Governance in Brief
July 11, 2019 | Editor: Martin Wennerström
Deutsche Bank overhauls operations
On July 7, German lender Deutsche Bank announced that it will reduce its workforce by around 18,000 employees by 2022, with its London and New York investment banking operations being particularly impacted. In an effort to restore its profitability, and following stalled merger talks with Commerzbank, CEO Christian Sewing has announced a far-reaching restructuring plan. The plan, which represents an initial outlay of around USD 8.3 billion over three years, aims to reduce total future costs by 25%.
The bank is also reshuffling its management board, with three departures (head of corporate and investment bank Garth Ritchie, as well as Sylvie Matherat and Frank Strauß) and as many new appointments (Christiana Riley, Bernd Leukert and Stefan Simon). Ritchie was at the center of several pay controversies in 2018, as he received a total compensation of around USD 9.5 million, mainly through USD 280,000 in monthly allowances. His discharge was opposed by 39% of votes cast at the 2019 AGM. Deutsche will also establish a new “Group Management Committee” consisting of the statutory management board and the operative business division heads. Deutsche share price was down by 5% on Monday, following the overhaul announcement.
Activist investors win proxy battle against EQT
It is now clear that Toby and Derek Rice will take over the board of US natural gas producer EQT Corp. following a proxy battle that culminated in the company’s July 9, 2019 AGM. The Rice brothers, who sold their company to EQT in 2017, and who now hold a 3% stake in the gas producer, had launched a proxy fight against EQT and proposed a slate of seven directors for the 12-seat board. All seven nominees were elected with more than 80% shareholder support. The new board held its first meeting on July 10, where it appointed Toby Rice as CEO and John McCartney as Chairman.
Prior to the AGM, the company’s largest shareholder T. Rowe Price Group Inc. (10% stake) and other investors announced their support for the alternative nominees. Proxy advisory firm ISS recommended a vote for the activist shareholders, while Glass Lewis’ recommendation was against the Rice brothers.
Serco Group division fined USD 24 million for misconduct
Serco Geografix (SGL), a division of the UK government contractor Serco Group, has been fined USD 24 million in a probe led by the Serious Fraud Office (SFO) over allegations of profit overstatement on a Ministry of Justice (MoJ) electronic monitoring contract, between 2010 and 2013.
The company had already compensated the MoJ, as part of a 2013 GBP 70 million settlement. Individuals linked to the tagging scandal are, however, subject to a separate criminal investigation. The group’s auditor Deloitte has been fined USD 5.3 million by the UK accounting watchdog the Financial Reporting Council (FRC) for audit failures in the same scandal.
Santander faces a lawsuit over canceled CEO job offer
Spain-based retail and commercial bank Banco Santander SA is reportedly being sued for USD 113 million by UBS’ former head of investment banking Andrea Orcel, after the company revoked his appointment to the CEO position in January 2019.
In September 2018, the bank announced that Orcel will take over the CEO role, only to withdraw the offer few months later, as the banker’s compensation for foregone remuneration was deemed excessive. Currently, Santander’s chief executive position is filled by José Antonio Álvarez, who also acts as vice chairman of the board. The company states that Chairman Ana Botín is responsible for the succession planning of the CEO role, yet no relevant disclosure on actual enforcement is provided.