(FT) Deutsche Bank has become the latest big company to be hit by investor ire over executive pay after shareholders voted down its new remuneration plan for top managers.
The vote follows pay rebellions at Citigroup and Renault, and capped a shareholder meeting full of criticism for Deutsche, which made a €6.8bn losslast year, and is battling to restore its fortunes and reputation after years of poor returns and high legal costs.
Germany’s biggest lender introduced the pay scheme at the beginning of this year. Under the plan, in addition to a basic salary and bonuses linked to the bank’s and their own performance, divisional heads would also be eligible for a bonus linked to their division’s performance.
However, in a non-binding vote at Deutsche’s annual meeting in Frankfurt, 51.9 per cent of shareholders voted against the scheme, with 48.1 per cent in favour.
Hans Hirt, from fund manager Hermes, said the plan had been rushed through without sufficient consultation. He urged Deutsche to rethink.
“For a key part of the new plan, the so-called division performance award, there is a lack of transparency in regard to the criteria, key figures and goals linked to them,” he said, adding that the supervisory board had too much leeway in determining some variable pay elements.
“In view of the current situation of Deutsche Bank, and the significant increase in fixed salaries in recent years, we reject the new pay scheme for the management board.”
ISS, the influential shareholder adviser, had recommended that investors reject the pay plan.
All other motions at the meeting were passed. A shareholder proposal for a special audit of whether top staff at Deutsche breached their obligations in how they dealt with some of the bank’s legal entanglements was narrowly rejected, with 46.4 per cent of shareholders voting in favour, but 53.6 per cent voting against.
The proposal requested an investigation into whether Deutsche had to pay heavier fines because members of its management or supervisory board had failed to co-operate sufficiently with authorities.
Britain’s Financial Conduct Authority said last year that it had increased the penalty it levied on Deutsche for its involvement in the Libor scandal by £100.8m for insufficient co-operation during the investigation.
Deutsche’s supervisory board and its chairman, Paul Achleitner, have come in for harsh criticism from investors in recent months for waiting too long to overhaul the top management, as well as for allowing a boardroom disputeover how to deal with past problems to spill into the public domain.
This public wrangling unsettled shareholders, and drew 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”.
Mr Achleitner, who has chaired Deutsche since 2012, said he “regretted” the public dispute and also acknowledged that there had been questions over his leadership.
However, the Austrian banker said he was “sticking to my duty and my 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.
Mr Speich said that 2015 had been a “catastrophic year” for Deutsche, and claimed that the bank was mired in “the most serious crisis in its history”. He noted that it was now worth less than the €21.7bn it has raised from shareholders since the financial crisis.
Mr Achleitner and John Cryan, Deutsche’s chief executive, acknowledged that the bank faced challenges. But they said there was no reason to change the five-year strategy the bank set out late last year.
Mr Cryan said that, while the bank was committed to cutting its cost base by €5bn to less than €22bn by the end of 2018, it would also invest in its corporate banking business, as well as its asset management arm.
He added that Deutsche was “unreservedly” committed to its markets division, despite calls for it to exit securities trading. “[This business] represents an indispensable element of our strategy,” he said.
“[It is] the only way we have of providing our corporate clients with capital market expertise and global access.”