German shareholder body succeeds in getting governance audit at Deutsche Bank

DSW hails victory for ‘shareholder democracy’ in Germany

German shareholder association DSW has succeeded in getting Deutsche Bank to submit to an audit of its governance to ensure that the recent scandals that have cost the bank billions of euros do not recur.

In a statement, DSW said that following negotiations with the bank over the past year, Deutsche agreed to the audit, which will be conducted by BDO, a Frankfurt-based accounting and consultancy firm.

In exchange, DSW will abandon its effort to have a Frankfurt court order the audit and will not re-submit a shareholder proposal on the matter at Deutsche’s annual general meeting (AGM) next month.

At the bank’s AGM for 2015, the DSW proposal won 14.35% of the shareholder vote, as responsible investors like PGGM of the Netherlands and British Columbia Investment Management Corp. supported it.

Representing the DSW in the negotiations with Deutsche was Klaus Nieding, a DSW Vice President and Partner of the Frankfurt law firm Nieding + Barth. “It took a long time before the bank was ready to settle. Now there will be an independent review of the bank’s risk management operations to see whether they are enough to prevent future scandals,” Nieding said in the statement. DSW President Ulrich Hocker added that the deal was a huge success both for the DSW’s negotiating team and for shareholder democracy in Germany.DSW’s two-pronged approach was because Deutsche had dismissed the need for an audit. The bank argued that the management that oversaw scandals like the rigging of Libor interest rates and the value-added tax cheating linked to ‘cum ex deals’ had left.

Compliance and risk management have strengthened under Deutsche Chief Executive John Cryan, the bank said. BDO will now determine whether that is the case.

Based in Düsseldorf, the DSW represents around 25,000 retail and institutional shareholders. The latter includes several asset managers like the German unit of Société Generale and Warburg Invest.

Elsewhere, TILP, the Tübingen law firm that has filed one of the many investor lawsuits against Volkswagen (VW) over the diesel emissions scandal, says a separate lawsuit against Porsche, VW’s sports car unit, has been green lighted by a Hanover court.

In the lawsuit, TILP claims that in 2008, Porsche’s management misled investors during a failed takeover attempt of VW. VW wound up acquiring Porsche in a reverse takeover. The Hanover court’s decision means that the TILP action against Porsche will get ‘KapMu’ status, or the equivalent of the class action lawsuit common in the US.