NETHERLANDS - ABP, PGGM and asset manager Robeco have criticised German steelmaker, ThyssenKrupp for granting its main shareholder, the Krupp family foundation, the right to nominate three members on the 20-seat supervisory board.

The pension funds' voting agent described the move as a step backwards for corporate governance in Germany.

A large number of both foreign and German investors protested against the proposal during the annual meeting but it received 79% of the votes, just enough to be accepted.

The Krupp foundation holds over 25% of the shares and has two representatives on the supervisory board. The Thyssen family holds 3% of the company's shares and has a board seat as well.

"A statutory right of appointing is, especially from the point of view of long-term investors, a step backwards in the development of corporate governance in Germany," said Hans-Christoph Hirt, head of European corporate governance at €93bn pension fund manager, Hermes.

Hirt represented the large Dutch schemes at the meeting as well as Norges Bank Investment Management, the manager the €240bn Norwegian state pension fund. The total of shares represented by Hirt was 1%.

"Major shareholders represented on the board is not necessarily a bad thing. But as shareholders, we want to be able to exercise our right to appoint board members. In the new situation, the procedure might be scrutinized less," Hirt added.

During the meeting, Hirt also raised questions over ThyssenKrupp's
Chairman, Gerhard Cromme, who represented the family foundation on the board while also heading the national body for corporate governance.

"The appointment of members of the supervisory board should be a right of all shareholders, and not just of some large ones. They already have an important vote thanks to their shares already," commented Erik Breen, Robeco's head of corporate governance. "The new right of the Krupp family foundation might cause inequality amongst the company's shareholders".

"That the vote was tight, is an important indication that institutional investors don't appreciate proposals like this. We hope our resistance will set a precedent for other companies with similar plans," Breen added.

"To us, the proposed corporate governance changes in the articles of association were the most important items on the AGM agenda. Because in Germany, shareholders can only appoint 50% of the supervisory board, their rights are already limited," said Gerard Fehrenbach, senior advisor for responsible investment at PGGM. "Since they are shareholders as well, the Krupp family foundation has achieved a disproportionate advantage in the appointment of supervisory board members."

He added: "At the moment, shareholders can only indirectly hold the executive board accountable via the supervisory board."