Hermes unit voices concern over possible Deutsche move

One of Europe’s largest institutional asset managers is potentially set to collide with Germany’s largest bank, by re-asserting its firm belief chief executives should not become chairmen in Germany’s two-tier board system.

The expectation was voiced today in an update of governance standards promulgated by the equity ownership service of $23bn institutional manager Hermes.

It encourages German companies to follow this standard, involving the management and supervisory board structure.

Hermes EOS, established in 2004 to help clients be active share owners, said it “recognises the value that former executives can bring to the work of the supervisory board”. But it stood firm on the issue CEOs should not aim for chairman of their companies’ supervisory boards .

This could affect Deutsche Bank, whose current CEO, Josef Ackermann, is expected to seek election to the bank’s supervisory board, with possible view to become its chairman.

Hans-Christoph Hirt (pictured above), Hermes EOS director, said his unit had yet to decide how to guide voting for his clients. His decisions generally carry weight, as the Hermes unit advises clients on about €100bn assets.

However, Hirt hinted Hermes EOS may make an exception to its general rule this time: “We may in exceptional circumstances consider supporting the election of suitable and successful executives to the supervisory board.

“Supervisory board nominations and elections are the next big topic on investors’ agendas. We think it is crucial to involve shareholders in an appropriate way in the nomination process, which has not been the practice in the past. The members of the supervisory board are, after all, the shareholder representatives in the company. Hermes EOS is holding discussions with a number of major Dax companies on this particular issue.”

Hermes EOS also encourages companies to involve shareholders in other key corporate decisions, such as large M&A, and particularly decisions over corporate governance including nominating candidates for supervisory board election, and executive remuneration.

Hirt said there was “better dialogue between companies and investors” in recent years regarding issues of pay.

“While, we do not think that there has to be a vote on remuneration every year, we want companies to give shareholders the opportunity to vote on it again, when there was a significant number of votes against in the previous year,” he added.

 

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