PGGM challenges Kottmann's appointment as GSW head

PGGM may not be one of the top five investors in GSM Immobilien but it has taken on activist shareholder, challenging the way its CEO was appointed.

PGGM is demanding that German listed residential property company GSW fire its recently appointed CEO Bernd Kottmann.

PGGM held just under 3% in GSW at end-2012, slightly less than APG, the largest Dutch pension fund asset manager. APG is the fifth-largest shareholder in the German company.


WHAT DOES PGGM WANT?

The Dutch pension fund asset manager is to submit a motion of no confidence in Kottmann at the shareholders' meeting scheduled for 18 June 2013.

PGGM wants an independent selection committee to re-open the search for a new CEO. PGGM will also call on shareholders to remove Eckart John von Freyend, chairman of GSW's supervisory board, which led the selection process.

In a statement, PGGM said it believed the appointment of Kottmann announced on 18 March this year was not done in a transparent way. Kottmann came from troubled German listed company IVG Immobilien to replace Thomas Zinnoecker in mid-April. Once the leader of the German property pack with a market capitalisation of €7.2 bn in 2007, IVG has since dwindled into a penny stock with a market cap of just €83 mln in May this year.

Zinnoecker GSW left to head Gagfah, the largest residential property owner in Germany.

'PGGM deems it extremely important that the companies it invests in should have and maintain a robust corporate governance structure,' the second largest pension fund in the Netherlands said. 'PGGM finds the procedure adopted for the recent appointment of a new CEO at GSW to be unacceptable,' it added.

PGGM said there were 'several indications' that cast doubt on the diligence of the appointment process, and that written and verbal inquiries directed to Von Freyend failed to dispel these concerns.

PGGM noted that both Kottmann and Von Freyend worked at IVG, which PGGM said 'got into great difficulties in 2008 under their management.'

'Dr. Eckart John von Freyend as chairman of the supervisory board and chairman of the executive committee (Präsidium des Aufsichtsrats) of the supervisory board is responsible for the inadequate recruitment process and its inadequate outcome. We are convinced that the shareholders of the company have lost confidence in him. Therefore, he is to be dismissed,' PGGM said.

CLAIMS REJECTED
GSW's supervisory board has rejected the allegations that the selection of Kottmann was not done in an appropriate manner.

In a filing for the annual shareholders meeting, it wrote: 'The supervisory board chairman has at all times complied in full with his duties under the law, the articles of association, the rules of procedure and the German corporate governance Code.'

'The supervisory board’s view that the concerns expressed by the shareholder Stichting PGGM Depositary as to Dr. von Freyend’s capabilities and his independence are not appropriate. This also applies to the allegation that the appointment of Dr. Bernd Kottmann as a member and chairman of the executive board of the company was decided on the basis of a defective selection process.'

The supervisory board added that Von Freyend, like all other supervisory board members, had declared he had no personal, financial or business relations existing with Kottmann.

Von Freyend indicated to other media that at least 10 candidates were interviewed for the top job over a five-week period and that Kottmann emerged as a 'very eligible candidate both professionally and personally'.