Defeat for Aareal Bank

Shareholder Petrus prevails at the general meeting with his criticism of the management board remuneration. The chairwoman of the supervisory board does not always cut a good figure. Marija Korsch can, however, maintain her position.

The headquarters of Aareal Bank in Wiesbaden

Mith an abundance of questions about travel expenses for flights and company cars and, above all, the salaries, bonuses and pensions of the Management Board, shareholders of Aareal Bank have kept the Management Board and Supervisory Board in suspense. After more than five and a half hours of virtual general meeting, the supervisory board, with its chairwoman Marija Korsch, suffered a defeat on Tuesday. Only 37 percent of the shareholders voted in favor of the Executive Board remuneration system decided by the Supervisory Board. But the hedge fund Petrus Advisers, which is one of the two largest owners of Aareal with 9.6 percent of the shares, was actually interested in more.

Together with the Swiss asset manager Teleios, to which around 7 percent of Aareal shares are attributed, Petrus wanted to vote out three of eight supervisory boards on the capital side, including chairwoman Marija Korsch. With three new supervisory boards instead, Petrus then wanted to force the management board to change its strategy and implement the complete sale of the Aareon IT division. But the deselection of the three supervisory board members Korsch, Christof von Dryander and Dietrich Voigtländer, who are responsible for the high salaries of Petrus, failed. Of the 55 percent of the share capital that took part in the vote, 69 percent of Korsch expressed their confidence.

Deka supports criticism

Petrus’ criticism of the management board remuneration system has caught on with other shareholders. The savings bank fund company Deka Investment, which owns a similar number of Aareal shares, considers the “remuneration to be inadequate compared to the industry”. For 2020, the six Aareal board members received a fixed salary of 5.9 million euros and a variable amount of 3.7 million euros (“bonuses”) – even though the bank made an annual loss for the first time since 2005 and the share due to the poor performance of the M-Dax in the S-Dax descended.

AAREAL BANK

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  • 1T
  • 1W
  • 3M
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  • 5J

To the detailed view

As Korsch explained, the board nevertheless achieved 70 percent of the goals it had set in 2020. The variable remuneration also included a 20 percent factor (“modifier”) that was intended for the deterioration in economic prospects for which the Management Board was not responsible. The corona pandemic is such an exception, argued Korsch. In addition, she explained that the bonuses for 2020 will not only be given to the board for its performance in the one year. Rather, target achievement over the past three years is included in the bonuses. Aareal Bank wants to reward the Board of Management based on long-term corporate success. Representatives of Petrus, on the other hand, criticized that each board member of Aareals could earn up to 5.5 million euros a year.

Korsch replied that it was a theoretical case. The appropriateness of the remuneration is ensured by a comparison with similar companies from the Dax, M-Dax and S-Dax (“peer group”). Korsch did not disclose who the comparison companies are. However, she named the auditor HKP as an external remuneration advisor, who supported the supervisory board and confirmed the appropriateness of the executive board’s salaries. Petrus, on the other hand, had extensively argued that Aareal pays the highest management board salaries of all banks – for example in comparison with main rival Deutsche Pfandbriefbank.

Korsch also said she had discussed the board compensation system with all relevant shareholders prior to the introduction. The chairwoman of the supervisory board did not answer the question of which shareholders approved it. After the remuneration system was rejected by a clear majority at the Annual General Meeting on Tuesday, Korsch has now announced a modified proposal, which the shareholders should vote on at the next Annual General Meeting in 2022 at the latest.

Looking for a new boss

Then there will also be a new CEO. Hermann Merkens left his post in November due to a serious illness, but it is now clear that he will not be coming back. The search for a new CEO among internal and external candidates is at an advanced stage and is being pushed ahead with high pressure, but also with the necessary care, said Korsch.