Last stand Deutsche Bank’s Achleitner under fire by Glass Lewis

Investors in Deutsche Bank, including influential US proxy advisor Glass Lewis, are unhappy with Paul Achleitner. An upcoming vote could spell the supervisory board chief's downfall.
Quelle: dpa
(Source: dpa)

The supervisory board chief of Deutsche Bank, Paul Achleitner, faces another turbulent shareholders’ meeting this month with one of America’s top proxy advisor firms, Glass Lewis, urging investors not to back him and to look for a successor.

In a report, Glass Lewis, which advises investors how to vote at meetings, said they should abstain in the annual vote on approving the actions of the management and supervisory boards. An outright “No” would be too risky because there’s no immediate successor in sight, while a “Yes” would send the wrong signal that no change was needed, it wrote.

“There seems to be a strong consensus that performance has fallen well short of expectations, that restructuring measures have taken too long to be implemented and have yet to yield any substantial results,” Glass Lewis wrote.

The meeting is scheduled for May 24. Shareholder votes on the actions of the management and supervisory boards are standard practice at German DAX-listed companies and while the outcomes aren’t legally binding, they are an important indicator of how investors feel.

It’s already clear that investors aren’t especially happy with Mr. Achleitner. Last month’s removal of CEO John Cryan and appointment of successor Christian Sewing via an internal telephone conference on a Sunday evening was seen as chaotic and left the bank’s management looking weak and divided.

Glass Lewis now sees Mr. Achleitner as part of the problem.

Big investors have said Mr. Achleitner, who used to be head of Germany for Goldman Sachs, shares blame for Deutsche Bank’s woes because he has always backed a strong investment banking presence and because he clung to co-CEOs Anshu Jain and Jürgen Fitschen despite a string of scandals. After a turbulent shareholder meeting in 2015, Mr. Achleitner installed Mr. Cryan, who was later accused of failing to take tough decisions needed to turn the bank around.

Deutsche’s share price has more than halved since Mr. Achleitner became head of the supervisory board in 2012. The bank has made losses in the past three years and income from investment banking has slumped to €14 billion from €20 billion on his watch.

Mr. Achleitner, as always this time of year before the annual shareholders' meeting, has been doing the rounds with influential investors.

One shareholder said the affable Austrian had given assurances that he had the backing of the management and supervisory boards as well as the German government, and had every intention of serving his full term through 2022.

Meanwhile, Deutsche Bank is charting a new course. Mr. Sewing, the new CEO, tried to sweeten a poor set of first-quarter results last week by pledging to scale back its investment banking, especially in the US, and to put a stronger focus on more stable businesses like retail banking, asset management and transaction banking.

Nevertheless, Glass Lewis now sees Mr. Achleitner as part of the problem. It said the supervisory board had fallen short of its duties and criticized the three changes of CEO under his leadership.

Many large institutional investors such as investment funds, insurers or pension funds follow the advice of proxy advisors like Glass Lewis or its bigger rival, the American proxy advisor ISS. Financial sources said the verdict of ISS, which is expected shortly before the meeting, will be important for Mr. Achleitner.

At last year’s meeting, Glass Lewis came out against ratifying the management and supervisory boards while ISS was in favor. Mr. Achleitner got re-elected with a relatively comfortable 93.5 percent of votes. But if ISS chooses not to back him this time, the pressure will mount. “A very weak vote with 20 to 30 percent against would weaken the supervisory board chief considerably,” said one big investor.

The lack of an obvious successor could save Mr. Achleitner, though. The last thing they want right now is to destabilize the beleaguered bank even further by plunging its supervisory board into a leadership crisis.

Mr. Achleitner does presumably have the support of the Qatari royal family, who controls around 10 percent of Deutsche Bank’s shares.

Michael Maisch is a senior financial editor with Handelsblatt in Frankfurt. To contact the author: [email protected]