The Florida State Board of Administration (SBA), the $174bn (€154bn) US institutional investor, has become the first leading investor to reveal it is voting against discharging the management and supervisory boards of Deutsche Bank.
German boards have to be ‘discharged’ from legal liability for their activities during the prior year.
While usually symbolic, Deutsche has been facing a shareholder revolt on the issue, with proxy firms recommending that discharge should be denied due to the wave of scandals that has swamped the bank over the past few years.
The SBA is also voting against ratifying KPMG as auditors for fiscal 2015 and for a shareholder proposal filed by German shareholder association DSW calling for a special audit looking at a potential breach of legal obligations by the management and supervisory boards.
SBA intentions, posted to its website, indicate that Deutsche could be facing an all-out shareholder revolt at its annual general meeting (AGM) on May 21 in Frankfurt. All major proxy firms are recommending that discharge should be denied due to the wave of scandals that has plagued the bank over the past few years.
The DSW – alongside proxy firms ISS, Glass Lewis and Ivox – has recommended that shareholders should not approve the discharge of management for 2014 (Glass Lewis is recommending abstention) and the SBA would appear to go along with this.The DSW says Deutsche’s shareholders should vote against discharge management due to the scandals that have embarrassed the bank and cost it billions of euros in legal fees. “The promise (made in 2012 by Co-CEOs Jürgen Fitschen and Anshu Jain) to reform the bank’s culture has not been kept. On the contrary, the bank keeps getting into trouble with regulators worldwide,” said the DSW, which represents 25,000 private investors.
Yet the DSW and Ivox, another German proxy advisor based in Karlsruhe, go further than ISS and Glass Lewis by recommending that shareholders also deny discharge for the supervisory board. The DSW said: “Overall the Board has not succeeded in rebuilding the trust in the bank among shareholders.”
While legally non-binding, a shareholder vote to deny discharge of either the bank’s management or board would not only be unprecedented, it could lead to the dismissal of executives. “But even a discharge vote of under 95% would be unprecedented for Deutsche and very embarrassing for either body,” said a source at a Frankfurt-based asset manager that has yet to decide how it will vote.
Other Deutsche shareholders like Hermes Equity Ownership Services, Norges Bank, Union Investment and the German Association of Institutional Shareholders (VIP), also have yet to make up their minds on the discharge question.