Richemont’s Governance Shield Hard to Break Through

Bluebell’s campaign for change at Richemont looks like an uphill battle. Under pressure from the activist, the firm will allow class A shareholders to appoint a director at the September shareholders’ meeting… if the chairman, Johann Rupert, allows it.

Bluebell’s pressure has merit. He argues that ordinary investors should be able to directly appoint a director. Rupert, who owns unlisted B shares and 50% of the votes (representing 9.1% of the capital), can choose the directors and decide the strategy.

Richemont’s own statutes and the Swiss civil code state that holders of A shares are entitled to a representative. But it seems that investors have not taken it into account so far. The choice is between Bluebell’s candidate, Francesco Trapani, a former Bulgari boss, and Wendy Luhabe, a current director, backed by Richemont. The company has recommended to shareholders to vote against Trapani.

But Richemont’s notice to the board suggests that the representative of the A shareholders will have to be approved by all: that is, Rupert’s B shares could still reject Trapani, provided there are valid reasons. Rupert says that there is no need to change the board, as their discussions always take into account the interest of all shareholders.

Richemont could use a new voice. He has offered a 53% return on the stock market in five years, compared to more than 200% for Hermès and LVMH, but better than Swatch’s 25% less. Forays into the online retailer YNAP have yet to deliver significant value. But the flagship jewelery division generated 3.8bn EBIT in 2021, above the group total, and had an operating margin of 34%, not far from Hermès’ 39%. Focusing on her and the watch business could bridge the gap.

Rupert’s voting power means Bluebell’s proposed changes may fail, although the fund could try to make new legal arguments. It would be a shame if the result meant that contrary business ideas were neglected.