Deutsche Bank’s annual general meeting (AGM) kicks off in Frankfurt tomorrow - and it’s set to be a humdinger.
The German financial giant has rarely been out of the headlines in the past six months.
Last October it announced a management cull and a big restructuring. In December it was linked with a $10bn (£6.8bn) Russian money laundering scandal, and during the start of this year its share price has been battered as its balance sheet put under immense pressure.
This afternoon its shares were swapping hands at €14.70 (£11.34). One year ago they were worth €28.99.
Plenty for investors to be angry about.
And angry is most certainly the word, as a string of shareholder groups line up to attack Deutsche Bank over at least three different issues at their AGM in Frankfurt tomorrow.
Time will tell how the German lender manages to fight on multiple fronts.
Call it the shareholder spring, if you will, but after much talk, revolts on pay deals this AGM season have been a little meek.
Maybe this time it will be different. The grievance certainly is.
Investment managers Hermes is set to vote against the remuneration policy being put forward tomorrow and has advised institutional shareholders holding around 0.5 per cent of Deutsche’s stock to follow suit.
Given the bank’s performance, there will be no job-well-done-payouts for its executives, but Hermes thinks base salaries are even too high at the beleaguered lender.
We are concerned about the significant increases in base salaries in recent years, the apparent lack of consultation on the proposed changes to the management board remuneration, the inadequate transparency in relation to performance criteria and targets … as well the high level of discretion of the supervisory board with regard to variable remuneration.
- Hans-Christoph Hirt, Hermes EOS
Quite the list.
Oliver Parry, head of corporate governance policy at the Institute of Directors added: “It’s crucial all companies … adhere to some basic governance competencies, namely to link pay with performance.”
Usually revolts are reserved to blow-out bonuses, the extension of angst towards base salaries could ignite a new fire in the attacks on executive pay.
Off the hook?
Advisers at Pensions and Investment Research Consultants (Pirc), have told investors not to let Deutsche Bank’s directors off the hook. Literally.
Every year German-listed companies hold a vote to “discharge” the company’s directors of their liabilities for goings-on in the year before. For instance, if the share price went down, the vote absolves directors of responsibility for it - save for any actual proven wrong-doing, book-cooking or illegal shenanigans.
Pirc has said that it will be opposing that motion in tomorrow’s AGM. In a note to clients, it said: “There are concerns over the capacity of the executive board to continue managing the company as an operating concern.
“The several litigations which [Deutsche Bank] has settled in the last year or in which the company is involved require open and transparent discussion between shareholder and a road map to restructure internal controls, which the company has not provided.”
Time to probe
Those “several litigations” Pirc mentioned have got some shareholders worked up enough to call for a specific investigation into how Deutsche Bank handled itself in discussions with regulators and prosecutors.
Advisory groups ISS and Glass Lewis are back backing a shareholder motion to launch an investigation into the misconduct that has plagued the firm. They want to know whether managers obstructed - or even misled - investigators, which led to the bank being fined higher amounts for wrongdoing.
In April 2015, the Financial Conduct Authority (FCA) fined Deutsche Bank £227m for Libor and foreign exchange rigging.
The fine is so large because Deutsche Bank also misled the regulator, which could have hampered its investigation.
- Financial Conduct Authority (FCA)
That message from the regulator - play nice or you’ll pay twice - is still resonating with shareholders, who want a one-off audit into the bank’s behaviour in the wake of misconduct scandals.
The AGM kicks off at 9am UK time tomorrow over in Frankfurt. Watch out.