Annual meeting

Deutsche Bank shareholders rebuff chairman in confidence vote

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The really bad news is that the Frankfurt soccer team beat Munich in the German Cup final. Source: Reuters

Deutsche Bank’s annual meeting Thursday lived up to its billing of turbulence as angry shareholders criticized and mocked Chief Executive Christian Sewing and Chairman Paul Achleitner. The attacks culminated in the traditional vote of confidence, where a significant percentage of those attending denied their support to Mr. Achleitner.

The marathon meeting, which lasted nearly 11 hours, eventually ran out of steam as shareholders headed for the exits before it ended. The stock market gave its verdict by marking Deutsche shares down 5 percent to close at a 52-week low of €10.38.

In the traditional vote of confidence, Mr. Achleitner received support from only 84.4 percent of shares represented at the meeting. Anything less than 90 percent is considered a rebuff. The “approval” was higher than it might have been because several big shareholders and proxy advisors who are critical of the chairman expressly said they would not withhold approval to avoid further instability.

The bank is still reeling from the abrupt dismissal of Chief Executive John Cryan in April and Mr. Sewing’s more aggressive approach to restructuring the bank. The two men fared considerably better in the confidence vote, with each getting a little more than 94 percent. It was an indication that shareholders now see Mr. Achleitner as the problem, rather than management.

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Well, heck, I gave it my all. Source: Reuters

The vote of confidence in German corporate governance historically is a formality. Deutsche’s recent turbulent history has turned the vote into a real test. When former co-chief executives Anshu Jain and Jürgen Fitschen got only 61 percent at the 2015 annual meeting, it was the beginning of the end for them. Shortly afterwards, they both resigned.

An early sign that trouble was in store on Thursday’s vote came when shareholders rejected the company’s recommendation for a vote of confidence on the supervisory and executive boards as a whole, insisting instead on a vote for individual members.

Even before the meeting, Mr. Sewing announced that 7,000-some jobs would be eliminated, including a quarter of its equities traders. The cuts were fewer than the 10,000 rumored just the day before but higher than previously expected. The increased cuts were a response to shareholders up in arms after three successive years of losses. The stock price indicated investors were unconvinced.

“The share price is like a ride through the haunted house.”

Andreas Thomae, fund manager, Dekabank

The meeting agenda included votes for replacing five of the 10 shareholder representatives on the supervisory board. (Germany’s co-determination law requires an equal number of worker representatives.) The fact that all five had to introduce themselves in English because they don’t speak German caused some consternation. Shareholders questioned why so many non-German speakers were joining the board just as the bank is retreating to its roots in Germany.

Others, however, welcomed the board nomination of John Thain, the former head of Merrill Lynch and the New York Stock Exchange, as a sign that Deutsche would not give up investment banking altogether and the retreat would be well managed. Mr. Thain is reportedly slated to head a new strategy committee on the board.

The meeting had some raucous moments. Mock clapping and loud hooting greeted Mr. Achleitner’s announcement of an €11 dividend, when in fact the payout is a meager €0.11. Fund manager Andreas Thomae from Dekabank, the asset manager for savings banks, said he would not support Mr. Achleitner in the confidence vote. “The share price is like a ride through the haunted house, where an unpleasant surprise is lurking around every curve,” he said.

The head of shareholder advisor Hermes EOS, Hans-Christoph Hirt, minced no words in his verdict. “Our bank urgently needs a more effective leadership also at the head of the supervisory board,” he said. However, he said he would give Mr. Achleitner and the board a vote of confidence to avoid any further instability. Proxy advisory firm ISS, which represented an estimated 20 percent of votes at the meeting, had earlier explained its support with similar reasoning.

Mr. Achleitner opened the meeting with a reference to the Frankfurt soccer team’s surprise victory over Munich in the German Cup final last Saturday. As a Munich resident, he wanted to congratulate Frankfurt supporters in the crowd. This drew a round of applause, but any good feeling generated by the sentiment quickly dissipated.

Several Handelsblatt correspondents contributed reporting to this article. Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the author: d.delamaide@extern.handelsblatt.com.

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