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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

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Buhlmann's Corner

A cautionary word to the Supervisory Board: ... and yet it moves

24.8% of the votes refuse discharge to the Deutsche Bank Supervisory Board, because it has not done its duty in recent years, and also to stop that happening in the future under new management. The unknown mass of (registered) shareholders moves after all, then, as in the times of Galileo Galilei (“Eppur si muove”). Just like back then – when Pope Urban VIII’s Inquisition denied the Copernican model – the bank’s leadership denied that 25% of shareholders could be brought together for the continuity of the bank.

Yet move they did: located between zero and 50%, the 22.3% Noes and 2.5% abstentions were the exactly right amount of “slap in the face” to get a board of respected personalities, albeit with difficulty, to discourage its chairman Clemens Börsig from worse. The Chairman was guilty, but the members maintain solidarity with the guilt through their successful action.

Of course it would have broken principles of corporate governance if Josef Ackermann – who couldn’t (or didn’t want to) find the 25% of shareholders – had moved from chief executive to chief supervisor. But continuity in the management of a global service provider is a value in itself, even more so than in industry. In addition, one need not be a “Baron” or be looking for a “bunch” of arguments to note that Josef Ackermann belongs to the Deutsche Bank just as Herrmann Josef Abs and Alfred Herrhausen did – Abs Herrhausen Ackermann: AHA!

Ackermann was clearly a communicative meltdown – but he has brought the bank back to greatness as an investment bank, stopped it becoming the German state bank and re-installed the retail sector. At market price, he has goofed – but now he has a second chance, namely by buying Deutsche Bank shares in his new role as Chairman of ZFS until the price gets back to €118. The Bank and its employees are worth it, and the new head has every chance.

A quarter of the shareholders refused discharge, and yet they were only 25% of those present, but a weak 9% of the issued shares. In Germany, Hermes and VIP were alone in their views: only IVOX followed the negative recommendation in the voting, while one shareholder association misinterpreted the counter-motion as a vote against the Board, and another – to the surprise of their own organization – recommended abstaining. Internationally, Glass Lewis (GL) and Institutional Shareholder Services (ISS) followed our argument, but while GL consistently put the vote on 2011 as No, the ISS found the spin that Yes (focus) was better because in the new year everything was going better (or would).

However difficult discharge and non-discharge are to understand and evaluate cross- culturally, VIP sincerely thanks the 90,409,200 votes that followed our motion and the HERMES one – those voices at the same time strengthen the new chairman Paul Michael Achleitner and wish him and us that shareholders never again have to hear their governing bodies say “we didn’t know.” The shareholders have given him and the double-headed board their confidence – now they may harmoniously sound the triangle. “All good things come in threes,” says the proverb.1

The motion against the Deutsche Bank Supervisory Board was preceded by the following counter-motions:

Deutsche Lufthansa (2003, 61% non-discharge for the deputy chairman of the Supervisory Board due to personal conflict of interest)
Südzucker (2006, opt-out although in the MDAX)
ThyssenKrupp (2007, 24.9% against charter amendment)
IKB (2007, against the management, which ran manfully into bankruptcy)
Infineon (2010, 56 and 27%. But the Supervisory Board chairman changed in 2011 after all)
RWE (2011, 30% against disproportional election to the Supervisory Board)
Deutsche Bank (2012)

2013 is the season of the German Supervisory Board elections – let us hope that is not surprisingly discovered two weeks before them that nine months’ dispensation for good candidates and structures are needed – as with the construction of the main airport in Berlin....

1 Etymological note: Thing, German Ding: Germanic folk and court meetings. The saying refers to the importance of the number three in the Germanic/medieval legal system. Three times a year, a court (Thing) was held. A defendant had to be convoked three times before he was then sentenced in absentia.

From http://de.wiktionary.org/wiki/Aller_guten_Dinge_sind_drei