Sideways: You can’t fire me, I quit!

By:
Jon Macaskill
Published on:

Deutsche Bank’s failure to acknowledge the enormity of the change it needs to return to health was demonstrated by the strange spin it gave to the departure of co-CEO Anshu Jain.

When Deutsche’s board announced on June 7 that it had decided to replace Jain with John Cryan, it did so with a press release that contained standard public relations bromides.

Chairman Paul Achleitner paid tribute to Jain and to Jürgen Fitschen, the co-CEO who will also depart, though not until after almost another year in transitional purgatory. Jain was given some space in the press release to comment: "It is right for the bank and for me to have new leadership at this time. I will be forever honoured to have served here, and I am convinced that the future of the bank is bright and in very good hands."

So far, so uncontroversial, even if this was not a courtesy that Jain always extended to the senior executives he dismissed during his 20-year tenure at the bank.

The odd spin came in the initial press coverage of Jain’s exit, which is likely to have been shaped by input from the bank’s communications staff to journalists looking for background details to the change in management.

A number of news outlets reported that Jain had decided to walk away from his job, rather than serve another five years in difficult circumstances to complete the 'Strategy 2020’ overhaul that he had announced a few weeks before to such a dismal reception from shareholders.

Further reading
Macaskill logo 160 
Macaskill on markets:
Liquidity drought's
conflicted Cassandras

This is a deeply implausible take on what happened, to put it charitably. A weekend board meeting, followed by the installation of a respected but low-profile supervisory board member as chief executive, seems very much like an abrupt dismissal of the incumbent, a firing by any other name.

Media outlets, to be fair, quickly shifted to describing the move as an ousting of Jain for consistently failing to meet profitability targets and his presentation of yet another unconvincing plan to overhaul Deutsche.

The question is why anyone except Jain himself would have approved the unconvincing line that he decided to step aside for the good of the bank.

"You can’t fire me, I quit," is a quote that has become shorthand for a delusional reaction to a firing by an employee. This spirit of pique and self-deception rarely makes it into a coordinated attempt to convince outsiders that a leading financial institution is taking the right steps to recover from a battered reputation.

And some effort seems to have gone into peddling the line, including the detail that Jain decided to walk away when he could have collected around €16 million of pay for the remaining period of his contract if he had waited to be fired.

This is another debatable assertion, given that Deutsche remains mired in a series of regulatory scandals, the most serious relating to Libor/Euribor rate fixing and FX misconduct that took place in units under Jain’s direct supervision. If the Deutsche board had decided to dismiss Jain for historical failure to manage subordinates he would have been hard pushed to collect on any payments nominally owed on his contract.

Instead, a compromise seems to have been reached where Jain would agree to go quietly and the board would present Cryan’s appointment as enough of a change to placate restive shareholders, and equally restive regulatory supervisors.

The danger with this approach is that tinkering with Deutsche Bank’s structure – even with an executive change at the top – may not be enough to transform the firm. Its investment bank is filled with managers who were schooled in the Goldman Sachs wannabe business model pursued by Jain, a model that often included testing regulatory limits in a way that seems a poor fit for the current environment.

Deutsche hired Sam Wisnia, a former Goldman partner, as head of fixed income and currencies structuring only nine months ago, suggesting that old attitudes are proving hard to shake.

The details of Cryan’s early months in charge will demonstrate whether Deutsche has committed to anything other than an optical change in replacing Jain.