Compensation practices and structures

Deutsche Bank is adopting a leadership role on cultural change within the industry, and has revised its compensation practices accordingly. We now direct greater attention toward the behavior of our employees – regardless of their position – and reward a long-term and sustainable focus, customer orientation and team work.

We expect our people to achieve their objectives in a manner that guarantees sustainable success and is in line with the values of the bank.

Our remuneration model consists of a basic salary and a performance-based component. At the end of 2012, the proportion of the variable remuneration component was reduced following in-depth dialog with our staff in connection with culture change. The variable component now stands at half the pre-crisis level. The compliance with our values and beliefs had a 50% impact on our variable compensation and promotion decisions in 2014.

Bonus payments for senior management are geared to the sustainability of success and are paid over several years in the form of deferred remuneration. At the highest management level, the deferral period for bonus payments has been extended. Instead of the previous graduated payments over a period of three years, in future a one-time payment will be paid only after five years in order to link the remuneration more closely to the long-term success of the Bank. The system also foresees the addition of penalty provisions or clawbacks to our compensation practices.

Aligning compensation with sustainable performance

In implementing these measures, we followed the recommendations of our external remuneration committee, which was set up specifically for supervising purposes. In addition, the committee, chaired by Jürgen Hambrecht, the former CEO of BASF, made a number of suggestions that have largely been implemented. For example, we have improved the transparency of remuneration and completely eliminated multi-year bonus guarantees.

We incorporated our cultural principles and involved risk management functions more closely in the remuneration process. We also ensured a better balance between employee compensation, distribution of dividends and retention of earnings, i.e. plowing profit back into the company.

Finally, one important measure is strengthening of our internal controls, which means that the latitude for unacceptable behaviour has been significantly reduced. Our current control system differs fundamentally from the system in force prior to the crisis. The objective is to transform our risk culture and ensure that concern for the Bank's reputation is always at the heart of our decision-making.

The Panel´s findings, published in 2013, noted that "governance processes around the bank´s compensation structure, decision-making and related disclosures are of a high standard."

Current developments

Vergütungsstrukturen bei der Deutschen Bank

“Fun­da­men­tal change needed to start with us. So we did what we felt was natural: we led by example. Our top 150 leaders, in­clu­ding our­selves, be­came sub­ject to a new ves­ting period of deferred com­pen­sation – ex­ten­ding it from three to five years.”

Jürgen Fitschen Co-Chairman of the Management Board, in February 2014

Major changes the new compensation system for Management Board members involves compared with the previous system.

In the past, the two variable compensation components were determined almost exclusively on the basis of financial key figures. The new system reflects a much stronger alignment to Deutsche Bank's strategic and business policy objectives, its values, and – very importantly – client satisfaction and the bank's reputation.

In this connection, the performance criteria for the two variable components have been broadened to take account of the wide-ranging goals and challenges that company managers face and to ensure that compensation is well balanced and strongly aligned to a sustainable development.

This includes a stronger focus on qualitative aspects so that compensation is not just linked to financial targets but also a reflection of "how" performance is achieved.
The revised shareholding guidelines round off the picture by requiring Management Board members to hold a certain number of Deutsche Bank shares or share awards. This fosters their long term identification with the bank and ensures that they act in the shareholders' interests.

The aim of the new compensation system was to implement structural changes to the previous system. By creating a stronger alignment to the bank’s strategic and business policy objectives and broadening the performance criteria, it can react very sensitively to the progress made in achieving the objectives. This ensures that compensation is well balanced and sustainable over the long term.

Furthermore, an upper limit for total compensation was introduced for 2013 that is well below the maximum total compensation formerly possible for the Co-Chairmen of the Management Board.

The new compensation system against the backdrop of the European Union’s regulatory changes

Based on the Capital Requirements Directive (CRD 4) the European Union has implemented new regulatory requirements, which are specified at German national level on the basis of the CRD 4-Implementation Act which changes respectively the German Banking Act (´Kreditwesengsetz´) as well as the revised version of the Institutional Remuneration Regulation (InstVV). Among other things, an upper limit of the proportion of variable compensation components in relation to the fixed compensation was implemented. According to this regulation the variable compensation of credit institutions´ management body members and employees must not in principle exceed 100 % of the fixed compensation (= relation 1:1). A higher limit for the variable compensation up to 200% of the fixed compensation (= relation 1:2) can be approved by the Annual General Meeting (AGM). On 22 May 2014, the Annual General Meeting approved the respective increase of the upper limit for the variable compensation for the members of the Management Board, the employees and the management body members of subsidiaries. Following the approval of the Annual General Meeting, the compensation structures for the members of the Management Board, the employees and the management body members of subsidiaries were reviewed and adapted to the regulatory requirements.

Values are key

50 % of

of our variable pay and promotion decisions in 2014 are comprised of adherence to our values and beliefs.

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