By Edward Taylor and Michelle Martin
FRANKFURT (Reuters) - Some of the sweeteners offered to Germany to secure a politically acceptable deal between Deutsche Boerse and NYSE Euronext could be watered down as soon as 2016.
Firstly, the chairman's powers will be crimped after Deutsche Boerse boss Reto Francioni's term of office in his new role as head of the combined group ends after 2016, a document filed with the Securities and Exchange Commission says.
After an initial term, the chairman will become a non-executive director, ending the "responsibilities and authorities" that go with the position, the filing says.
This could undermine the insistence by both companies that the deal, announced last week, is a merger of equals. A key element of this is that the Deutsche Boerse chief executive will assume the role of chairman in the new company.
Meanwhile, Francioni's NYSE counterpart Duncan Niederauer, who is set to become chief executive of the new group, also has a term that will end in 2016. But the shelf-life of the chief financial officer and the head of derivatives may be shorter, the filings show.
Deutsche Boerse's market value is about 50 percent higher than NYSE Euronext's and the German group's shareholders are set to control 60 percent of the new company.
That means to begin with it will nominate 10 of 17 board seats and under a so-called "dual headquarter" concept, Frankfurt will have responsibility for derivatives, market data and analytics while New York will host cash trading and listings.
For six years the group chairman and chief executive will not work from the same location, Deutsche Boerse said in a written statement.
But among other longer-term plans, the number of directors -- excluding the CEO and chairman -- will be cut from 15 to 10 after the initial board term; and a ratio whereby Deutsche Boerse and NYSE Euronext effectively have a "quota" will go.
But the link between the chairman's office and Frankfurt -- an extremely sensitive point for politicians in the region of Hesse which awards the license for the exchange -- has not been set in stone.
And New York has ensured that other key areas of responsibility will be located in the United States, with corporate development, M&A, human resources, public relations and branding all based there.
Investor relations and controlling/budget will have their primary location in New York, although the Chief Financial Officer is officially being appointed by Frankfurt.
For Francioni initial term as chairman he will however have the power will call board meetings, set the agenda and be responsible for initiating and developing overall group strategy. Other powers include chairing the nomination, governance, corporate responsibility and the strategy committees, the filings, dated February 15, show.
DIVIDING THE SPOILS
While Francioni has no formal powers to prevent radical changes to the global executive committee, he needs to be "consulted," the business combination agreement shows.
Power to appoint members of the global executive committee officially resides with the group chief executive.
The four existing trading platforms will be cut from four to two.
"One of those platforms will be a platform currently used by NYSE Euronext, and the other will be a platform currently used by Deutsche Boerse," the Business Combination Agreement says.
Eventually cash and derivatives businesses could run on "one single platform."
The filing also revealed the holding company of the combined group could become a Societas Europaea (SE), a corporate structure that curbs the power of employee representatives.
"The influence of labor representatives would suffer," Johannes Witt, who represents employees on the Deutsche Boerse supervisory board said on Monday.
If it ends up an SE, that could erode the German tradition of employee co-determination, which hands half of the seats on the board of directors to labor representatives.
But a final decision has not been taken, and it could remain a German corporation.
"Many German companies like Allianz and BASF have recently become SEs because it is European, international, modern and sounds cosmopolitan," Frank Scholderer, a partner at Clifford Chance in Frankfurt, told Reuters.
"But many large companies have also done it because one of the advantages of becoming an SE is that you can reduce the size of the supervisory board."
(Editing by Alexander Smith)
