Deutsche Bank AGM Shouldn’t Absolve Leaders, Advisor Says

(Bloomberg) --

Deutsche Bank AG shareholders shouldn't sign off on management's actions for the past year, an influential advisory firm recommended, citing ongoing legal investigations against the lender.

Proxy adviser Glass Lewis listed probes against Deutsche Bank's asset manager DWS Group and an unidentified management board member in connection with a tax evasion scheme known as Cum-Ex, according to a report published on Sunday. It also cited a raid last week related to the bank's reporting on potential money laundering.

While Glass Lewis said it's “unaware of any substantial indications to suggest that management board members overwhelmingly failed to fulfill their duty to shareholders,” it recommended shareholders “abstain from voting on ratification proposals as a matter of caution” as long as the outcome of the various probes is uncertain.

Chief Executive Officer Christian Sewing and departing Supervisory Board Chairman Paul Achleitner will likely seek to highlight at the May 19 meeting what they see as a successful turnaround of the lender over the past three years. Yet the Glass Lewis report also shows how much the recent string of new regulatory and legal issues have cast a shadow over the German lender despite a strong rise in profitability.

The issues cited involve allegations against DWS that it overstated how much it factors environmental, social and governance considerations into its investment decisions and Deutsche Bank's role in a tax scam known as cum-ex that allegedly has cost German taxpayers billions of euros. The bank's outgoing chief risk officer, Stuart Lewis, is being probed over his role in the transactions, Bloomberg reported last year.

Deutsche Bank AGMs can be highly contentious events as shareholders use their right to give speeches and ask questions to the lender's leadership as a way to vent sometimes scathing criticism. This year's AGM will also feature a motion by one investor to oust Sewing, even though Deutsche Bank has dismissed the proposal and labeled it as “riddled with half-truths and conspiracy theories.”

The AGM will be the last for Achleitner as he is set to be succeeded as chairman by a former CEO of the Dutch insurance company Aegon NV, Alexander Wynaendts. Glass Lewis recommended voting for Wynaendts.

The adviser also recommended voting against ratifying Deutsche Bank's remuneration report, saying Chief Executive Officer Christian Sewing's base salary was “excessive” and criticizing “poor” disclosure on annual bonus metrics and performance targets. The CEO earned 8.8 million euros last year, including fixed pay of 3.6 million euros, while the management board as a whole made 66.5 million euros.

“We are concerned about the high base salaries paid to management board members, some of which have been further increased in the past year,” Glass Lewis said in the report. “We believe shareholders should have reasonably expected a compelling rationale to justify this amount of fixed remuneration, which we were not able to find.”

Credit Suisse Group AG shareholders on Friday voted not to absolve the bank's board of directors from legal liability for mistakes made in the run-up to the Archegos Capital Management debacle, while rejecting an attempt to force a special audit of the Greensill Capital losses.