Ahead of Deutsche Bank’s AGM in Frankfurt on 21 May 2015, Dr Hans-Christoph Hirt, Director, explains why Hermes EOS will not approve the actions of the management board.
Hermes EOS, on behalf of the institutional investors it represents, will vote against the so-called discharge of the members of Deutsche Bank’s management board. With this vote we formally express our strong concerns about a range of issues and our lack of confidence in the management board.
We urge the bank’s supervisory board to review the composition of the management board, taking its performance over the last three years and its new strategy into account.
Concerns about the management board
Hermes EOS has previously raised concerns with Deutsche Bank about its progress on culture change, dealing with pending litigation and investigations and the delivery of targets set under its Strategy 2015+, which the bank launched in September 2012.
We have previously queried with the bank itself the suitability of Juergen Fitschen and Anshu Jain, the bank’s two chief executives, to lead Deutsche’s culture change, given their long tenure in key leadership positions including at the Investment Bank.
In our opinion, the development of Deutsche’s share price and the total shareholder return since Fitschen and Jain took over three years ago seem to reflect the failure of Strategy 2015+.
Valuable time and credibility has been lost by the management board’s late recognition that changes to the bank’s structure and business model are required to sustainably create value in a changed regulatory environment. In April 2015, Deutsche Bank announced the next phase in its strategy, Strategy 2020, but has not yet provided enough details to allow investors a robust assessment of the new plan.
Settlements of interbank offered rates (IBOR) investigations with US and UK regulators
Hermes EOS and its clients are very concerned about the findings of US and UK regulators which were published when Deutsche settled investigations into its involvement in the rigging of IBOR on 23 April 2015 by paying around $2.5 billion in fines and disgorgements.
The statements by key regulators involved indicate, in our view, that the levels of the fines reflect both the severity of the misconduct of Deutsche’s employees but also the bank’s slow response to the investigations and inadequate cooperation. The management board bears ultimate responsibility for the apparent defects and delays in responding to the investigations and thus the increased fines.
Background: Hermes EOS engagement with Deutsche since 2009
Hermes EOS has had an intensive engagement with Deutsche on behalf of its clients since 2009, involving dialogue with senior executives and members of the management and supervisory boards, filing of a shareholder proposal in 2012 and speeches at the AGMs in 2012 and 2013.
Our shareholder proposal in 2012 raising concerns about the amount of pending litigation and investigations and corporate culture was supported by more than 20% of the shareholders voting at the AGM and contributed to more focus on the creation of a sustainable business.
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