Dr. Werner Rügemer is considered an expert on business practices in Germany. In a recent piece on the anti-American conspiracy Web site NachDenkSeiten, he questions American involvement in the German multi-national corporation Bayer AG. Judging from this piece, Dr. Rügemer has little understanding of capital markets, and even less knowledge of the United States. This is hardly surprising. For many years Dr. Rügemer was affiliated with the DKP, the Stalinist communist party that vehemently opposed free market capitalism and supported the corrupt autocratic-socialist systems of the GDR and former Soviet Union. Today he spends his time warning against the evils of America and Israel ("USrael").
Dr. Rügemer's biggest concern is the ownership stake of Blackrock in Bayer AG:
Der Finanzinvestor Blackrock ist mit gegenwärtig 6,2 % der Aktien der größte Einzelaktionär der Bayer AG. Ich greife ihn unter den anderen Großaktionären heraus, um deren Rolle im Unternehmen zu klären. Bisher trägt der Vorstand nichts zur Klärung bei.
Of particular interest is the influence of Blackrock's CEO Lawrence Fink on companies where Blackrock has substantial holdings:
Blackrock-Chef Lawrence Fink erklärte vor einigen Wochen: „Wir müssen die Macht unserer Stimmen nutzen, wir müssen mit Vorstand und Aufsichtsrat reden und manchmal auf grundlegende Veränderungen drängen. Und das tun wir. Das ist unser Job.“ Ich frage den Vorstand: Wann und an welchen Orten außerhalb der Hauptversammlung fanden im Laufe des Jahres 2014 solche Kontakte statt? Wozu hat Blackrock den Vorstand und den Aufsichtsrat gedrängt?
Fink, a prominent Jew, is a favorite bogeyman of German conspiracy sites, where he often is described as a "bloodsucker" (Der jüdische "Philanthrop" Larry (Lawrence) Fink ist der Chef des blutsaugenden Finanzimperiums Blackrock.) One can't help but think that the desire to "de-Americanize" (Entamerikanisierung) of German industry is really a call for "dejudizaition" (Entjudung) - eliminating Jewish influence on German companies.
As I mentioned in an earlier blog post, Blackrock is the world's largest asset manager and specializes in "Index Funds" - passively managed funds that mirror the performance of different stock indices. So any Blackrock fund that is pegged to either the DAX or the FTSE 100 will include shares of Bayer AG. Likewise any sector fund, such as a Chemicals fund, will include Bayer AG shares, along with shares of Dow Chemical and DuPont. Or Pharmaceuticals Fund, will include Bayer AG along with Novo Nordisk, AstraZeneca and Pfizer. With over $4 trillion under management, that can add up to a significant number of shares. Index funds are a great vehicle for retail investors to participate in the global equities markets, since they tend to outperform actively managed funds and have very low expense ratios.
Dr. Rügemer's complaint about American influence on Bayer is especially dumb when one considers how the company has thrived in the US market. With the exception of Siemens, no other German corporation has benefited as much as Bayer AG in the open American marketplace. in 1994 Bayer acquired the trademark rights to "Bayer Aspirin ' - one of the most valuable personal care brands in America. Today Bayer achieves twice the revenue (US$12 Billion+) and profit in the US market with half the number of employees as it does in the domestic German market. Dr. Rügemer may find it unacceptable that a good percentage of Bayer's profits come from the "evil" United States, but most shareholders are very pleased.
The way I see it, Dr. Rügemer has only a couple of options to cleanse Bayer AG of all American influence - to bring the German company "Heim ins Reich." One, he could convince German investors to buy Bayer AG shares and reduce Blackrock's position as shareholder. This is unlikely to succeed given the preference of Germans for bank savings accounts over stock investments. The other option would be to spin-off Bayer's US operations and have a consortium of private equity investors take the German operations private. This would remove Bayer AG from the DAX - making it out of reach of Blackrock - but destroy much of the value of the company.
Actually, I really wish Lawrence Fink would have as much power as the conspiracy theorists like Werner Rügemer think he has. Fink has been an outspoken critic of companies spending millions of dollars buying back their share instead of investing in long-term, sustainable growth. Share-buybacks boost the share price in the short-term, but provide nothing of substance to the employees or other stakeholders. Earlier this year, Fink sent a letter to the CEO's of every corporation in the S&P 500 which included this statement:
It is critical, however, to understand that corporate leaders’ duty of care and loyalty is not to every investor or trader who owns their companies’ shares at any moment in time, but to the company and its long-term owners. Successfully fulfilling that duty requires that corporate leaders engage with a company’s long-term providers of capital; that they resist the pressure of short-term shareholders to extract value from the company if it would compromise value creation for long-term owners; and, most importantly, that they clearly and effectively articulate their strategy for sustainable long-term growth. Corporate leaders and their companies who follow this model can expect our support.
Such statements just don't register with the mind of Dr. Werner Rügemer, whose personal mission is to demonize America and the free market system. However, Larry Fink's letter (unfortunately) had zero influence on the CEOs: stock buyback programs continue at a record pace.