Succession Sealed Deutsche Bank Nominates Indian Investment Banker as New Co-CEO

Deutsche Bank will in the future be co-managed by Anshu Jain, a cricket-loving investment banking hotshot from India. Because he speaks little German and has no political contacts, however, he will be flanked by a German co-executive -- and watched over by current CEO Josef Ackermann, who is to head the supervisory board.

The designated co-chief executive of Deutsche Bank -- investment banking head Anshu Jain.

The designated co-chief executive of Deutsche Bank -- investment banking head Anshu Jain.

Deutsche Bank has decided that it will need two people to fill the shoes of the current chief executive Josef Ackermann, who has steered Germany's largest bank to record profits in his decade at the helm.

On Monday, the bank's supervisory board agreed to appoint Anshu Jain, the Indian head of Deutsche Bank's investment banking operations, as co-chief executive of the bank from May 2012 alongside Jürgen Fitschen, currently in charge of its Germany business.

In addition, Ackermann appears set to become chairman of the supervisory board in an about-face after he had initially declared he had no interest in the position.

The decisions follow an embarrassing few weeks for the bank. First it was spurned by its crown prince when Ackermann's preferred choice of successor, Axel Weber, the former president of the Bundesbank central bank, turned Deutsche down and opted instead for a rival offer to head Switzerland's UBS.

Then Ackermann and supervisory board chairman Clemens Börsig descended into a dispute over who was to blame for the loss of Weber and which alternative candidate should get the top job.

The failure to groom a successor who enjoyed the general backing of the bank's management and supervisory boards would have not just been damaging for the bank, but for the wider German economy. The head of Deutsche Bank is the face of Germany's corporate establishment and a key negotiating partner for the government, especially in these times of financial crisis.

Dual Management Has Drawbacks

The idea of dual CEOs is risky because it can lead to internal rivalry and slow decision-making. But it is regarded by many in the bank as the best way to keep Jain, 48, a highly-talented investment banker whose unit contributed nearly 90 percent of Deutsche's pre-tax profit in the first quarter.

A German co-CEO is needed, at least initially, because Jain, a cricket lover, speaks little German and lacks the necessary contacts in Berlin and in Germany's corporate sector -- a key ingredient for a Deutsche chief executive. The changeover is expected to happen at the annual shareholder meeting in May.

According to sources inside the bank, Ackermann believes 62-year-old Fitschen is too old for the job and had been pushing instead for a close associate of his, 55-year-old Hugo Bänziger, Deutsche's chief risk officer, to be appointed alongside Jain. Ackermann and Bänziger are both Swiss nationals.

In the end though, the choice of Jani's running mate was academic because Ackermann is staying to watch over them all as head of the supervisory board. His contacts in politics and business are regarded by many in the bank as too valuable to lose.

A Tough Act to Follow

Ackermann, 63, was able to weld together Deutsche Bank's two very distinct cultures -- the flashy, dynamic Anglo-Saxon investment bankers based in London and their distinctly more conservative counterparts in the Germany-based retail and corporate banking divisions.

In addition, he played an important role in helping the government tackle the 2008 crisis, proposing a rescue fund for troubled banks and negotiating a bailout with Chancellor Angela Merkel for mortgage bank Hypo Real Estate.

A few weeks ago, he and German Finance Minister Wolfgang Schäuble sat side by side in Berlin to present an agreement under which German banks would voluntarily contribute €3.2 billion ($4.63 billion) towards a second rescue package for Greece.

But Ackermann has made some PR gaffes. In 2004, he was labelled the epitome of the arrogant banker after he made a V for victory gesture during a trial over bonus payments to former executives of Mannesmann, the telecommunications company. He had been a co-defendant in his capacity as member of Mannesmann's supervisory board which approved the payments. In 2005, he drew fire for announcing thousands of redundancies at the same time as reporting a surge in profits.

Legal Obstacle

His move into the supervisory board faces a legal hurdle because German corporate law was recently changed to require a two-year time gap between a CEO stepping down and moving up into the supervisory board of his company.

The parliament decided on this "cooling-off period" in 2009 to prevent former executives from obstructing efforts by their successors to take necessary strategic decisions or uncover mistakes made during their reign.

But the law allows an exception to be made if at least 25 percent of shareholders desire it. Given that Ackermann already appears to have the backing of the workforce, which accounts for 10 percent of the voting rights, he might get the necessary support to permit his transfer. Jain and Fitschen should brace themselves for a powerful, hands-on backseat driver.

cro -- with wire reports


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