Top 3M shareholder fires warning shot at chief executive

One of 3M’s largest shareholders has called on the US conglomerate to improve performance or consider appointing a new chief executive, following five years of weak returns, legal challenges and a falling share price.

Flossbach von Storch, the eighth largest investor in the group, warned 3M boss Mike Roman that it is “increasingly concerned” about the operational running of the company and its “competitive position” against rivals.

Bert Flossbach, co-founder of the German asset manager, said in a letter to Roman: “While it is true that there have been many challenges outside of management’s control in recent years, in our view this does not fully explain the weak earnings development since you took over as CEO in July 2018.”

Flossbach said it was “concerning” that the $65bn company’s revenue was expected to be flat in the year ahead. Shares in 3M have dropped by more than a half to $116 since 2018, while adjusted earnings per share are down by about 8 per cent over five years.

He urged Roman to “take a deeper look at everything [you] do” and “apply it not only to how 3M should operate going forward, but also to who should shape the future of 3M”.

He added: “Regarding the ‘who’ we have not reached an ultimate conclusion. However, as we find it increasingly unacceptable to be constantly put off in anticipation of a distant better future, we expect you to provide us with specific answers regarding the ‘how’ and ‘who’ in a timely manner.”

The letter, seen by the Financial Times, comes just a week after 3M said it will cut 2,500 jobs worldwide, largely in its manufacturing operations, which employ about 50,000 people. 3M spans industries from healthcare to consumer goods, and products from adhesives to personal protection equipment.

The Minnesota-based company said last year it was aiming to spin off its healthcare unit and put one of its subsidiaries into bankruptcy, following legal claims over allegedly faulty earplugs. 3M also said it will stop making chemicals that harm the environment by the end of 2025 as a result of pressure from regulators and shareholders.

Flossbach said it was “increasingly hard to take confidence in your still positive statements regarding the underlying health of 3M”, noting that management “once again had to revise the earnings forecast and initiate further restructuring measures”.

3M has also faced legal challenges over its earplugs which Flossbach said, in addition to the restructuring, had “been a major distraction for the entire organisation and weigh on 3Mers’ morale”.

He added: “In this context, we also ask ourselves to what extent your leadership team and employees still stand behind your decisions.”

3M said: “We are in regular discussions with our shareholders and we always welcome their feedback.”