‘Slap in the face’ for Deutsche as German shareholders step up on governance

Approx 22% vote against board discharge.

Shareholders have dealt what one industry figure termed a “slap in the face” to Deutsche Bank with 22% opposition to the discharge of the supervisory board at the bank’s annual meeting on May 31. The board was ultimately discharged with a 78% positive vote. Yet rarely have so many of Deutsche’s investors shown such antagonism – last year’s result was 93% in favour, when criticisms of the board first emerged.

“The vote is tantamount to a slap in the face for Deutsche Bank,” said Hans-Martin Buhlmann, CEO of the German corporate governance advisor VIP (Association of Institutional Shareholders). On behalf of his clients, who have 4m shares in the bank, Buhlmann voted against discharging the board.

Joining the opposition was Hans-Christoph Hirt of Hermes Equity Ownership Services whose clients hold 6m Deutsche shares Link
Other big investors like pension funds Railpen and PGGM, Dutch asset manager Robeco and UK insurer Legal & General were also said to have opposed discharge of the board.During the meeting, first Hirt and then Buhlmann said there were two main reasons for the investor anger: first, the supervisory board had blundered during the search for a successor to outgoing CEO Josef Ackermann. Second, the proposed hike in compensation to €2.6m was inappropriate.

Hirt told Responsible Investor that incoming chairman, former Allianz CFO Paul Achleitner, takes investors’ concerns very seriously. “Mr Achleitner has assured us that the board will do its best to improve communication. Concerned investors will be able to contact the board directly,” he said.

In the German edition of its Corporate Governance Principles, Hermes says there should be “practical consequences” when shareholders do not strongly support discharging supervisory board members.

It adds: “A supervisory board member who was not convincingly discharged during his or her tenure should generally not be proposed to shareholders for re-election.”