Well, there’s knowing your shareholders – and then there’s going way too far.
The German magazine Der Spiegel reports today that the country’s largest bank, Deutsche Bank, hired private investigators to look into members of its management and supervisory boards – and a pesky shareholder.
To be sure, the bank was investigating information leaks it saw as threatening – but it seems obvious someone should have said “No.” Now, the bank faces reputational damage, scrutiny of top executives’ roles – and possible legal action.
A 2001 case involved a union representative on the company’s supervisory board, suspected of leaking earnings info to the press. In 2006, the bank investigated contacts between management board members and German media mogul Leo Kirch, who was tangling with the bank legally. Among the targets, Spiegel says:
The bank also had external helpers investigate a shareholder believed to have links with Kirch – Michael Bohndorf, a lawyer who resides on the island of Ibiza. The investigators compiled detailed reports on his movements and even looked into whether he had any personal weaknesses: alcohol, gambling, women? One insider reports that the agency resorted to hiring women to test him.
For years, Bohndorf has been annoying Deutsche Bank by asking dozens of questions at annual shareholder meetings and taking legal action if his questions aren’t answered. The bank has already informed Bohndorf of the spying operation and apologized for it.
Two other German companies, Deutsche Telekom and Deutsche Bahn, face spying scandals. American firms have fallen into this trap in the past.
When the company is in the heat of battle – litigation, proxy fight, M&A contest – a mood of paranoia can take over in the executive suite. But when it comes to violating the law – or doing something that will look stupid in The New York Times or Der Spiegel – someone on staff should be saying “No. Don’t go there.”
The sanity check, sometimes, might even come from investor relations.
