The Deutsche Bank management must once again prepare for criticism from its shareholders about its compensation system. The US voting rights consultant Glass Lewis once again criticized the remuneration of the board of directors with strong words this year and recommended voting against the remuneration report at the general meeting on May 16th. The consultants from Institutional Shareholder Service (ISS) also criticize what they see as the comparatively high pension payments and the low performance incentive of the bonuses. Even if the share price develops mediocre, the board members could achieve high variable compensation.
Glass Lewis consultants described the base salaries of Deutsche Bank board members as “excessive.” Not only is CEO Christian Sewing’s fixed salary significantly higher than at other comparable banks, the average basic salary of Deutsche Bank board members also exceeds the average salary of other CEOs of large German corporations. In general, from Glass Lewis’s point of view, high fixed salaries are problematic anyway because there is too little connection to the performance actually provided. In view of the IT debacle at Postbank, the supervisory board had reduced the bonuses of some Deutsche Bank board members – but on closer inspection, this measure was more of a symbolic nature.
The criticism from the shareholder advisors has probably had an effect
The consultants also critically mentioned the increased fixed salaries of deputy boss James von Moltke and investment bank and corporate bank boss Fabrizio Campelli. His fixed salary (3.25 million euros) is significantly higher than the basic salary of the CEOs of eight comparable European banks. Christian Sewing (total compensation 9.5 million euros), on the other hand, now earns 43 times as much as a Deutsche Bank employee, whereas three years ago it was only 29 times as much. Unlike the voting rights advisors, Deutsche Bank compares its compensation with several Wall Street banks, which are significantly larger and more successful. First had that Handelsblatt reported on the shareholder criticism.
In fact, the criticism from the shareholder advisors has had an effect. ISS analysts praised the new bonus system, which the bank plans to vote on at the AGM. In the future, for example, the bonus will be measured based on significantly fewer indicators. The recommendations of Glass Lewis and ISS are generally followed by around 20 percent of Deutsche Bank shareholders. The business model of voting rights advisors is comparable to that of rating agencies: They create studies that they sell to professional investors. For example, they check whether managers adhere to the rules of good corporate governance. The advisors do not own any shares themselves, which some criticize as giving them too much power.
However, the threatened defeat of Deutsche Bank in the dispute with former Postbank shareholders was no longer included in the voting rights recommendations that had already been finalized. However, the topic is likely to raise questions at the general meeting. Deutsche Bank is threatened with an additional payment of more than one billion euros.