(Bloomberg) -- Deutsche Bank AG’s next challenge after the breakdown of merger talks with Commerzbank AG may be its own angry shareholders.

ISS and Glass Lewis -- the world’s biggest shareholder advisory firms -- are recommending investors vote against backing Deutsche Bank’s management and supervisory board at its annual general meeting on May 23. The firms pointed to the shares, which lost about 40 percent over the past year, as well as the bank’s continued legal and business challenges.

A decision not to back the board is perhaps the strongest sign of discontent shareholders can send to the company’s leadership and it’s relatively rare for shareholder proxy firms to recommend that action. Deutsche Bank’s stock has hovered near a record low for the past several months amid investor doubt the lender will eke out more than a tiny profit any time soon after talks with Commerzbank failed.

Other shareholders have lined up to express their frustration with Deutsche Bank’s leadership and Chairman Paul Achleitner in particular. One has even tabled a motion to oust him.


“It is reasonable to partially attribute accountability to the supervisory board chair for the bank’s low share price and legal troubles,” Glass Lewis wrote in its report. An abstain vote on the proposal to sack Achleitner “would be sufficient to clearly indicate dissatisfaction without requiring immediate action.”

Deutsche Bank’s approach to legal risk and compliance has improved, ISS said. Still, the adviser cited concerns that investigations started in the past year may raise questions about whether the bank needs to undertake further work to ensure effective internal checks.

The ISS report “does not reflect the current situation of our bank and its control environment,” a Deutsche Bank spokesman said in an emailed statement on Wednesday. “The share price should not be seen as an indicator for financial stability.”

Glass Lewis also referred to last year’s search for a new CEO and executive compensation in its report, as well as the bank’s struggle to turn around its business.

“The company’s share price decline and involvement in further investigations in the past fiscal year, as well as the worrying performance of certain business divisions, are difficult to overlook,” the advisory firm said. “Furthermore, we believe that there may be some shareholder concern regarding the company’s executive remuneration practices in the past fiscal year, as well as the manner in which the CEO change was conducted.”

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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