RI learns that more big shareholders in Deutsche Bank will vote against discharge of its top management

Investors are angry over scandals that have embarrassed the bank and cost it dearly

Deutsche Bank’s annual general meeting (AGM) in Frankfurt tomorrow (May 21) promises to be a decidedly uncomfortable affair for Co-Chief Executives Jürgen Fitschen and Anshu Jain. Two more big shareholders have told RI they will vote against discharge of the bank’s top management for the 2014 accounts, as shareholder discontent mounts. Last week, the Florida State Board of Administration (SBA), the $174bn (€154bn), became the first big investor to announce that it would vote against discharge for Deutsche’s management. In doing so, the SBA followed a recommendation from major proxy firms ISS and Glass Lewis which believe that discharge of Deutsche’s management should not be given due to scandals that have embarrassed the bank and cost it billions of euros in legal fees. With just a day to go before the AGM, Responsible Investor has learnt that two more big shareholders in Deutsche – namely a Frankfurt-based asset manager and a German proxy agent that advises institutional clients – will also vote against discharge of the bank’s seven top managers, including Fitschen and Jain. They have at least 20m shares between them.
Under German securities law, there are no legal consequences if a majority of a listed company’s shareholders deny management (or the board for the matter) discharge for a given business year. However, denial of discharge in Deutsche’s case would be unprecedented and likely put great pressure on Chairman Paul Achleitner to remove those who no longer have the confidence of the bank’s shareholders. At Deutsche’s AGM for 2014, 11% of shareholders voted against discharge of all top managers.
Speaking to RI, the Frankfurt asset manager, which asked not to be identified, noted: “Denying discharge is the most effective way that we can show our dissatisfaction with a management that has not delivered on its promise to change the bank’s culture.” Indeed, soon after Fitschen and Jain became Co-CEOs of Deutsche in June 2012, they vowed to change that culture by, for example, making bonuses more dependent on performance and their payment less frequent.Yet since then, the bank has largely distinguished itself by reports of scandals that date all the way back to 2002. They include the manipulation of Libor interest rates by Deutsche traders in London, a fraudulent value-added tax scheme and a hugely damaging legal fight with the descendants of the former media mogul Leo Kirch. Beyond the billions of euros Deutsche has paid to settle related lawsuits, Fitschen himself has been indicted for perjury in a Munich court following his testimony in the Kirch case. Also standing trial for perjury in the Kirch case are Fitschen’s predecessors as CEO, namely Rolf Breuer and Josef Ackermann. They all deny wrongdoing.
Dieter Hein, Partner at the German stock analyst firm Fairesearch and a perennial Deutsche watcher, agrees that since Fitschen and Jain took over, nothing has changed at the bank. “It’s still an institution dominated by investment bankers – the same people who caused much of the damage in the past,” said Hein, adding: “Consider that between 2012 and 2014, the bank earned only €2.5bn in profits but paid out bonuses of €9bn – most of which went to the investment banking division.”
Hein also said that it was beyond him why Jain, who was in charge of Deutsche’s investment banking division during the Libor scandal, was promoted to Co-CEO in June 2012: “Either he had knowledge of the scandals, which is bad enough, or he didn’t, which means he did not have his division under control.” Jain and Fitschen have since apologised for the bank’s transgressions and are confident that despite the coalition building against them, they will be discharged for 2014. “Don’t be fooled: Investor support for us is strong and you will see it during the AGM,” Jain told the Sunday edition of the Frankfurter Allgemeine newspaper. Jain added: “The investors will reward us for, among other things, doubling the bank’s base capital and cutting €3bn in costs in the last three years.” Deutsche’s biggest shareholders include BlackRock, which owns 6.6% of the bank and does not comment on its voting intentions. The bank’s second biggest shareholder is the Arabic state of Qatar which, through a British Virgin Islands-based firm, has just under 6%.