Swatch shareholder vote tests Hayek grip after advisers back Wood

Swatch is bracing for a showdown at its annual ‌meeting on Tuesday after proxy advisers came out in support of investor Steven Wood, challenging the Hayek family's control as the watchmaker underperforms rivals.

Institutional Shareholder Services (ISS) and Glass Lewis recommended that investors support Wood for the seat representing bearer shareholders, rather than Swatch nominee Andreas Rickenbacher, a former ‌Swiss politician and current director at BKW and Aebi Schmidt. The company has said Rickenbacher would bring valuable experience to strengthen oversight. "Our benchmark for success is going to be backing out the Hayek vote to see what most shareholders want," said Wood, whose GreenWood fund owns about 0.5% of Swatch, which makes Omega, Longines and Tissot watches.

The vote highlights growing investor dissatisfaction with governance and strategy ‌at the tightly controlled watchmaker, whose shares have lagged peers and whose earnings were hit by weak demand in key markets including China. The Hayek family, which owns about a ‌quarter of the equity but controls more than 40% of voting rights through a dual-class structure, is expected to retain decisive control.

HIGH LEVEL OF SUPPORT WILL PRESSURE BOARD Swatch has so far resisted calls for broader board renewal although it has expanded its board, allowed a separate bearer shareholder vote and put forward an independent nominee for the first time in 16 years.

Glass Lewis has urged investors to oppose the board re-election of Chief Executive Nick Hayek, Chair ⁠Nayla Hayek, her son Mark Hayek and director Ernst Tanner. The ⁠board's average tenure is about 20 years and Wood has argued it needs renewal and a clearer succession plan for Nayla Hayek, 74, and Nick Hayek, 71.

ISS said a vote for Wood would be a "constructive step toward improving ⁠oversight and rebuilding investor trust". Swatch said Wood was not suited to represent shareholders.

"The actual recommendations of the proxy voters can hardly be reconciled with their statements of wanting to support long-term stewardship and encouraging the Board to propose an independent representative," a Swatch spokesperson said. "Their recommendations clearly support the opposite: a bearer share representative that wishes to maximise its own investment short term."

The ⁠company, which reported an 89% drop in net profit last year, said its brands were launching new products and using AI tools to help buyers personalise watches, and teased on Saturday a new partnership with premium brand Audemars Piguet. But, ⁠even if Wood fails, a high level of support from investors could pressure Swatch's management to pursue incremental reforms.

STOCK GAINS SOME GROUND The Zurich-listed stock has risen about 25% so far this year, but remains near historic lows and has underperformed peers, reflecting years of falling profits that analysts say may require deeper changes.

Wood said Swatch would benefit from the kind of outside leadership changes ⁠seen at peers Richemont and Kering and expects some form of succession planning to occur in the near term. He has also submitted six proposals aimed at increasing minority shareholder and ⁠independent director representation, preventing the chair from holding executive ⁠roles, strengthening independence of remuneration committees and auditors and requiring in-person annual meetings.

Swatch said there was no need to change its bylaws beyond Swiss legal requirements. Some analysts and investors say the children of founder Nicolas Hayek, who launched the Swatch brand in the 1980s, have resisted innovation - a ‌view the company rejects.