Buhlmann's Corner

The German Federal Republic is still a better shareholder, and it shows

April 30 – the meeting of the shareholders of Commerzbank, the bank that “from Lehman onwards” hasn’t paid out a cent in dividends but has instead requested ten or so (depending on which brand of arithmetic you use) share capital increases. The State of Germany, currently owner of 17% of the bank, was invited to the meeting just like every other shareholder..

So the state sent its representative to Frankfurt. No faceless bureaucrat nor, by contrast to previous occasions did it delegate the company to vote for it by proxy. A week before the AGM, the media usually has a fairly clear idea as to how the voting will go. After the votes on item 9 on the agenda had been counted, it was obvious that the German Federal Republic had said “no”.

The fact that the point at issue was an increase in bonuses for bank employees, and the exploitation of an opting out provided by law (The decision shall be approved by a majority of at least 66% of the votes submitted, provided that at least 50% of the voting rights are represented when the decision is taken, or by a majority of at least 75% of the votes submitted.) is of little importance just as of little importance was the bank’s nota bene “we’re asking for your blessing but just so’s you know if we don’t get it we’ll go ahead regardless“. In the event, the motion was denied by 64.6% of votes and 45.5% of voting rights present.

So how does that make the State of Germany a better shareholder? Because it’s there, it shows its face, it takes the items on the agenda and the votes seriously, because it put a lot of thought into its votes beforehand, and it checked to see if and how its votes had reached the ballot box. And that is the heart of the issue Who ever checks to see if his/her votes were counted?

There is no shortage of examples:

Last year, an important MDax-listed group with a vast shareholding had to make do with a 19% presence of voting rights..

In IBEX 35 we have witnessed the mathematical impossibility of the presence of voting rights in excess of 100%. Unfortunately, though the attendance fees promised didn’t quite trickle down to the bank account of the shareholder, who still has no way of knowing or finding out about his voting rights .

A resolution passed by the AGM of another company was erroneous because the representative of several percent of voting rights had unwittingly cast his votes wrongly.

Two years ago an MDax listed company found its ballot box mistakenly bereft of three quarters of the votes that had been sent in

In one Finnish Euro-listed company, voting is by acclamation.

I can remember one instance of thirty years ago when the decision to salvage a company failed because the bank’s representative mistakenly voted one way instead of another and the company went bankrupt shortly after..

My belief is that the German State is a better shareholder because it is more conscientious about managing third parties’ money and because its sponsor – the German taxpayer – could bring it to book to face its responsibilities.

But shouldn’t ETFs (exchange trading funds), institutional investors and pension funds be concerned about this too?