Investor Demands Swatch Overhaul Citing 'Worst-in-Class Governance'

U.S. investor Steven Wood has leveled a significant accusation against Swatch Group, alleging "worst-in-class governance" and advocating for a series of reforms to the Swiss watchmaker's board and overall corporate structure, as reported by the Financial Times. Wood, who founded GreenWood Investors and holds approximately 0.5% of Swatch's share capital, has strategically pivoted from his initial aim of securing a board seat. Instead, he is now focused on compelling the board to implement a comprehensive package of governance changes.

Wood's primary goal has shifted, as he stated to the FT, from pursuing a constructive relationship on the board to actively forcing the company to evolve its governance. GreenWood Investors formally submitted six proposals aimed at amending Swatch's corporate governance. A key proposition among these is to empower so-called bearer shareholders to elect three representatives to the board. This group of shareholders collectively holds a majority of the firm's share capital, yet they do not possess a corresponding majority of voting rights. While Swatch acknowledges the right of bearer shareholders to representation, the company disputes the specific mechanisms through which such representatives should be chosen.

This latest push for reform follows an unsuccessful attempt by Wood in May to secure a seat on Swatch's board as a bearer shareholder representative. His bid encountered strong resistance from the influential Hayek family, who maintain control over more than 44% of Swatch's voting rights, despite holding a smaller portion of the overall share capital. The company's board officially recommended against Wood's election, a stance that was ultimately upheld by shareholders, with 79.2% voting against his appointment at the annual general meeting.

Beyond governance structure, Wood has also been a vocal advocate for a strategic reorientation within Swatch Group. He has persistently urged the company, renowned for its diverse portfolio including plastic watches and luxury brands like Tissot, Longines, and Omega, to increase its focus on high-end luxury brands such as Breguet and Blancpain. This strategic shift, according to Wood, is crucial for revitalizing the fortunes of the Swiss company, whose share value has notably halved since early 2023.

The current developments highlight Wood's renewed and more assertive approach to driving change within Swatch Group, moving away from direct board involvement towards a more systemic overhaul of its governance. Neither Swatch nor GreenWood Investors provided an immediate response when contacted by Reuters for comment on these proposals.