Deutsche Bank seeks to placate shareholders and public with pay reforms

Response to public outrage and shareholder pressure

Deutsche Bank has responded to shareholder pressure – and public outrage – in the debate over excessive compensation at big banks, announcing a reform of bonuses to employees and executives and the creation of an independent panel to review its pay practices.

“After a phase of reflection and discussions with various interest groups, we have decided to be at the forefront of cultural change in the banking sector,” Deutsche Bank said in a statement distributed ahead of a news conference in Frankfurt.

The bank is reducing the employee bonus relative to business performance and extending the time horizon for bonuses paid to top management. Instead of getting partial payments over a period of three years, executives will get one single payment every five years.
Deutsche has also created an independent panel of experts to review its compensation practices. Its recommendations will apply from 2012 onward.“We believe that we are a pioneer with these measures, and I would challenge you to name one other industry other than banking which is thinking about doing something similar,” Anshu Jain, Co-CEO, told journalists at the conference.

The bank’s move is a response to public outrage over the compensation that managers at big banks still receive four years after Lehman Brothers’ bankruptcy ignited the global financial crisis.

At Deutsche’s annual meeting in late May, several big shareholders took aim at the supervisory board, saying it had botched the search for a successor to former CEO Josef Ackermann and that it didn’t deserve the €2.6m in compensation for 2011.

Earlier this month RI reported that the bank’s DB Advisors institutional asset management arm has been awarded a €125m environmental, social and governance (ESG) corporate bond mandate from a German utility company.