NSSMC sought alternating ceo nominations before Usiminas dismissals
Japan’s Nippon Steel & Sumitomo Metals Corp (NSSMC) proposed that the ceo position at Brazilian steelmaker Usiminas should be alternated every four years, it has been revealed.
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The suggestion was made prior to the board’s decision a month ago to remove three senior executives.
An email exchange in September 2014 between senior executives from NSSMC and Ternium Group – Usiminas’ two major shareholders – shows that the NSSMC side demanded “an alternate appointment of ceo every four years from each side”, according to a document presented by the Brazilian firm to the country’s securities regulator, CVM, on Friday October 24.
The NSSMC Group is comprised of Nippon Steel & Sumitomo Metals Corp (NSSMC), Mitsubishi Corp and Metal One Corp.
Accepting this proposal would be a condition for postponing the board’s decision to dismiss three Usiminas executives, Ternium said.
“In the emails, [the NSSMC Group] said they would agree to keep the executive officer if we agreed to alternate [the nomination] of the Usiminas ceo,” Eduardo Munhoz, partner at law firm Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, said.
The firm represents Ternium in the dispute.
The suggestion was a clear attempt to apply leverage in a bid to change the shareholders’ agreement, Munhoz told Steel First.
The NSSMC Group did not reply to requests from Steel First for comment on the issue.
The Usiminas board decided on September 25 to remove ceo Julián Eguren, subsidiary vp Paolo Bassetti and industrial vp Marcelo Chara, a decision that surprised and raised questions among financial analysts.
An external auditing company found that Usiminas’ human resources department had paid bonuses and compensation to expatriate executives, without the approval of the board of directors, according to documents presented by Usiminas to the country’s securities regulator.
The payments were made without the executives’ knowledge, and were returned in full, Munhoz said.
“It was an unimportant fraction of the directors’ regular remuneration, and they did not participate in the decision,” he said.
The bonus was paid due to an incorrect interpretation of the company’s policies by Usiminas’ human resources department, according to Ternium.
“If those directors were really convinced that these supposed irregularities could harm the company, they would not have proposed that the ceo could be maintained under any circumstances,” Munhoz said.
Ternium argues that the decision to dismiss the three executives goes against the shareholders’ agreement, which was signed in 2012 and runs until 2032.
The agreement requires that Usiminas’ control group would not vote on issues without a previous consensus from its major stakeholders.
“The decision to dismiss the executives was unilateral and violates the agreement,” Munhoz said.
A solution to the disagreements between Usiminas’ two major stakeholders is not likely in the near term.
Ternium has filed two legal actions intended to annul the dismissals in Brazilian courts, but these have been rejected.
“There is a clear division between the main shareholders,” Munhoz said. “The two companies have clearly very different views regarding Usiminas’ future.”
Ternium recently paid state-run Banco do Brasil’s pension fund 616.7 million Reais ($253.8 million) for 51.4 million Usiminas shares.
“It was a very high investment from Ternium Group, which shows commitment to a long-run plan for the company,” Munhoz said.