Deutsche Bank has become the latest company to have incurred the wrath of investors over executive pay after shareholders voted against its new remuneration deal for top managers.
The vote comes amid a shareholder meeting full of criticism for Deutsche Bank, which has been battling to regain its fortunes and re-establish its reputation after a long period of poor returns and high legal costs, having made a €6.8 billion loss last year.
Proposed New Pay Scheme
Deutsche Bank introduced the pay scheme at the beginning of the year. Under the plan, divisional heads would also be eligible for a bonus linked to their division’s performance in addition to a basic salary and bonuses linked to the bank’s and their own performance.
However, in a non-binding vote at Deutsche Bank’s annual meeting in Frankfurt, 51.9 percent of shareholders voted against the scheme, with 48.1 percent in favour. ISS, the shareholder adviser, had recommended that investors reject the pay plan.
Hans Hirt, from fund manager Hermes, had however commented that the plan had been rushed through without sufficient consultation and urged Deutsche Bank to rethink.
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Breach of Obligations
A shareholder proposal for a special audit of whether top staff at Deutsche Bank breached their obligations in how they dealt with some of the bank’s legal entanglements was also narrowly rejected, with 46.4 percent of shareholders voting in favour, but 53.6 percent voting against.
The proposal requested an investigation into whether Deutsche Bank had to pay heavier fines because members of its management or supervisory board had failed to co-operate sufficiently with authorities.
The Financial Conduct Authority (FCA) increased the penalty it levied on Deutsche Bank last year by £100.8 million for its involvement in the Libor scandal for insufficient co-operation during the investigation.
Deutsche Bank’s supervisory board and its chairman, Paul Achleitner, have been subject to severe criticism from investors in recent months for delaying the overhaul of the bank’s top management, as well as for allowing a boardroom dispute over how to deal with past problems spill into the public domain.
The dispute unsettled shareholders, and attracted further criticism on Thursday. Ingo Speich, a portfolio manager at Union Investment, one of Deutsche Bank’s top 20 investors, described the spat as a “scandal”.
Achleitner, who has chaired Deutsche Bank since 2012, is said to have regretted the public dispute and also acknowledged that there had been questions over his leadership. Nonetheless, he said that he was sticking to his duty and responsibilities. He added that he would have stood for re-election had the chairmanship been put to the vote at this year’s annual meeting.
Speich commented that 2015 had been a “catastrophic” year for Deutsche Bank and claimed that it was mired in the most serious crisis in its history, adding that it was now worth less than the €21.7 billion it has raised from shareholders since the financial crisis.