Swatch Group: The Hayek family rejects a new bid from U.S. investor Wood

The Swatch Group’s Annual General Meeting of Shareholders was held on May 12. A key item on the agenda was the election of new members to the Board of Directors.

While Swiss entrepreneur Andreas Rickenbacher was elected as the new—and eighth—member of the Swatch Group’s Board of Directors with 92.2 percent of the vote, Steven Wood’s attempt to join the Board failed once again. The Annual General Meeting rejected his nomination with 79.6 percent of the vote. Instead, Jean-Pierre Roth was re-elected as the long-standing representative of the owner-shareholders.

In an initial vote, in which only bearer shareholders were eligible to participate, Wood initially received 80.4 percent of the votes and was thus nominated as the representative for this category of shareholders. Andreas Rickenbacher, the opposing candidate backed by the Swatch Group, was rejected by the bearer shareholders. Since the members of the Board of Directors are ultimately elected by the entire General Meeting, a second vote was held. In this vote, Wood was decisively rejected.

The Board of Directors includes, among others, CEO Nick Hayek, his sister Nayla Hayek, and their son Marc Hayek. Also on the board is Daniela Aeschlimann, who represents the Ammann Group. She is the daughter of former Federal Councilor Johann Schneider-Ammann, who served on the Swatch Group’s Board of Directors from 1998 to 2010.

The Hayek and Ammann families have also been friends for decades, and the Ammann Group holds a direct stake in the Swatch Group. In terms of voting rights, Aeschlimann is therefore aligned with the Hayek side, which thus holds the majority.

The other members are also frequently accused of lacking independence, given that each has served on the Board of Directors for at least 15 years. These include Ernst Tanner, Chairman of Lindt & Sprüngli; astronaut Claude Nicollier; and former National Bank Director Jean-Pierre Roth. A new member, Andreas Rickenbacher, has now joined the board.

U.S. investor criticizes Swatch Group’s strategy

Through his investment firm Greenwood Investors, Steven Wood holds a 0.5 percent stake in the publicly traded Swatch Group. Last year, in an interview with the Swiss magazine *The Market*, he explained the reasons behind his candidacy and his criticism of the group’s strategy:

“I’ve spoken with over thirty industry leaders, including former Swatch Group executives as well as some who work for competitors like LVMH or Richemont, and they all confirm my view. Nick Hayek, CEO of the Swatch Group, has done an excellent job building the entry-level brands, but there is still room for improvement with the premium brands. They have the right products, but suffer from a closed culture and missed opportunities for execution. They should be open to new executives with fresh ideas.”

Nayla Hayek criticizes Wood in her opening remarks at the General Assembly

“The Board of Directors’ long-term strategy is clear. Our production—and by that we mean Swiss Made—our employees, and our customers are our top priority, not our stock price and dividends, as some investors have demanded. Each of us is happy about and benefits from higher share prices and dividends, but they must not be our primary strategy. As my father used to say: ‘We sell watches, not shares,’” emphasizes the Chairwoman of the Board of Directors of the Swatch Group, adding about Steven Wood:

“Now an activist investor is demanding to be appointed to our board of directors. Why? Because his priority is to increase the share price and the dividend. In other words, a classic short-term strategy aimed solely at maximizing profits, designed to transform our long-term strategy into a short-term one. He does not meet any of our criteria for nomination to our Board of Directors, whereas our candidate, Mr. Rickenbacher, does so in full. But that’s not all: he is also suing the very body he intends to work with in the future. That is why the Board of Directors stands firmly behind our proposal to elect Mr. Rickenbacher to the Board of Directors and opposes the election of Mr. Wood to the Board. And to cement this for the future, he is also proposing amendments to the Articles of Association designed to break the so-called power of the Hayek Pool.”

According to the NZZ, Steven Wood has not given up, even after his second failed attempt to become a member of the board of directors:

“Support for me among the owner-shareholders has increased by 70 percent compared to last year,” the Swiss newspaper quotes the investor as saying; he intends to use this momentum to continue fighting for his cause.