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Deutsche Bank vote has wider implications

15-06-2012 | Visie | Kendra Janga Robeco joined 27 other investors to object to the poor performance of the German giant’s supervisory board. Corporate Europe should take note, says Kendra Janga.

 
 Key points
  • Robeco voted against AGM resolution approving supervisory board’s performance
  • Deutsche Bank’s supervisory board has failed to fulfill its major functions
  • Vote is a warning shot to all companies about adequate corporate governance
At Deutsche Bank’s AGM, Robeco joined forces with 27 other investors from the US, the UK and the Netherlands. “We wanted to express our concerns about the mismanagement of the bank’s supervisory board,” explains Engagement Analyst Kendra Janga. On this occasion, Robeco granted power of attorney to a representative of UK asset manager Hermes to speak on its behalf.

The concerns go to the core of the board’s role. “We believe that the supervisory board has failed to fulfill its major functions: the appointment of management board members, advising the management board and the remuneration of the management board members,” she explains.

A list of supervisory board failures
It is quite a charge list. For one thing, the supervisory board has not succeeded in finding a successor for Josef Ackermann, the bank’s departing CEO. This process has damaged the reputation of the bank, as breaches of confidentiality may have occurred.

 

“The vote against Deutsche Bank’s supervisory board is a message to all companies in Europe that they need to have good corporate governance”

 


The supervisory board also failed to handle in an adequate manner Ackermann’s proposed—and quickly withdrawn—move to the supervisory board. Janga says it shouldn’t have been too difficult for the supervisory board to forecast the furor that rapidly mushroomed.

There’s more. Significant investor concerns with regard to the bank’s remuneration report were brushed aside.

Finally, it is questionable whether the board guarded the alignment of the company’s strategy and culture with the principle of sustainability. There’s evidence for this, as the bank’s annual report includes a list of pending litigation and other disputes. Moreover, questions have been raised about the sustainability of some of the bank’s business activities.

To put it mildly, Robeco was dissatisfied with the performance of the supervisory board. “We don’t have confidence in its functioning in an adequate fashion any longer,” stresses Janga.

Robeco voted against resolution approving board’s FY2011 performance
Robeco was therefore in agreement with the investor group’s text that read: “The members of the supervisory board in office during the financial year 2011 are not discharged.” In other words, Robeco voted against the AGM resolution approving the supervisory board’s performance in the previous year.

And the joint statement and vote of the investor group might have an afterlife. Janga believes it could represent a significant step forward in the development of European corporate governance.

After all, Deutsche Bank is one of Europe’s major companies and she hopes that the bank’s peers will see the vote as a warning shot. “The vote against the supervisory board is a message to all companies in Europe that they need to have good corporate governance policies in place,” she says.
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