Flatout at flatex? Demands for leadership change at June’s Virtual AGM

May 17th, 2024

A high-stakes shareholder fight has broken out at Germany’s fintech brokerage flatexDEGIRO AG. After a flurry of senior management changes, twenty percent shareholder, GfBk Gesellschaft für Börsenkommunikation mbH (GfBk) is demanding the removal of supervisory board chair Martin Kombacher at the conclusion of the virtual AGM scheduled for June 4, 2024.

GfBk’s concerns, focused on alleged failures of governance, control, risk management and boardroom remuneration, follow on from a recent flurry of management change at the top of the firm. On 30^th April 2024, the company announced the departure of CEO Frank Niehege on the grounds of: “differing views on the strategic development and for the benefit of the company." What exactly those differing views are have yet to be explained to shareholders, however.

Earlier this month (3^rd May) Herbert Sueling, a member of the flatexDEGIRO supervisory board resigned for "personal reasons" with effect from the end of the company's upcoming AGM. Sueling is also a member of the advisory board of Heliad AG, a Germany-based investment company focusing on the fintech sector. Its founder and majority shareholder is GfBK's Managing Director, Bernd Förtsch. GfBK is proposing that Förtsch be elected as a member of the supervisory board with effect from the end of the virtual AGM.

GfBK argues that flatexDEGIRO is suffering a failure of leadership and management oversight by the supervisory board led by Kormbacher. Concerns are centred around the review and monitoring of the accounting, control, and risk management systems with "instances of questionable governance practices under the current chairman's leadership, leading to concerns about transparency, independence and accountability." GfBK makes further allegations of "violations around ad-hoc publications" and describes the remuneration and incentive system as "concerning", questioning both the reliability of the 2023 remuneration report, and the transparency of the remuneration system.

GfBK goes on to state that "the failure to address previous, significant shareholder dissent" and the intention to renew contracts with chief officers just a few days before the virtual AGM should "alarm shareholders."

In demands for change on both leadership and operations, GfBK is proposing that Axel Hörger, a management consultant, be elected in Kombacher's place "for the period until the end of the AGM that resolves on the discharge of the newly elected supervisory board member independent of GfBk."

In a response intended for the June AGM, tucked away on the IR pages, flatexDEGIRO AG has denied the allegation. In the statement Korbmacher asserts that: "An incomplete picture of the facts is being painted.” The allegations are, he believes: "unsubstantiated, factually incorrect or taken out of context” adding that “GfBk draws an incomplete and completely distorted picture of the supervisory activities of the Supervisory Board and its Chairman."

flatexDEGIRO is, however, not denying there have been problems. The statement also refers to the special audit that was undertaken by the German Federal Financial Supervisory Authority (BaFin) in 2022, saying that "measures were taken by flatexDEGIRO without delay to eliminate the identified deficiencies." It has also given details of its current Remuneration Report, and a revised remuneration system for the management board which it will be presenting at the AGM.

However, while the flatexDEGIRO AG response to GfKB’s allegations from runs to seven pages, it is notable that it has not addressed the allegations of "underperformance". GfBK argues that "despite promising initiatives, the company's performance has consistently fallen short of expectations under the current leadership. This impacted shareholder returns, especially when comparing to its peers and the industry, which we believe needs to change."

Given the seriousness of the allegations, it’s surprising that the company is taking the virtual AGM route rather than face the dissidents in person. Perhaps Germany’s position as the second most targeted geography for investor activism in Europe is one of the drivers for that decision. However, two weeks is a long time in AGM season, so there is still time for more exchanges from flatexDEGIRO and GfBK.

Author: Dina Medland

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.