Deutsche Bank continues to improve its compensation structure by extending the reach of its “clawback” provisions for senior staff.
In a move reported by the Financial Times, the lender adjusted its bonus rules to extend its “clawback” provisions to include unvested Deutsche Bank shares that newly hired senior staff received in exchange for unvested shares earned at previous employers.
The reported provision is more accurately described as a “malus” provision rather than a “clawback” provision. Under malus provisions, portions of deferred awards (rather than awards that have already been paid out) can be forfeited based on individual misconduct or negative company results.
The reported tweak comes on the heels of a successful reception of the company’s compensation policy at the annual general meeting, where it garnered support of 94% of shareholders. This year, Deutsche Bank improved disclosure by providing shareholders with disclosed target payouts, maximum payouts and performance hurdles under its two incentive plans.
The high level of shareholder support as well as the update of bonus provisions is set against the backdrop of compensation-related missteps in the previous two years. In 2010, 42% of shareholders voted against the company’s proposed compensation policy. Following the dismal showing, a year later, the company inexplicably left the issue of say on pay entirely off of the AGM agenda.
This year, however, Glass Lewis recognized increased disclosure as a tremendously positive development given that shareholders could more effectively gauge to what extent pay is tied to the Bank’s performance over the short-term as well as the long-term.
We look forward to seeing how other financial institutions react to this news and how it will affect the discourse on executive compensation globally.