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PARIS (Dow Jones)--Shareholders of building materials company Compagnie de Saint-Gobain (12500.FR) Thursday voted in favor of the governance agreement signed with the group's main shareholder Wendel (MF.FR), despite concerns from some individual shareholders.

"My interests have nothing in common with those of Wendel, which are speculative short-term interests," one individual investor told the company's annual meeting.

But Saint-Gobain management disagreed. "Wendel's entry onto the board is compatible with our strategy and with our solid governance," said Saint-Gobain chairman Jean-Louis Beffa.

Of shareholders present at the AGM, 95.14% approved the agreement with Wendel. They also voted in favor of a resolution proposing the appointment of Jean-Bernard Lafonta, Wendel's chief executive, to Saint-Gobain's board of directors, and that of Wendel board member Bernard Gautier. Under the agreement, Wendel won two board seats, reflecting its 21.5% stake in Saint-Gobain.

Shareholders also voted to increase the size of Saint-Gobain's board to 16 from 15. They extended a poison pill mechanism that allows Saint-Gobain to issue free warrants to shareholders in the event of an unwanted takeover offer.

They also backed the severance package of Saint-Gobain CEO Pierre-Andre de Chalendar, should he be let go from the company. The package had been deemed excessive by proxy voting advisor Institutional Investor Services (ISS).

Before the vote, Beffa urged shareholders to back the deal with Wendel as the investment company had pledged to support the group's strategy. However, he stressed that a single shareholder shouldn't be allowed to control the company unless it launches a successful takeover bid on the entire share capital.

"A single shareholder cannot control a listed company even if it holds, as is the case for Wendel, a significant stake in the company," Beffa said. He said Wendel's stake gives the investment company the right to gain board representation to express its views.

Wendel started building its stake last September without previous warning to the management. Although Wendel described its move as friendly, it initially drew a cautious response from Saint-Gobain's management concerned about a creeping takeover.

Wendel and Saint-Gobain eventually signed a governance agreement after months of wrangling. The investment company agreed to cap its stake at 21.5% and temporarily limit its double voting rights that shareholders get after holding their stock for a period of time.

Under the terms of the deal, Saint-Gobain agreed to create a strategy committee and give Wendel its two board seats. Wendel will be represented by a third board member from next year.

Saint-Gobain said a proposal for Jean-Cyril Spinetta, CEO of Air France-KLM, to chair the strategy committee, will shortly be submitted to the board for approval. The three-member strategy committee would include Wendel's Lafonta and Saint-Gobain's Pierre-Andre de Chalendar.

Pierre-Andre de Chalendar reiterated that Saint-Gobain has no plans to tie-up with rival French building materials group Lafarge SA (12035.FR). "We have different strategies" he said.

Saint-Gobain confirmed its 2008 financial objectives and said it was on track to meet its 2010 targets despite more challenging conditions this year.

-By Nathalie Boschat and Alice Dore, Dow Jones Newswires, +33 1 4017 1740; nathalie.boschat@dowjones.com.

(END) Dow Jones Newswires

June 05, 2008 13:32 ET (17:32 GMT)