On Wednesday, the Stuttgart Higher Regional Court rejected a lawsuit brought by shareholders seeking 6 million euros ($7.8 million) from Daimler AG for allegedly failing to disclose former Chief Executive Officer Juergen Schrempp’s 2005 decision to resign in a timely fashion.
Bloomberg reports that the shareholders claimed that Schrempp decided in May 2005 to leave the company by the end of the year, but the Board did not disclose the information until the end of July 2005.
The basis for any damages is unclear, as well, given that upon the disclosure of the news that Schrempp had resigned, Daimler actually rose 3.16 euros, or 8.7 percent, to 39.49 euros. As I joked back in 2005, perhaps the lawsuit should have been targeted at Schrempp’s failure to resign sooner:
According to this article in the NY Times, following the announcement of his resignation on July 28, shares of DaimlerChrysler spiked up more than 10%. There were unusually heavy purchases in the stock in the hours before the announcement, however, which caused the BaFin to open an investigation.
The article notes that “[a]nalysts had long factored a ‘Schrempp discount’ into Daimler’s stock price, so advance knowledge of the increasingly embattled chief executive’s departure would have been highly valuable.”
So basically it appears that Schrempp’s presence as CEO of DaimlerChrysler was having a widely-known, material, negative effect on the price of the company’s stock–the Schrempp discount. Could that be the basis for a lawsuit? The failure to resign as CEO when you know or should know that your resignation would have an immediate and materially positive impact on the price of the company’s stock?