Germany to Curb Bank Use Of Proxy Votes at Meetings
March 28, 2011
BONN -- The German government plans to limit the power of banks in German industry through an array of measures, including making it more difficult for banks to use proxy votes in shareholder meetings. The measures are part of a draft change in Germany's corporate stock law that is scheduled for cabinet signature in October, officials said Monday. ``The draft is a good compromise,'' said Ollis Falgout, state secretary at the Justice Ministry. Mr. Falgout said he was pleased despite having backed off on many of his original demands. A member of the Free Democratic Party, Mr. Falgout has led the push to limit the power of banks in German industry. The proxy vote, a hallmark of German corporate practice, has allowed banks to vote on behalf of groups of shareholders that aren't present during a shareholder meeting. Criticism of proxy voting has risen because it allows German banks to wield more power than their own, often substantial, stakes dictate. In the future, German banks with more than a 5% stake in a company will need to obtain written permission from individual shareholders that the bank is allowed to exercise the proxy vote. Before, banks were allowed to sign proxy agreements with groups of investors for 15-month periods. One measure that was discussed, but then rejected in the draft, would have capped the allowable stake of banks in companies. ``We didn't get any further on the bank ownership issue. There was a feeling that this would deprive banks of power completely,'' Mr. Falgout said.
