Feeds

Vodafone/ Mannesmann multi-million payouts not illegal

Says report sponsored by the companies

  • alert
  • submit to reddit

The essential guide to IT transformation

The multi-million payouts given to executives of Mannesmann and the CEO of Vodafone when the two companies merged, currently being investigated by German authorities, aren't illegal, a new report has concluded.

Which is fine until you consider the fact that the report was commissioned by Vodafone and Mannesmann. The two companies paid an undisclosed sum to Theodor Baums, a law professor at Frankfurt University, to investigate the payouts. They describe him as a "renowned expert" and have sent the report to the Dusseldorf state prosecutor for his consideration.

It comes two months after inaccurate press reports stated that the prosecutor had decided to drop the case. That time a spokesman for the prosecutor had to officially deny the stories.

The investigation hinges on the Mannesmann board's sudden decision to accept Vodafone's £79 billion bid for the company even though it had previously been at odds to say it would not accept any hostile takeovers. When the deal did go through, Mannesmann CEO Klaus Esser received £30 million, nine other executives received £2 million each and head of Vodafone Chris Gent received £10 million.

The "awards" were added to the deal only at the last minute.

Vodafone leaked its plan to buy out Mannesmann to the press in July 1999. Then it formally offered £64 billion for the company which was valued at £59 billion at the time. Esser said the bid was "wholly inadequate" and "extremely unattractive". Esser then put pressure on Goldman Sachs to not advise Vodafone, something a German judge later called "totally disgraceful and unacceptable".

Four days later, Vodafone made a revised bid of £79 billion, causing the German chancellor Gerhard Schroeder to get involved, saying the deal would ruin the "culture" of Mannesmann. This in turn sparked UK prime minister Tony Blair to advise Mr Schroeder to keep his nose out of it.

The German press turned against Vodafone, dredging up age-old hostilities between England and Germany and pointing out the German stock exchange had never in its history accepted a hostile takeover.

Then, in an unexpected turnaround, the Mannesmann board - including the head of the IG Metall trade union, Klaus Zwickel, and top executive of Deutsche Bank, Josef Ackermann, accepted the bid.

The suggestion is that the multi-million pound payouts influenced the decision made by the people involved.

Not so, says the new report. Professor Theodor Baums says that the size of the awards and the decision process had been "appropriate". Mr Esser's payout was apparently "proportionate to his achievements as head of Mannesmann" (it is undeniable that Mr Esser did turn the company around and this is why, initially at least, he was so set against given up control of "his baby").

Reviews of executives' payouts when large deals are made are frequent in Germany but only occasionally are formal charges made. There is still no set date for a conclusion of the investigation. ®

Related Stories

Chris Gent still under fraud investigation
Vodafone CEO faces Mannesmann merger fraud probe

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.