Voting rights advisers criticize Commerzbank’s remuneration system

Frankfurt The Commerzbank is holding a virtual general meeting for the first time this year because of the corona crisis. But even without protests from small shareholders on site, there will be no shortage of critical topics at the event on May 13.

Added to this is the criticism of Commerzbank’s remuneration system. The influential voting rights advisor Glass Lewis and his German subsidiary Ivox recommend that shareholders reject the slightly modified remuneration system for members of the Management Board in March 2020. This emerges from the recommendations of both companies for the Annual General Meeting, which are available to the Handelsblatt.

“From our point of view, there is great potential for improvement in the company’s remuneration policy,” says the Glass Lewis study. The goals on which the variable remuneration of the Board of Directors depends are too vague and too focused on the bank’s performance in the past.

Anglo-Saxon investors in particular often follow the advice of proxy advisors such as Glass Lewis and ISS at general meetings. If the Commerzbank shareholders did not endorse the remuneration system, the Supervisory Board would have to deal with it again. Germany’s second largest private bank did not want to comment on this.

Criticism of the number of positions

In his study, Ivox also speaks out against the planned election of Jutta Dönges to the Commerzbank Supervisory Board. The co-boss of the finance agency is to be elected as the new representative of the federal government to the control committee in May – together with Frank Czichowski from the KfW development bank.

Dönges and Czichowski are to replace State Secretary Markus Kerber and Anja Mikus, who heads the State Fund for Nuclear Waste Management. After Commerzbank’s rescue from the crisis, the federal government still has a good 15 percent stake in the bank – and anything but satisfied with the development of the money house in recent years. In Berlin, some have hopes that Dönges and Czichowski can give new impetus to the supervisory board.

But at least Ivox has reservations about the Dönges personnel. There are no doubts about the manager’s qualifications, according to the study based on guidelines of the BVI fund association. “However, there are concerns about the number of mandates.”

Dönges is already a member of the supervisory bodies of the FMS Wertmanagement and the Deutsche Pfandbriefbank. In addition, there is her job as managing director of the finance agency, which Ivox rates as an “executive position” like two mandates.

According to this method of counting, your work on the Commerzbank Supervisory Board would be your fifth mandate. And that would be two more mandates than Ivox recommends for people in an “executive position”. “Therefore, this election should be viewed very critically,” said the voting rights advisor.

The finance agency did not want to comment on Ivox’s criticism. However, a spokeswoman pointed out that Dönges had resigned from the supervisory board of Eurex Clearing in order to avoid conflicts of interest.

In contrast to Ivox, the parent company Glass Lewis has no objection to the choice of Dönges. Other persons familiar with the personnel also consider the appointment to be sensible, after all the financial agency manages the federal government’s participation in Commerzbank and is in close contact with the institute anyway.

Dönges is also highly valued in Berlin because it closely monitored the Commerzbank strategy review. Some also believe that Dönges’ work at FMS Wertmanagement cannot be viewed as a full supervisory mandate.

More concrete goals for 2020

The core remuneration system for Commerzbank board members has existed for several years. In March it was slightly adjusted to take account of the new requirements of the second Shareholder Rights Directive (ARUG II) and the new version of the German Corporate Governance Code. The most important innovation is that a maximum remuneration for each member of the Board of Management of six million euros per fiscal year has now been fixed.

The variable remuneration of the Management Board depends 70 percent on the achievement of the Group’s goals and 30 percent on the development of the department for which the respective Management Board member is responsible. In addition, individual goals have an impact on the amount of bonus payments.

When calculating the variable remuneration for 2019, the development of the bank and the respective department in 2017, 2018 and 2019 is taken into account. Glass Lewis criticizes this approach as backward and advocates “forward-looking” goals. However, this would have the consequence that Commerzbank could not set the bonus payments for 2019 until 2021 – and that the actual payment to the Management Board would then be postponed even further.

Voting rights advisers also take a critical view of the fact that the expectations of the Management Board are not described clearly enough. The performance goals are “only presented in a descriptive manner, but not clearly disclosed,” complains Ivox. As a result, it is not understandable for shareholders whether the goals for the Management Board are ambitious enough, emphasizes Glass Lewis.

Strictly speaking, these comments do not refer to the remuneration system, but to the remuneration report, which the Annual General Meeting does not vote on this year. Nevertheless, there are employees within Commerzbank who find this criticism justified. According to financial circles, the goals for the Executive Board in the 2020 financial year have therefore already been formulated more specifically.

It is of course another matter whether there will be any significant bonus payments in view of the Corona crisis 2020. In addition, the payment of Commerzbank management is generally rather below average compared to other institutions. In the past year, the total remuneration of the Management Board amounted to EUR 12.1 million. At the neighbourhouse Deutsche Bank the executive committee received almost three times as much despite a loss of billions.

Assistance: Jakob Blume

More: Bank President Zielke: “Must review Corona business model”

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Million dollar bonuses for Goldman bankers drive shareholder advisors onto the barricades

Boston, New York The influential voting rights advisor ISS stands against the millions of bonuses for Goldman Sachs boss David Solomon and other top managers of the bank. Goldman Sachs ISS increased the bonus for CEO Solomon sharply, although some important key figures would have deteriorated in 2019 compared to the previous year, ISS criticized in a Reuters report on the night of Friday.

Solomon earned nearly $ 25 million in 2019. ISS recommended that shareholders vote against the salary package at the Annual General Meeting next Thursday. The shareholders’ vote is only of an advisory nature and is therefore not binding. Many funds and large investors follow the recommendations of voting rights advisers such as ISS and Glass Lewis.

Solomon succeeded Lloyd Blankfein at the top of Goldman Sachs in October 2018 and was able to look forward to a substantial salary increase in 2019. He collected a total of $ 24.7 million, of which 7.65 million were bonus payments. Solomon thus received 19 percent more money than in the previous year, although the investment bank’s profit plummeted 19 percent to $ 8.47 billion.

However, the highest-paid US banker remained long-time JP Morgan boss Jamie Dimon in 2019, who received $ 31.5 million after a record profit from the bank – 1.6 percent more than in the previous year.

A Goldman Sachs spokesman defended the salaries for top managers around Solomon. Goldman rewards long-term growth and does not place undue emphasis on short-term results. Income for 2019 reflected the significant long-term success of the top management.

More: How the corona crisis will weigh on US banks’ businesses.

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Asset managers: climate protection remains a top issue

Investors are increasing their pressure on companies to develop a sustainable strategy. The corona crisis must not be an excuse to ease in the effort. .

Hering Schuppener recruits the head of the ISS voting rights advisor

Thomas von Oehsen

The qualified lawyer knows the pitfalls of investor support.

Cologne Hering Schuppener has hired another capital market expert for his advisory team. In April, Thomas von Oehsen moved as Managing Director to the Berlin location of the German communications consultancy, as was announced on Monday. Most recently, he was head of the Germany, Switzerland and Austria region at the US proxy adviser ISS.

“Thomas von Oehsen has an extremely valuable wealth of experience from which our listed clients can benefit,” commented Hering-Schuppener partner Alexander Geiser. “Especially in volatile times, it is crucial to optimally meet the expectations of the stakeholders.”

Voting advisors such as ISS or Glass Lewis support investors in the decision-making process for voting at general meetings of listed companies. They are often considered unpopular with managers, but their influence has increased significantly in recent years. With von Oehsen, Hering Schuppener now has an expert in this area who is to support customers in preparing for the growing influence of their shareholders.

“After having been a critical companion of listed companies for a long time in the sense of the voices entrusted to me, I am now looking forward to being an active designer to better align companies with their requirements,” explains von Oehsen. He sees a much more important role of corporate communication for large investors than in the past.

Von Oehsen told Handelsblatt that 15 years ago investors were often satisfied with having received sufficient information about the course of business. A lot has changed since then. “Investors are increasingly demanding a dialogue with the company management.” The management and increasingly also the supervisory board would have to prepare for an intensive dialogue with all relevant stakeholder groups, especially in view of increasing regulatory requirements and a possible economic downturn.

Preparation for activist investors

The care of shareholders is becoming increasingly relevant for many German groups. Like the previous general meetings, such as the German bank or the industrial group Thyssen-Krupp showed that the influence of so-called activist investors is growing. These often target management weaknesses in order to assert their own interests, right up to the division of entire groups.

“Companies must not wait until activist investors are at the door, but must proactively prepare for the dialogue,” explains von Oehsen, among other things by setting up and communicating a convincing corporate strategy.

According to Hering Schuppener, the corona crisis could also give activist investors a new boost. For example, do companies have to postpone their general meeting due to the virus, as is now happening at Deutsche Telekom, or does the share price suffer from the volatile situation, be it all the more important to take critical investors along with the management? Otherwise there is a risk of resentment among investors or even legal trouble.

From April, Hering Schuppeners will help von Oehsen to convincingly explain their strategies in the areas of sustainability and good corporate governance. The consulting business is no stranger to Oehsen, who studied law at the Free University of Berlin. Before joining ISS, he advised clients with his own consulting firm. The 47-year-old began his career in the automotive manufacturer’s financial services division Daimler.

More: The US exchange regulator wants to break the power of the voting right advisers.

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