I posted a bit a while back about the proposed loyalty dividend at DSM. I still think this was a really good initiative and a practical response to short-term pressure from some investors.
Well, they've scrapped it, because of the intervention of US fund manager Franklin Templeton. Basically Franklin raised the issue with the Enterprise Section of the Amsterdam Court, arguing that the proposal violated the principle of equality of treatment for shareholders. The Court subsequently ruled that the loyalty dividend couldn't be proposed at the company's AGM yesterday. DSM can appeal the decision but it said this could take up to 2 years, and as such has decided to throw in the towel.
Separately the monster Dutch public sector pension fund ABP has said that it would like DSM to keep plugging away, but I suspect it's unlikely that will happen.
In effect a very fundamentalist interpretation of shareholder value has been used to kill off an attempt to encourage long-term ownership. Although 17% of DSM's shareholders had already pre-registered for the dividend, Franklin, with about 2%, managed to get it scrapped. And we wonder why companies complain about short-term pressure from the capital markets.
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