Deutsche Bank Case Study: How CGLytics Tools Inform Glass Lewis’ Pay and Governance Analysis

Silvia Gatti is a Senior Research Analyst—Dach Region at Glass, Lewis & Co. This post is based on her Glass Lewis memorandum. Related research from the Program on Corporate Governance includes Regulating Bankers’ Pay by Lucian Bebchuk and Holger Spamann (discussed on the Forum here).

In the following case study, we describe how CGLytics’ analytical tools informed Glass Lewis’ review of Deutsche Bank ahead of the 2019 AGM.

Overview of DBK

Annual Say-on-Pay won’t be mandatory in Germany until SRD II is implemented, allowing Deutsche Bank to omit any remuneration-related votes from its 2019 AGM agenda; the multinational last sought shareholder approval of its remuneration policy in 2017. Nonetheless, for large cap companies Glass Lewis provides a remuneration analysis comprising CGLytics graphs and tables and a write-up to summarise any material issues. Even when there is no proposal focused solely on remuneration, this analysis informs our assessment of overall governance practices and the performance of the board, its committees and directors. Beyond the Proxy Paper report and voting recommendations, the analysis helps us to shape our engagement agenda and identify areas for further research.

Deutsche Bank’s KPIs have been consistently negative in the past years due to a number of legal disputes and organisational issues. In 2017, the Bank posted its third consecutive loss. Awards for those three years would have partially vested, mostly due to the achievement of the CET1 capital ratio and relative TSR targets. However, the management board decided to waive all variable remuneration payments and grants for fiscal years 2015 to 2017, in order to demonstrate that shareholders’ experience was reflected in the pay of top executives.

In 2018, the Bank reported its first consolidated net profit since 2014 and resumed the payment and grant of short- and long-term awards to management board members.

Overview of CGLytics Remuneration Analysis

CGLytics’ relative indicators confirmed that the company’s performance was below peers, while payouts were above. Moreover, the analysis raised concerns about an excessive use of upward discretion and costs related to executive turnover.

Using CGLytics’ data, our analysis showed a poor alignment between pay and performance during an ongoing period of subpar results. In recent years, the management board’s waiver of variable remuneration had demonstrated a good appreciation of shareholders’ concerns—but a return to profitability in 2018 prompted an immediate return to the payment of incentives which appeared excessive and premature. While we acknowledged an improvement in performance, CGLytics showed that Deutsche’s EPS, ROA and ROE were still negative and below peers. Similarly, CGLytics’ analysis of relative TSR and realised pay showed a disconnect between above-median CEO costs and shareholder returns that remained significantly below peers.

The awards granted last year aren’t reflected in the charts below due to their deferral structure—nonetheless, CEO remuneration was still higher than that of German and European peers, highlighting quantum concerns and a wider issue of executive succession planning and turnover costs. Last year, departed Deutsche executives, many of whom presided over a period of underperformance, received over €7 million in immediate non-compete payments, with additional severance payments totalling millions to be paid in tranches over the next few years.

Glass Lewis Perspective

The context for this quantitative analysis centred on Deutsche’s role as a multinational bank. In the case of large financial institutions , we recognise that the use of US and international peers is—to a certain extent—reasonable. In addition, we recognise that banks subject to CRD IV must cap variable pay at 200% of fixed, which tends to inflate fixed pay levels. We also noted that 2018 awards were subject to extensive deferral requirements.

On balance, while cognisant of the competitive marketplace, we remained concerned by salary levels—and moreover by the high cost of severance, with some payments set to continue for years to come, along with the level of variable pay awarded given shareholder returns.


Deutsche didn’t have any remuneration-specific proposals on its AGM agenda in 2019. Nonetheless, the executive pay, succession planning and broader governance issues raised by CGLytics’ analysis contributed to our overall assessment of the company’s governance, and our recommendation that shareholders vote against the ratification of supervisory board acts.

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