Hermes condemns Deutsche Boerse's management for failed LSE merger and insider trading probe, and sets timer for chairman to step down

 
Lucy White
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Deutsche Boerse's former CEO, Carsten Kengeter, is set to face investor wrath (Source: Getty)

Deutsche Boerse's chairman and ex-chief executive are set to come under fire tomorrow, as Hermes EOS – the governance branch of asset management giant Hermes – has said it will raise a number of concerns in tomorrow's AGM.

Following a year in which Deutsche Boerse failed to nail a merger with the London Stock Exchange (LSE) and was subjected to an insider trading probe, Hermes is set to tell chairman Joachim Faber that he should step down within the next three years.

Hermes grudgingly advised shareholders to re-elect Faber at tomorrow's AGM, since the company "needs continuity" following the resignation of CEO Carsten Kengeter in the wake of the insider trading allegations, but has requested that Faber does not stand for a full three-year term and instead provides clarity on who will follow him by next year's meeting.

Read more: Deutsche Boerse under pressure as investor group recommends vote against board

"We will vote against the chair of the supervisory board, because we see him as responsible together with the CEO for the failed deal with the LSE and for not communicating with key stakeholders throughout the negotiation process," Hermes EOS's Michael Viehs told City A.M..

There was a need in our view to have a contingency plan in place in case the Brexit vote happened.

"We have questions around this – were there scenarios set up in these merger negotiations on the side of Deutsche Boerse that factored in the risk of the potential Brexit vote and how this would affect the merger negotiations?"

Hermes is also recommending that shareholders vote against the discharge of Faber and Kengeter. A vote of discharge is a feature in Germany which allows shareholders to express their support – or not – for how senior management has carried out their duties. Though the vote is not legally binding, it sends out a strong message to the company.

Read more: Former Deutsche Boerse boss could rake in up to €9m over the next four years

"We wanted to make it clear that because of the mistakes and the weaknesses in the [LSE] deal execution, plus the insider dealing allegations and the chair's handling of these allegations and whether he maybe supported the former CEO for too long, we decided to provide no vote of discharge," Viehs explained.

Deutsche Boerse now has a new CEO in Theodor Weimer, an ex-banker who Hermes considered a "really credible candidate".

However even he will come under pressure to reveal more plans on how he will turn the German exchange around and make sure growth is sustainable.

Read more: Deutsche Boerse's new boss eyes quarter of euro clearing after Brexit

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