than in the previous year. In the current situation, “securing liquidity has priority first,” says Eric Frère, director of the Institute for Strategic Finance at FOM University.
Nevertheless, there are very good reasons why BMW is sticking to the dividend. The profit sharing of the automaker’s employees is partly linked to the distribution to the shareholders, according to corporate circles. If the owners’ profit sharing is canceled, this automatically reduces the bonus for the employees.
In addition, dividends are per se past. The corporations share their shareholders in the economic success for the 2019 financial year. For 2020, the year in which the corona crisis actually has an impact, the distributions will in many cases be eliminated completely or shrink significantly. In addition, many German companies do not want to lose their reputation as reliable partners on the capital market.
This is doubly important, especially for corporations like Daimler. Unlike BMW or VW, the Stuttgart company has no protective anchor shareholder. Because Daimler’s share price has been falling for years, many investors see the final argument in the dividend as to why they are still involved in the Swabians.
Suspending the previously announced profit sharing in such a constellation should scare away large dividend funds, it is said in financial circles. The result: Daimler’s stock market value could drop even further and the group could finally become the takeover target.
More: How well are German companies prepared for the crisis?
The buyback program in the amount of 1.5 billion euros is to be stopped once half of the amount.
Munich Europe’s largest insurer alliance wants to pay its shareholders a dividend for 2019 despite the corona crisis and against the advice of European supervisors. “Although the current environment is expected to be reflected in our results, our financial strength remains very strong,” said the DaxGroup in Munich on Monday.
The shareholders are to vote at the Annual General Meeting on May 6, as planned, on a dividend of EUR 9.60 per share. However, due to the corona virus pandemic, the meeting will take place in virtual form without the personal presence of the shareholders.
While the board of directors is sticking to the planned dividend, it is steering back during the ongoing share buyback. The current program, worth 1.5 billion euros, is to be stopped once half of the total. “We will consider resuming the program when the financial and economic impact of the Covid 19 pandemic is more apparent,” the group said.
A few days ago, the European insurance regulator Eiopa asked the companies in the industry to take a break from dividends and share buybacks. With her demand, however, she is not heard by large German insurers. In addition to Allianz, Munich Re also intends to maintain its payout: the group will stick to its proposed dividend of EUR 9.80 per share.
“Against the background of Eiopa’s statements, we are sticking to this decision,” said a Munich Re spokesman for the German Press Agency. “We were able to demonstrate our risk-bearing capacity to the German financial regulator even in the event of extreme damage. She expressed no concerns about dividend payments. ”A share buyback program was suspended until further notice due to the uncertainties.
The Talanx insurer is to propose a dividend of EUR 1.50 as planned. “We are confident that we can convince the Bafin of our position,” said a spokesman. Hannover Re is also in consultation with Bafin and refers to the unchanged dividend proposal of EUR 5.50. Talanx and Hannover Re do not have share buyback programs.
The German financial regulator Bafin had not considered a blanket distribution ban for insurance companies. The Bafin expected from the companies “a convincing reason, if they want to pay dividends”, it said. Bafin does not comment on individual companies.
“Eiopa is not our home regulator, but the Bafin,” said Allianz. The German financial regulator is positive about the dividend payment and share buyback because the financial strength and liquidity situation of Allianz – even in the crisis – is good ”.
Bull and bear in front of the Frankfurt stock exchange
Historically unique losses in global equity markets.
(Photo: Oliver Ruether / laif)
Dusseldorf The money could be used to repay all of Europe’s public debt, and there would still be five trillion euros left: the 50,805 listed companies worldwide lost 19.4 trillion euros in just six weeks, according to Handelsblatt calculations. In such a short time, this decline is historically unique.
The courses worldwide lost 24 percent, in Germany the 755 listed companies were hit even harder with a loss of almost 30 percent. All local companies together currently cost 1.4 trillion euros. Alone Apple and Microsoft reach a total market value of 1.95 trillion euros.
For most corporations, saving in the corona pandemic is important.
Frankfurt Shareholders in Germany have to expect dividend losses this year due to the corona crisis. In the best case scenario, the 160 companies in the Dax, MDax and SDax stock market indices will transfer a total of over 44 billion euros to their shareholders in 2019 – around 14 percent less than in the previous year. It is also the first drop in five consecutive records. More than a quarter of the companies are therefore not planning a distribution (as of March 31).
Dusseldorf Germany’s companies wanted to transfer a dividend of over 45 billion euros to their shareholders after this year’s Annual General Meetings. Actually. The total is calculated from the corresponding proposals of the groups in their business deals for the past year and the annual press conferences.
But after Dax– Newbie MTU has announced that, given the corona pandemic, it is unlikely that a dividend will be distributed, “the ice has broken”, fears Commerzbank-Expert Andreas Hürkamp. The engine manufacturer originally wanted to distribute 3.40 euros per share, 55 cents more than in the previous year.
According to MTU, many companies are now rethinking their previously announced dividends. Covestro for example, plans to continue paying a dividend of EUR 2.40 per share, but a spokesman for the group restricts the Handelsblatt: “We will continue to monitor economic developments closely and, if necessary, take them into account in our dividend proposal.”
Express themselves similarly BASF and Volkswagen. With 3.3 billion euros, the car maker would be the largest payer after the alliance. On the other hand, the pharmaceutical giant Bayer announced on Friday that it would transfer EUR 2.80 per share at its purely digital general meeting on April 28, as planned.
For shareholders and the Dax prospects, dividend cuts and, above all, the uncertainty about it are bad news. Companies have never canceled the dividends proposed by the Board of Management and the Supervisory Board, not even during the financial crisis in 2009, the largest recession in German post-war history. Many stocks are held primarily because of high and reliable dividends. With the annual distributions, more could be earned in the long run than with price increases.
So it remains to be seen how companies will deal with the issue of dividends at the annual general meetings, which will probably be made up for in the second half of the year after the cancellations. With the announced 45 billion euros, for example, the crisis-shaken one Lufthansa buy almost ten times.
Twelve German companies have promised their shareholders more than one billion euros in dividends, most of all Allianz with four billion euros, Volkswagen with 3.3 and Siemens with 3.1 million. But in the face of the global crisis, are the promises actually kept?
“MTU is the icebreaker with a view to further deletions,” assumes Andreas Hürkamp from Commerzbank. The strategist has been pursuing corporate dividend policies for decades. There has never been a comparable situation in which companies have canceled dividends that have already been announced – not even in shock after the bankruptcy of the major American bank Lehman in 2008. With the cancellation, MTU would keep 177 million euros.
The approach of the Dax newcomer seems understandable given the massive loss of revenue this year, but is controversial. After all, the dividend is about the success or failure of the past financial year. There was no corona crisis yet.
Legally not clearly clarified
Jürgen Kurz from the German Association for the Protection of Securities (DSW) describes such a procedure as “legally difficult”. “After the approval of the consolidated financial statements by the Supervisory Board, the dividend proposal is also approved, and companies can no longer go back from such a decision,” Kurz argues, but adds: “The question is not legally clear.” He refers to legal opinions that are different the investor protection have previously caught up with.
In contrast, the lawyer Marc Löbbe from the renowned Frankfurt business law firm Schilling, Zutt & Anschütz grants the companies the right to make provisions with the dividend retained: “It is even permissible at the Annual General Meeting to propose a change to the original proposal for the appropriation of profits and thus the Bring in dividends, ”argues Löbbe. It is controversial among lawyers under what conditions this is possible.
The question is controversial, because nine out of ten German listed companies currently want to distribute dividends for the past financial year. You are now faced with the decision to stick to this in view of the good results in the past year or to cut the dividend due to collapsing earnings due to the corona crisis. “In the current environment, I expect the corporations to cut their dividends significantly,” predicts the chief investment strategist at German bank, Ulrich Stephan.
The focus is not on companies like Beiersdorf, handle, Deutsche Telekom and SAP. Your dividend seems certain because the business models are little to no crisis prone. Siemens and Infineon have been among the few companies that have already paid dividends because their fiscal year ended in late September. It’s about the many cyclical companies.
For days, analysts have been speculating on a dividend cut at the chemical companies BASF and Covestro as well as at the automaker Volkswagen. The general meetings, which have been postponed for almost all companies for an indefinite period – but still this year – fuel corresponding speculation. “The later the annual meetings take place, the more shareholders and management will focus on the current financial year,” says Commerzbank analyst Hürkamp.
“Covestro plans to continue paying a dividend of EUR 2.40 per share,” a group spokesman told the Handelsblatt, but at the same time restricts: “However, we will continue to monitor economic developments closely and, if necessary, take them into account in our dividend proposal.” There will only be a dividend proposal at the – postponed – general meeting.
BASF also keeps all options open. “Not so far,” answers a corporate spokesman when asked whether there are any plans to change the announced dividend of EUR 3.30 per share – and he adds: “In principle, such a proposal can also be changed at the Annual General Meeting. ”
At BASF, that would be like breaking a taboo. Shortly after taking office, CEO Martin Brudermüller put himself under pressure and announced that he would like to increase the payout every year in the future. The maxim among his predecessors was: pay more in good times and keep the dividend in bad years if possible. A cut of just ten cents would mean a dividend at BASF “only” at the previous year’s level – which would have broken the new boss’s first promise to shareholders.
Volkswagen is in a tricky situation. In view of the high after-tax profit of 14 billion euros, the world’s largest car maker has increased its dividend significantly from 4.86 to 6.56 euros per preferred share. Even so, the payout ratio calculated from the net profit is only 24.5 percent. 40 to 50 percent are common internationally. Even more: “We are still below our strategic target for a payout ratio of more than 30 percent,” says a VW Group spokesman.
Car maker considerations
So there is a lot of buffer. Nevertheless, Volkswagen is also considering reflecting on the decision again: “The decision on the dividend will be made at the 2020 Annual General Meeting. Until then, we will closely monitor the further development of the corona crisis. ”The competitor BMW intends to distribute 2.50 euros per share as planned, one euro less than in the previous year. “There is currently no intention to change anything in these plans,” it says on request. However, the Munich-based company also leaves the decision open.
Is only a little more solid Daimler to his promise. “Our proposal for a dividend has been made and there is no reason to change anything at this point,” said Daimler CEO Ola Källenius. Which means something like: Tomorrow everything can look different. There would not be much to cut at Daimler anyway, after the Stuttgart company had announced in Europe before the corona crisis that it would cut its payout from 3.25 euros to 90 cents.
In particular, companies that are considering taking government aid during the crisis are likely to be forced to cut their dividends. This applies, for example, to the automotive supplier Leoni. Lufthansa also talks to the state development bank KfW about possible aid, which has not yet been necessary. Both Lufthansa and Leoni canceled their dividends.
The banks have been in the focus of dividends since the end of last week. So far, the crisis has hardly spread to the financial industry. But the public sector does not want to have to step in again after the banks have distributed billions of dollars. It was like that a decade ago. “We advise financial institutions to handle existing capital resources very carefully,” said Felix Hufeld, president of Bafin financial supervision. He advises banks to carefully consider dividends, profits and bonuses.
Deutsche Bank need not think about this. She has no intention of spilling anything anyway. So far, Commerzbank intends to pay a dividend of 15 cents per share. Given the state share of just over 15 percent that resulted from the financial crisis a good decade ago, anything but a deletion would be surprising.
From a business point of view, a dividend waiver makes sense given the large drop in earnings, even though the companies have financial cushion. The equity capital of the Dax groups rose by almost four percent to 656 billion euros in the course of the past financial year. This corresponds to a solid average equity ratio of 34.5 percent. With the exception of the provider Eonwho, however, does not have to fear any losses in view of the corona crisis, all other groups have a quota above the critical mark of 20 percent.
Operating cash flow, i.e. the cash generated from its business activities, also grew by a good 11 percent to EUR 142.8 billion within one year. Volkswagen amassed the most cash flow with 30.7 billion euros, followed by Deutsche Telekom with 23 and Daimler with 13 billion euros.
However, liquidity is quickly lost if, during the crisis, income suddenly runs dry and costs remain the same. The companies experienced this at the turn of 2008/09. This time, the standstill in the economy is much bigger. “Many companies are likely to increase their debt in the form of new loans in the coming months. In the medium term, we also expect capital increases to strengthen equity, ”predicts DZ Bank expert Christian Kahler. This certainly includes withholding dividends to limit cash outflows.
More: Company lawyer Marc Löbbe considers dividend cuts to be a tried and tested means of maintaining liquidity.
The lawyer works in the area of corporate law / M & A.
(Photo: SZA Schilling, Zutt & Anschütz)
The doctor of law is an expert for general meetings at the Frankfurt commercial law firm SZA Schilling, Zutt & Anschütz.
Mr. Löbbe, legally dividends will be distributed for the 2019 financial year. Is it appropriate to cut dividends if the crisis only affects earnings in 2020? Yes, because companies can build up retained earnings or carry forward the profits to new accounts and thus make provisions for the future. It is about maintaining liquidity to prepare for difficult times. Therefore, companies can withhold profits instead of distributing them. Shareholders must always reckon with this, even in times without a crisis. Companies particularly affected by the corona crisis must also take into account when deciding whether paying a dividend can affect their chances of receiving government funding.
But so far it has been the practice for companies to propose a dividend in their annual report. Now companies are changing their own proposals later. Is that possible? That is clearly possible. The proposed appropriation of profits is reproduced in the notes to the annual financial statements. The Executive Board also communicates the intended dividend at the annual press conference. However, the proposal will only be voted on at the general meeting.
Can companies change their announced dividend afterwards? Yes, even at the general meeting. However, there are arguments among lawyers when the invitation to the Annual General Meeting is already out and the company then changes the proposed appropriation of profits and thus the dividend. One opinion says that I can only make another proposal at the general meeting if circumstances have changed. The other opinion says: I can always change my proposal, even at the general meeting.
What is your opinion? In my view, companies can change the proposed appropriation of profits at their general meeting if they submit an application there. In any case, companies should consider whether to send out an ad hoc notification as soon as they change the proposal.
More: German corporations have never canceled their promised distributions. The corona crisis is now forcing many people to rethink their dividends.