Swatch’s governance under watch by investors

{"text":[[{"start":5.6,"text":"What makes a good board director? At Swatch Group, the question has taken on fresh relevance. "}],[{"start":11.35,"text":"The Swiss-listed watchmaker sits at the centre of a governance debate amid a battle over board representation. The company owns some of the best-known names in the industry, from Omega and Longines to Breguet and Tissot. It helped rescue Swiss watchmaking in the 1980s and remains a symbol of industrial Switzerland."}],[{"start":30.35,"text":"It also has been struggling. Its shares have fallen by more than 40 per cent in the past decade, although they are up about 6 per cent since the start of the year. Net profit plunged almost 90 per cent last year to just SFr25mn — on top of a 75 per cent drop in 2024. Morgan Stanley has estimated the company has lost market share in some areas — although the company has strongly disputed the bank’s figures."}],[{"start":56.3,"text":"Much of this owing to external factors such as weakening demand from China, the impact of US tariffs and a stronger Swiss franc. And the luxury market has cooled. Recent data underline the pressure. Swiss watch exports fell in March and growth in the first quarter was modest. Analysts at Vontobel this week suggested that even this is likely to overstate underlying demand."}],[{"start":82.1,"text":"But not all the problems at Swatch are because of external factors. Some investors point to internal problems with strategy, execution and governance. That puts the spotlight on the Hayek family — with Nick Hayek as chief executive and his sister Nayla as chair. It retains tight control, owning about a quarter of the equity but close to half the voting rights. "}],[{"start":103.89999999999999,"text":"Nick, the son of the company’s founder, has clashed strongly with critics, once declaring on an earnings call that if investors don’t like the company or the way it’s governed, they can invest elsewhere."}],[{"start":115.8,"text":"This is where the question of the “good director” becomes more than theoretical. Hayek family members hold three of the company’s seven board seats. Another director, Daniela Aeschlimann, has longstanding ties to the shareholder pool that underpins the family’s control. Other directors are long-serving. The newest recruit as director who is not a representative of the main shareholders has been on the board for around 16 years."}],[{"start":141.9,"text":"For more than a year, a small activist shareholder — Steven Wood of GreenWood Investors — has been seeking board representation to challenge the status quo. The company has been resisting."}],[{"start":null,"text":"

"}],[{"start":151.1,"text":"Next month’s annual meeting will mark Wood’s second attempt to gain a board seat, even as his firm has challenged last year’s AGM results in court. The case centres on whether the process complied with Swiss corporate law."}],[{"start":163.6,"text":"After criticism of its governance, this year Swatch has nominated Andreas Rickenbacher, a former cantonal politician, entrepreneur and director on other boards. On his nomination, he said he would act independently as a director. He also said boards “are like collegial governments” — they work best when the body functions as a whole. "}],[{"start":183.9,"text":"Will that be enough for investors? Should it bring on a more explicit challenger of board thinking and strategy like Wood? Greenwood controls about 0.5 per cent of the voting rights of the company and holds just over 0.3 per cent of the share capital. His holdings include more than 30,000 bearer shares compared with just 10 held by Jean-Pierre Roth, the current representative of bearer shareholders. "}],[{"start":208.45000000000002,"text":"Swatch’s board has opposed Wood’s candidacy, questioning the extent of his sector experience and stating it wanted its board directors to be either Swiss citizens or have Swiss residency. Wood is American."}],[{"start":220.25000000000003,"text":"Activist investors are not always ideal board candidates. For some companies, they can be seen as awkward disrupters. In markets like the US or UK, it is more common for activists to join boards than in Switzerland."}],[{"start":235.05000000000004,"text":"Swatch says that if Rickenbacher is elected, its board will be composed of four members that represent majority shareholders and four that are fully independent. It adds the company’s governance and board of directors composition is in line with Swiss law, which allows for directors to be re-elected without any limitation in time. But if Swatch shares and company performance come under further pressure, the questions from investors over whether there is enough internal challenge on strategy at the board level are not likely to go away."}],[{"start":271.80000000000007,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777016538_8597.mp3"}