Adidas Shareholders Grill Management at Virtual AGM
At Adidas’ annual general meeting, held online this morning from Germany with close to 600 participants, shareholders pressed the company’s executives on all of the sportswear giant’s recent controversies — and then some.
In 117 questions posed by shareholders, topics included the use of forced labor in China, bad publicity arising from the fact that, at the beginning of the COVID-19 pandemic, the sportswear giant said it might opt out of paying rent and, most recently, alleged racism in the human resources department.
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After shareholder voting, with just over 74 percent of voting rights represented, all seven items on the agenda were passed.
It was agreed Adidas would not pay a dividend this year because of pandemic-related problems. This was also a condition of the government-backed credit facility Adidas had signed into. In July, the company accessed 500 million euros worth of the credit.
It was also announced that Adidas’ supervisory board members would be taking a 30 percent pay cut during the pandemic, with the forgone earnings donated to charity.
Other items included the election of a new member, Christian Klein, to the supervisory board. Klein is the chief executive officer of SAP, one of Germany’s most successful software companies.
Another board member, Thomas Rabe, who heads media and publishing giant Bertelsmann, will take over the seat at the head of the supervisory board, vacated by Igor Landau, who is 76 and retiring after 16 years.
Landau’s tenure was over immediately after the AGM finished. But before he could go, he was asked what efforts had been made to find a female candidate for the supervisory board, instead of Klein. Currently there are 11 men on the board and five women.
“I understand that we will be criticized for this decision,” Landau conceded. “Yet we need to remember the gender of a person is only one of many criteria in the decision. The board is convinced that with Christian Klein, it is proposing the best candidate, not least because of his proven expertise in the areas of technology and digital transformation, which will be crucial to the future development of Adidas.”
German corporations usually have two boards: a supervisory board, which advises management, and an executive board, which oversees the day-to-day operations of the company.
After the departure of senior human resources manager, Karen Parkin, from the executive board in late June as the result of a racism scandal, Adidas’ executive board is all-male once again. Parkin had been the first woman to ever serve on the executive board.
Parkin’s retirement was the result of a mutual decision, chairman Landau said, and she should be respected for her willingness to go. Due to the premature termination of her contract, Parkin received a severance payment consisting of two years’ worth of her annual salary, he noted. No further details about a new human resources manager were available as yet.
The Adidas board members were also asked about people of color in senior management positions. “We don’t measure this because of legal restrictions,” was the reply. The board had held in-depth discussions on this topic and the company now had a stated goal of making 30 percent of new hires people of color or of Latin background.
Fund manager, Union Investment, which holds around 1.3 percent of the company’s shares, said current measures were not enough and that it expects a clearer signal against racism and more diversity in all areas, including gender, age and culture.
Members of both the supervisory and the executive boards were also questioned on Adidas’ possible connection to forced labor in China. This was quickly dismissed by the chief financial officer, Harm Ohlmeyer, who said suppliers in that country had been specifically instructed not to source any yarn from the Xinjiang region, where human rights groups say Uighur people are being forced to work in detention camps.
Referring to Adidas’ plans to take a rent holiday at the beginning of the pandemic, one shareholder asked, “how are we planning to prevent unfortunate and damaging statements like this in the future?” This decision made negative headlines around Germany, still one of Adidas’ most important markets, and the company was eventually forced to withdraw the statement.
Adidas ceo Kasper Rorsted apologized again for the mismanagement. “We have learnt our lesson. In the future, we will pay even greater heed to our public image,” he said, adding that any impact on sales had been short term. “Our apology earned us much positive feedback and our ongoing internal analysis of public sentiment clearly shows that,” he stressed. “We do not get the impression that customers refuse to buy our products [because of rent or racism],” he continued. “In Germany, we even saw a return to growth in July.”
Judging by the nature of further questioning, it was clear that the shareholders were not particularly happy with Adidas’ two boards. Board members were asked about their salaries, whether they were able to concentrate fully on Adidas given that several were ceo’s of other companies, and the ratio of executive board members’ salaries to ordinary Adidas employees’ earnings; in 2019, executive board members were paid 41 times more than the average staffer.
Financial management, and in particular, what was perceived as a slow reaction to the danger posed by the pandemic, was also criticized.
