FRANKFURT – Former Lufthansa Chief Executive Wolfgang Mayrhuber is back in the running to become supervisory board chairman of Germany's biggest airline after overcoming shareholder opposition to his candidacy.
Lufthansa said late on Monday the supervisory board reiterated its nomination for Mayrhuber to become a supervisory board member after key investors said they would vote for him.
If all goes according to plan, shareholders will hold their annual meeting on Tuesday to elect him as a board member. The supervisory board will then vote him its chairman later that same day.
Lufthansa said the earlier opposition by shareholders was "caused by voting recommendations that are unsuited to Germany's two-tier corporate governance system." In Germany, a supervisory board - whose members have non-executive functions - controls a separate management board.
Earlier on Lufthansa said Mayrhuber had withdrawn as candidate to become a board member amid signs of shareholder opposition.
The announcement came after daily newspaper Frankfurter Allgemeine Zeitung said proxy advisory firm ISS had recommended that shareholders vote against Mayrhuber because he held too many supervisory board positions.
He is chairman of the supervisory board at German chipmaker Infineon
A spokeswoman for ISS declined comment. The ISS website said its policy was to recommend against a candidate who holds an excessive number of board appointments.
It also wants a five-year "cooling-off period" between his stepping down as chief executive and his appointment as chairman. German corporate governance rules allow two years.
Under Mayrhuber, who was CEO for seven year years through 2010, Lufthansa expanded rapidly, buying up BMI of Britain, Austrian Airlines and Swiss.
Swiss had to be restructured, Austrian Airlines is still loss-making despite years of heavy cost-cutting and Lufthansa agreed to sell BMI in late 2011.
Institutional investors including Union Investment had reservations about Mayrhuber being named chairman as long as his successor is still dealing with his legacy.
German activist shareholder group DSW said it would vote for Mayrhuber because of his deep knowledge of the industry.
"His strategy to acquire Austrian Airlines, Swiss and BMI were right at that time. Lufthansa needed those companies then," DSW Managing Director Ulrich Hocker said.
Hocker said shareholder attendance in annual meetings at companies including Lufthansa has been declining and there was risk Mayrhuber would not get the majority vote on Tuesday.
"It seemed that Mayrhuber had thought he wouldn't get the majority vote tomorrow and didn't want to go through that risk. That was why he backed out earlier on," added Hocker.
Lufthansa announced last September that Mayrhuber would replace Juergen Weber in May 2013 as board chairman.
Lufthansa was not the first company forced to accede to ISS' wishes. ISS backed efforts of two big MetroPCS shareholders to block the company's proposed merger with Deutsche Telekom U.S. unit T-Mobile USA. Deutsche Telekom eventually was forced to sweeten the deal.
(Reporting By Marilyn Gerlach; Editing by Noah Barkin and Steve Olofsky)