The upcoming AGM of Deutsche Bank AG is looming large in many shareholders minds now. With the long running succession planning debate at the company leading some proxy advisors to publicly recommend opposition to ratification of the supervisory board acts, combined with countermotions tabled for director elections, there's plenty for shareholders to consider.

The ability to propose countermotions is of course a vital tool in the German shareholder action toolbox. Not only does it get an item out in the open by getting it on the meeting agenda (quite literally), it also gives other shareholders the opportunity to voice their support for you as well. At least, that's what should happen.

Unfortunately, foreign shareholders who can't get to the meeting in person are effectively being disenfranchised next week . Shareholder countermotions are in fact much harder to vote on through the complex 'chain of intermediaries' voting system. Why? Well, because one of the intermediaries (the dominant voting platform that most global custodians force their customers to have their votes processed by) - how do we put this? -  simply doesn't process them. In their own words “Counter proposals cannot be reflected in the ballot”*.

The net result is that German sub-custodian banks end up with an instruction to vote the shares on most resolutions without an instruction as to which way to vote them on countermotions. In the absence of the ability to get explicit instructions through, we can be far from sure that shareholders who wish to support the countermotions will be able to prevent their sub custodians from voting their shares in favour of management.

Shareholders therefore have a difficult choice when there are counter motions on the agenda. One is to arrange to have a representative physically at the meeting; a highly (prohibitively) costly proposition. The other is to choose to not vote at all at the meeting. At least that way management doesn't get inadvertently supported.  

This is a cast iron example of the cross-border voting system being unfit for purpose, and is one of the myriad reasons why Manifest continues to call upon the EU to intervene to ensure the unbundling of voting services from custodians. Then shareholders could choose a voting method that can accommodate instructions for countermotions.

Currently, shareholders are denied this choice by their custodians who simply insist that there's no problem with the current system. Shareholders who might like to support the countermotions at Deutsche Bank would understandably beg to differ. They therefore have a difficult choice when counter motions are on the agenda. One is to arrange to have a representative physically at the meeting; a highly (prohibitively) costly proposition. The other is to choose to not vote at all at the meeting. At least that way management doesn't get inadvertently supported through a system which is effectively akin to the US broker discretionary votes situation, now thankfully resolved.

 *Perhaps we should be grateful for small mercies - at least this meeting is one that intermediaries are actually processing some votes for. Sometimes they simply tell their clients "we're not processing votes for that meeting (because the issuer hasn't paid us to)".