It’s taken a few years, but the revolt against extractive pay in banking is getting traction.
The UK fund manager Hermes* is leading a charge against the pillar of the German establishment, Deutsche Bank, over compensation and succession planning. Hermes, which is leading 27 funds that hold only 0.5% of the votes, is urging other shareholders to vote no on the annual resolution approving the supervisory board’s performance for the past year. A bit of background per the Financial Times:
The investor group is particularly angry that Europe’s largest bank by assets did not give shareholders the opportunity to vote on its remuneration report for last year. The bank’s move followed a rejection by 42 per cent of shareholders of the pay system the year before, the second worst voting result on such a matter in the German blue-chip Dax index. The bank has put the vote on executive pay back on to the agenda for the AGM.
Now this might seem as if this measure is getting headlines by virtue of coming right after the shareholder rejection of Vikram Pandit’s $15 million pay package, but the Hermes move is significant in its own right. The UK investor has made itself a force to be reckoned with in Germany, having launched a proxy fight against Dax 30 company Infineon.
The Hermes move raises a broader question about US investor complacency. We’ve commented repeatedly on how mortgage bond investors are standing pat as the mortgage settlement explicitly will reverse the established creditor hierarchy and impose losses on first mortgage investors when second mortgages should be wiped out before that happens. Of course, the problem is that these “investors” are really agents, and can’t be bothered to expend the energy to fight for their clients.
Even though some major institutional investors, most notably Calpers, have take up the interventionist role in the US, they’ve become much tamer in recent years, perhaps because creeping corpocracy has become accepted as normal. The success of a firm like Hermes in punching above its weight should give US activists pause. There’s a lot of looting going on, and it might behoove them to take note of it.
* Hermes is also a firm of good taste, since it supported NC in our fundraiser.