TAFE is once again taking the initiative in the ongoing dispute between itself and AGCO by delivering another challenge to the AGCO board in the form of demand that it splits the role of chief executive officer (CEO) and chair of the board of directors.
Down here at ground level, such shenanigans might appear rather esoteric, but AGCO is one of the big three tractor manufacturers in the west and its fate at boardroom level will have a huge impact on its performance in the market and the health of its brands.
The Indian company, which has a 16.3% shareholding in AGCO is now demanding that AGCO include within its proxy statement, a proposal that the positions are two quite distinct roles and the board should separate them completely.
In America, a proxy statement is a statement required of a firm when soliciting shareholder votes before the annual general meeting. It’s a way of telling the shareholders the company’s intentions.Â
One man, two jobs
Within AGCO, it is Eric Hansotia who holds the title of CEO, chair and president of the corporation, and he has done so since 2021, a period during which the company has been out performed by its peers, according to TAFE.
To understand why TAFE might be quite so agitated, it is worth looking at what is entailed in holding the two roles.
The most basic explanation of the difference, is that the chair of the board is responsible for deciding the direction of the company, while the CEO is there to implement whatever policies the board decides upon.
In the case of AGCO, both roles are held by one man which immediately eliminates much of the accountability the CEO has to the board.
It is unlikely, for instance, that Hansotia will sack himself for poor business performance, yet TAFE argues that is precisely what should be happening, or at least there should be a greater degree of debate within the higher echelons of the company about policy and its implementation.
TAFE alleges bad practice
Within the business world it is indeed considered inappropriate for the two roles to be combined, certainly at the multi-billion dollar level of major international corporations such as AGCO, so the complaints of TAFE will not go unheeded by other shareholders.
TAFE has issued a list of what it sees as the problems developing within AGCO due to the roles being given to one person.
It includes poor business performance, unsuccessful acquisitions, missed market opportunities and ineffective company governance.
The company goes on to state that an independent chair would ensure the board provides oversight and strategic guidance, enabling AGCO to respond more effectively to the market.