Deutsche Bank AG supervisory board chairman Paul Achleitner must improve corporate governance at Germany’s biggest bank to allow management to focus on boosting shareholder returns, investors said.
“Ensure that Deutsche Bank can finally come to peace and concentrate on its operating business,” Ingo Speich, a fund manager at Union Investment, said to Achleitner in a speech at a meeting of the bank’s shareholders in Frankfurt today. “Corporate governance needs to be examined. The past shows there’s significant room for improvement here.”
Deutsche Bank shareholders approved motions originally passed at their annual meeting in 2012 after a Frankfurt court voided the resolutions because Achleitner’s predecessor, Clemens Boersig, curtailed an investor’s right to speak. Boersig also came under fire at the meeting last May for his handling of the succession of former Chief Executive Officer Josef Ackermann. Achleitner became chairman in June.
“You have to lead the bank to more integrity,” said Hans-Martin Buhlmann, chairman of the Cologne, Germany-based Association of Institutional Shareholders. “You have to create a culture of ethics for employees and clients that makes shareholders proud to own the stock and staff proud to have a Deutsche Bank identity card. You are our leader for this.”
Some shareholders voiced their disapproval of Boersig, 64, last May, with only 78 percent of investors who cast a valid vote ratifying the supervisory board’s actions compared with 99 percent signing off on those of the management board, company filings show.
Speich said his firm didn’t vote in favor of ratifying the supervisory board’s actions at the meeting last year.
Shareholders voted to approve the use of the bank’s 2011 profit, the naming of its auditor and the election of Achleitner and two other individuals to the supervisory board, Deutsche Bank said in an e-mailed statement today.
Franz Enderle, the shareholder representative Boersig denied a second opportunity to speak last year, asked management at today’s meeting if the bank has set aside reserves to settle a dispute with the Kirch family.
Enderle is a lawyer for the family, which blames Frankfurt-based Deutsche Bank for the collapse of now-deceased entrepreneur Leo Kirch’s media empire.
A Munich court found Deutsche Bank and former CEO Rolf Breuer partially liable for statements he made in 2002 before the Kirch group filed for bankruptcy. The court had previously said that Deutsche Bank may have to pay as much as 1.5 billion euros ($1.97 billion) in a case tied to the collapse.
Europe’s second-largest bank by assets has since set aside reserves for a potential settlement with the Kirch family, Deutsche Bank co-CEO Juergen Fitschen said at the meeting today. He declined to specify the size of the reserves and said their existence doesn’t imply the company will settle with Kirch, nor does it mean Deutsche Bank admits any wrongdoing.
The bank, which isn’t in settlement talks with the Kirch family, awaits a verdict from Germany’s highest court on its objection filed against the Munich court’s decisions, Fitschen said. An end to the proceedings isn’t in sight, he said.
The Kirch family, Achleitner and the bank’s management should push for the matter to be handled in court rather than at shareholder meetings, Klaus Nieding, vice president of Germany’s DSW shareholder group, said today.
“This vendetta is pretty much a private party and the one promoting it should pay,” Nieding said referring to the costs the Kirch legal proceedings have caused. “The Kirch family is trying to promote its own legal interests.”
Today’s meeting will cost the bank about 5 million euros, while the Kirch case has so far cost Deutsche Bank a sum in the “low double-digit millions of euros,” Fitschen said. Both amounts exclude internal costs, he said.
“Certainly we do not want to make it a habit, but circumstances have forced us to take this step,” Fitschen said of today’s extraordinary shareholder meeting.
Deutsche Bank also faces 2 million euros in legal risks related to the Kirch family’s legal costs should the court rule against the lender, Fitschen said.
Achleitner, a 56-year-old Austrian, stepped down as chief financial officer of insurer Allianz SE to join the bank. The former Goldman Sachs Group Inc. banker advised Deutsche Bank on its $9 billion purchase of Bankers Trust Corp. in 1998, a key step toward becoming a global investment bank.
The 65-year-old Ackermann spent a decade as Deutsche Bank’s CEO before being succeeded by investment bank chief Anshu Jain, 50, and Germany head Fitschen, 64, at the end of May.
The co-CEOs are working to boost the bank’s capital levels, the lowest of Europe’s four biggest investment banks, while grappling with mounting litigation costs and regulatory probes. Standard & Poor’s said last month that legal expenses coupled with risks related to a slowing economy and stricter regulation may prompt it to cut its rating of the German lender’s debt.
Deutsche Bank’s core Tier 1 capital ratio rose to 7.8 percent at the end of 2012 from less than 6 percent a year earlier, company filings show. That’s still below the measure of financial strength at Barclays Plc, Credit Suisse Group AG and UBS AG, data compiled by Bloomberg Industries show.
“We don’t want the current problems to just be the tip of the iceberg,” Speich said, without being more specific. “We need a strong and independent supervisory board that knows the subject matter so that Deutsche Bank’s business is led back into an orderly path and value can be created for shareholders.”
Union Investment, the fund manager for Germany’s cooperative banks, said it holds about 1 percent of Deutsche Bank’s shares.