Bayer trims 2 C-level execs amid cost-cutting scheme and governance criticism

Bayer logo and dark clouds
Bayer is bidding farewell to two management board members, slimming down the top exec team to five seats. (Bayer)

Bayer’s restructuring ax has hit the top—the company’s board of management.

The German company will bid farewell to two top managers and hence reduce its C-level seats to five, comprising only its CEO, CFO and three division chiefs. Hartmut Klusik, who oversees Bayer’s human resources, technology and sustainability and is the company’s labor director, and Kemal Malik, who’s responsible for innovation and the Asia-Pacific regions, will leave by year-end.

“By streamlining the structure of the Board of Management, we are optimizing the allocation of responsibilities and contributing to the company’s ongoing efficiency program,” Bayer Chairman Werner Wenning said in a statement Wednesday.

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Both execs have been with Bayer since the 1980s. Klusik, boosted to his current position in 2016, had his contract extended by one year that ends at the end of 2019, according to Bayer’s annual report.

Sources cited by Reuters who are familiar with the company said the extension raised eyebrows, what with an FDA warning letter slapped on Bayer’s Leverkusen pharma site in 2017. As the technology supervisor, drug production falls in Klusik’s purview.

When the warning letter became public early 2018, Bayer said it was affecting supplies of some of its mature products, such as Levitra, Adalat and Nimotop. And during its 2018 full-year earnings call, the company confirmed the supply interruptions hit its adjusted earnings by about €300 million.

RELATED: Worst deal ever? Bayer's market cap now close to the total cost it paid for Monsanto

Stefan Oelrich, who last November rejoined Bayer as its pharmaceuticals chief, at that time told investors Bayer was “in a good place” in terms of relieving the FDA’s concerns. “We are ramping up on some of our lines so we can get to full capacity,” he said. “So there’s still a little bit of an effect, but we perceive this to be minor overall.”

He said an inspection was planned in March. But so far there’s no update on how that went, and Bayer didn’t immediately respond to a FiercePharma inquiry.

Bayer appointed Malik to its top management team in February 2014, and his contract would have expired on Jan. 31, 2022, according to Bayer’s annual report.

Moving forward, CEO Werner Baumann will take over Klusik’s role of labor director and will take care of a unit called Human Resources, Sustainability and Leaps, which handles early investments in technology. Regional responsibilities will be reassigned: Oelrich will get Europe and the Middle East, CFO Wolfgang Nickl will get North American, crop science division chief Liam Condon will get Latin America and Africa, and consumer health head Heiko Schipper will get Asia Pacific.

RELATED: Bayer to rid itself of animal health unit 'over time' in $7.6B deal with Elanco

Last November, Bayer embarked on a major overhaul that aims to cut 12,000 jobs to alleviate investor concerns about the company’s debt load incurred in its $63 billion takeover of Monsanto. But that didn’t stop shareholders from casting an eyebrow-raising no-confidence vote in management in April, as the avalanche of lawsuits that claim Monsanto’s Roundup weedkillers caused cancer has wiped out about 30% of Bayer’s share price.

Bayer has repeatedly said it believes Roundup is safe but has so far lost three U.S. suits. And to make matters worse, Germany recently said it would gradually restrict the use of the chemical until banning it outright by the end of 2023. Even though Germany is a small market for the weedkiller and the decision was made out of environmental concerns rather than health issues, the fact that it comes from Bayer’s home country is still a blow to the company.

As part of the restructuring, Bayer also jettisoned its Dr. Scholl’s and Coppertone consumer health brands and recently agreed to merge its animal health unit with Eli Lilly’s spinoff Elanco in a cash-stock deal valued at $7.6 billion.

The resources freed up by the cutbacks will go toward making external collaborations, especially in its pharma division, whose thin pipeline has worried analysts. Developing partnerships and pushing for innovation will remain a key focus of the new slimmer management team, Wenning said.

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