Professor Christoph Schalast, a mergers and acquisition specialist at the Frankfurt School of Finance and Management, said Friday’s unprecedented rebuke of Bayer’s management was in part caused by Baumann’s overconfidence in the company’s handling of glyphosate lawsuits that have already lopped two-fifths off Bayer’s value. The nine-month timescale he laid out refers to the timing of when Bayer sets the agenda for its next annual general meeting, after which dissident shareholders can file counter motions against management.

Baumann, for his part, has insisted that “management acted conscientiously” in assessing the liability risk around Monsanto.

There have so far been two multi-million-dollar verdicts in the U.S. that held Monsanto liable for plaintiffs’ cancers, on the basis that those cancers were caused by years of using the glyphosate-based weedkiller Roundup. There are another 13,400 such claims waiting in the wings. Bayer’s shareholders do not believe the company adequately assessed this financial risk when buying Monsanto for $63 billion last year in an effort to become a leading player in agriculture.

Extraordinary pressure

At Bayer’s annual general meeting last week, 55.5% of investors voted against “discharging”—or ratifying—the board of management’s actions over the past year. This does not have direct legal implications, but it certainly sent a message.

Ordinarily, German shareholders discharge management by 90% or more, and anything less is seen as a stain on management’s reputation. Deutsche Bank’s co-CEOs were forced out several years ago after 39% of investors refused to back them in such a vote. Baumann now has the distinction of being the first CEO of a DAX-listed company to have a majority of investors vote against him.

Just as unusually, many of those voting against Baumann and his team said they did not want Bayer’s management to go just yet, due to the added chaos that would introduce into the situation. As Janne Werning of shareholder Union Investment put it to the Financial Times, management now gets a “second chance to get to grips with the risks and take the company back on to a path of stable growth.”

Schalast said Baumann’s situation was not directly comparable with that of ousted Deutsche Bank chiefs Anshu Jain and Jürgen Fitschen, because their defenestration was the result of generally poor performance at the bank.

“It is the one deal. That’s why [Baumann] is under such strong pressure,” said Schalast. “[The AGM vote] is a wake-up call for both the supervisory board and board of management, but [Baumann] is in the spotlight.”

Germany has a two-tier system for boards of directors in corporations, with the supervisory board being responsible for monitoring the board of management. Immediately following Friday’s vote, Bayer’s supervisory board—which itself only won 66% approval from shareholders—expressed its support for Baumann. However, supervisory board chair Werner Wenning is known to see Baumann as his protégé, so this support is less than surprising.

Bayer’s route to change

If the board of management does not prove in the next nine months that it is capable of getting a handle on the legal situation in the U.S., Schalast said, shareholders will need to apply pressure to the supervisory board. This may involve calling for a new supervisory board member who has expertise in U.S. litigation of the sort Monsanto faces.

“If they want a change and the supervisory board is not open to such a change, then they have to vote in a new supervisory board,” Schalast said, explaining that in Germany supervisory boards are generally responsive to pressure from shareholders, to whom they are ultimately responsible. “You usually talk to them and they resign and then you have the possibility to vote for a new member,” he said. “If that doesn’t happen, then you need an extraordinary general assembly.”

Investor pressure could be accelerated if there are more major verdicts that go against Bayer/Monsanto, Schalast said.

A Bayer spokesperson said shareholders’ decision not to discharge management was “a new situation for us,” but highlighted the fact that investors had also said “there is no real alternative to the current management.”

“There was nobody who asked the board or the CEO to step down,” said the spokesperson. “There is no real basis for speculation about Mr. Baumann’s future as CEO.”