Book review: Why Ackermann will always be an outsider
Joseph Ackermann has just signed on for another four years at the helm of Deutsche Bank. It’s testament to the success he has had in creating one of the world’s most successful banks. A new book seeks to explain why his achievements are lauded overseas but he is disliked in the country that his bank’s name bears. Will domestic difficulties bring his tenure to a premature end?
|*Erik Nolmans Josef Ackerman und die Deutsche Bank – Anatomie eines Aufstiegs (“Josef Ackermann and Deutsche Bank – anatomy of an ascent”) (Zürich, Orell Füssli Verlag, 2006, SFr39.90 ISBN: 3280052025)|
Joseph Ackermann’s father saw enough ruined drunks and gamblers in his Alpine doctor’s surgery to warn his son – “Seppi” in those days - not to destroy wealth in the pub or playing Jass, the Swiss card game. A solid and disciplined relationship with money, Seppi is supposed to have learnt, would protect him from a descent into social misery. Dishonesty was met with the occasional fatherly clip around the ear. Sincerity was key. “If you help yourself, God helps you” and “The strong man is mightiest alone” were among the Allemani aphorisms, the kind chiselled into awnings all over the Alps, that Seppi internalized and that are said strongly to inform him to this day. One key life tip ought also to have been: beware the overzealous German secretary.
For one such lady, working in the “Compensations and Benefits” department at Mannesmann, the traditional German industrial conglomerate which, after a fierce bidding war in 2000, Vodafone swallowed whole in pursuit of its mobile assets, has ultimately precipitated a descent into a social misery of sorts for Ackermann. Because of her, accusations of dishonesty and financial ill-discipline have, fairly or otherwise, attached themselves to him in portions of the German public mind.
The secretary in question didn’t like the look of the casual paperwork from the supervisory board sub-committee where Ackermann sat, which had signed off – “with a croupier’s gesture” (Weltwoche) – €30 million in post-merger bonuses or “Appreciation Awards”. These had originally been the suggestion of a delighted shareholder, Hutchison Whampoa. The delight sprang from the fact that the acquisition had enabled Hutchison to exit a complicated holding in Mannesmann originating from its stake in Orange, with a large cash profit.
Especially problematic for this firmly diligent secretary, and a subsequent army of indignant pundits, lawyers, academics and judges, was that Mannesmann’s non-executive board chief, Joachim Funk, had apparently signed off his own €3 million bonus in this short committee meeting, and that Ackermann had approved this not only on his own behalf but also, after a brief phone call, on behalf of an absent committee member – as luck would have it, a trade union boss. The Mannesmann compensations chief shooed away the secretary’s initial concerns about protocol. She persisted, though, seeking out the company’s internal auditor. And so it went public.
It is Ackermann, rather than Funk, who has gone on to become a symbol of the subsequent trials, despite not gaining, or seeking to gain, a single cent from the bonuses he signed off. Spiegel magazine has dubbed him “Boo-man of the nation”. Nor was it even Ackermann’s day job; rather a non-exec seat, bequeathed to him in the Deutsche Bank tradition by his mentor and head-hunter, Hilmar Kopper.
Meanwhile, in what is beginning to seem like a footnote, Ackermann has built Deutsche Bank into one of the most powerful and successful banks in Europe and is making a good go of eradicating the “Germany” discount from the its share price.
So why can’t Germany and Joseph Ackermann get along? We can find some answers in a new biography* of the Deutsche Bank chief by Erik Nolmans, a fellow Swiss and also a biographer of Ackermann’s former boss at Credit Suisse, Rainer Gut. Nolmans seems to expect on balance that Germany and Ackermann will split, sooner rather than later.
This is despite Ackermann, in February this year, becoming Deutsche Bank’s first ever chairman for 136 years rather than “board speaker”, with a contract that runs to 2010, also despite the stellar results, and despite his having steered Germany’s biggest bank against all the odds and against the domestic will into the global bulge bracket.
People close to Ackermann see the chances of a second acquittal in the Mannesmann retrial this autumn, ordered by Germany’s constitutional court in December, as less than even. Ackermann has stated that if he is convicted he will surrender his Deutsche Bank job, without a payoff. According to Nolmans, he is also likely at the soonest opportunity to head back into the Anglo-Saxon realm, probably New York, where he has an apartment he loves, maybe to work in private equity. ‘There is a life after Deutsche Bank,’ he says.
We can grant Nolmans proximity to Ackermann: his book contains private family photos and describes a Heidi-esque childhood in detail – the time Seppi kicked a stone through his father’s surgery window, how he would smash his table tennis ball into the wall in a defeated rage, how he conquered the prettiest girl at high school.
Ackermann/Germany has the makings of a classic divorce. A fundamental incompatibility has simmered since the beginning of the union, which events have exacerbated into a ferocious set of misunderstandings and mutual recriminations that stem from deeply held irreconcilable differences of belief.
For our part, we must wonder about the most important casualty of the divorce: the troubled child they have raised together, as Ackermann has it, “the baby of all Germans”. What, in other words, will happen to Deutsche Bank, just at a time when, thanks largely to Ackermann’s disciplined parenting, it is beginning to win excellent grades across the board? Worryingly, Nolmans says that Ackermann has so far neglected, despite the advice of Kopper, to create a viable set of successors.
In a peculiar aspect of this biography, we aren’t told a great deal of what Ackermann feels about recent events – a sarcastic aside to the court or doleful remark to friends here, a controversial V-for-victory sign there, but no documented fit of pique since the occasion in the late 1980s when he abandoned his office for a few days after being passed over for promotion at Credit Suisse. But it doesn’t take much guesswork from the other information about Ackermann – his alleged vanity, his ambition (a characteristic everyone attributes to him), his desire to be seen as a winner, and his belief in loyalty and discretion – to assume that he is absolutely furious about Mannesmann. The case levels at him and his co-defendants Untreue (literally, “disloyalty”). In corporate legal terms it means the abandonment of their fiduciary duty.
A fair amount of public abuse has been shovelled his way. When the German constitutional court unexpectedly overturned Ackermann’s original acquittal, citing injury to the interests of Mannesmann as an entity in its own right, rather than injury to its owners, it did so with, for judges at least, fiery rhetoric, effectively comparing Ackermann and his co-defendants to thieves. They patronizingly informed Ackermann that he didn’t live in the real world.
Ackermänner, once meaning “men of the field” has come to mean “unscrupulous capitalists”. Ackermann has even adorned pre-election agit-prop posters of leftist groups. For his part, ahead of the first trial, he denounced Germany’s neurotic relationship with money: “this is the only country where you get taken to court for creating value”. In spite of his generally controlled manner, he couldn’t resist snide asides: when explaining the apparently unseemly haste of the bonuses decision to the court he pointed out that, “unlike in law and government”, businessmen were obliged to make quick decisions. His legendary V-sign, a reference to the contemporaneous Michael Jackson case, had accompanied a pithy aside to co-defendant Klaus Esser: “in America the defendants turn up late, here the judges do.”
Some of the distemper is down to bad chemistry and a certain stubbornness. Ackermann seems to be clumsy with, or at least indifferent to, the German general press, which, save for the odd bright spell, is relentlessly hostile. Nolmans provides excuses. Ackermann, in one of several instances of devoutly keeping his bond, promised to his predecessor, Rolf Breuer, not to talk to the press in the two-year run-up to the handover in 2002. This, we hear, inadvertently renders Ackermann aloof.
The London-centric press machine of the bank, we are told, ignored the sensitivities of mass lay-offs. Earlier this year, the bank managed to announce these together with a record dividend on the same day. Investor relations bravado, maybe. But, as we write, there is an example of how this can be done with less collateral damage: a recent edition of Spiegel has a long, lovingly photographed interview with Allianz CEO Michael Diekmann, as he explains the need to dump 7,500 staff.
Ackermann has also been incredibly single-minded, bruising several egos along the way. A number of allies in his past, both at Credit Suisse and Deutsche, have been discarded when they were no longer aligned with Ackermann’s objectives. These include Thomas Fischer, a supporter – and indeed potential successor – who fell by the wayside when Ackermann changed Deutsche Bank’s traditional consensus board system, and Ulrich Cartellieri – eminence grise and long-time Ackermann supporter – who in the end disliked the drift to risk-oriented business in London.
But part of the problem, Nolmans thinks, is just a traditional German beastliness to outsiders, especially one who is running Deutsche Bank. We are told of an “ambivalent” relationship with Germany’s economic and political establishment. Even liberal conservatives are critical or at best, stumm. Only a very small handful of industrialists, notably those like Juergen Weber of Lufthansa who sit with him on supervisory boards, support him in public.
But some of the distemper is not just attributable to his manner but to fundamental differences in attitude to business and money. Ackermann is a well-paid capitalist in the Anglo-Saxon mould. His father taught him an interest in the stock market as a child, and his PhD was on “the effects of money on the real economy”.
He genuinely believes in the idea of companies organized around the principle of creating profits and maximizing shareholder value. As Ackermann himself admits, this is at odds with the idea, implicit in the constitutional court ruling, that companies have interests like people in their own right, irrespective of owners and managers.
Much of German public opinion simply cannot get over the sums involved in the Mannesmann bonuses, or Ackermann’s own pay, or that of his London investment banking cabal. Nolmans doesn’t neglect to mention that Ackermann’s fate hangs on the decision of a judge being paid €4,900 a month. Ackermann, as the book explains at length, has also been a key agent in the unwinding of the Verflechtungen or cross-shareholdings between banks, insurers and companies that formed a central part of Germany AG, and, incidentally, gave Ackermann his fateful Mannesmann supervisory board seat. Nor was he frightened to offend people in the process, earning a rebuke from Munich Re, for example, when Deutsche profitably offloaded its shares. Perhaps the public forgets that this process of change was initiated by Rolf Breuer, Ackermann’s predecessor, and enabled and encouraged by Hans Eichel, former finance minister, who changed the tax treatment on such disposals.
It is clear from everything Nolmans describes that Ackermann has a very simple ambition: to create a first-rate modern, profitable, universal bank. Those in Germany who fear that his intention is to turn Deutsche into a pure London-based hedge fund are surely wide of the mark. They need only look at his track record at Credit Suisse, where he was CEO in the early 1990s. Rainer Gut, then chairman, made Ackermann take his hat when he publicly mused on the benefits of scrapping Gut’s beloved holding structures in favour of integrating the investment bank with the traditional wealth management and retail businesses.
His actions at Deutsche reveal similar intentions – at the same time as his unsentimental disposal of industrial holdings and internal bank businesses such as custody, he has bolstered the private client business. Nor has he been blindly biased to investment banking, which he understands from the inside, having cut his teeth while lining Credit Suisse’s pockets at CSFP in the early 1990s. He was happy in 1998 to watch the infamous Quattrone tech team stage a mass walk-out to CSFB, which, as Nolmans points out, earned Ackermann brickbats from Euromoney and others at the time. But Ackermann simply thought they were too expensive, working on deals not oriented to profitability.
It seems that the central aim that has brought so much trouble and controversy is an incredibly mundane, uncontroversial one – Ackermann wants to build something in the mode of, say, UBS, in Frankfurt. Nor was this his plan alone, as an “outsider”. It was the job his “foster father” at the bank, Hilmar Kopper, the ultimate insider, hired him to do.
Perhaps it is simply the wrong location for this venture. Much of the fallout has been because many in Germany don’t see this as the purpose of Deutsche. It isn’t, or at least hasn’t been, just a bank. Deutsche was built as a nexus of capital and industry at the heart of post-war Germany. Many of its chiefs, notably the man who rebuilt it in the 1950s, Hermann Abs (who also set-up KfW in his spare time) have been quasi-statesmen. Former Chancellor Gerhard Schröder felt at liberty to involve himself in the Citigroup merger discussion on behalf of his new chum, Sandy Weill, and he also put in a call to “invite” Deutsche to buy Postbank. Nolmans portrays a slightly weary Ackermann going through the motions in these cases, neither of which in the end detracted him from his chosen course.
It is no wonder that Ackermann takes refuge in his London investment banking people, profits aside. Here, Ackermann has met, we are told, with the reciprocal trust and fidelity he was taught to value as a child. Nolmans tells us that Ackermann has a “pact” with Anshu Jain that dates back to Jain’s valuable help and loyalty in retaining Edson Mitchell during Deutsche Bank’s investment banking wobble in 1998. Jain and Ackermann are said to have a very solid bond of trust. Mitchell, the architect of Deutsche’s investment bank, who died in a plane crash in December 2000, was the first board member to nominate Ackermann to be Breuer’s successor as board speaker. Profits and loyalty, we can conclude from the biography, is a mixture which is really going to push Ackermann’s buttons.
Although the book is subtitled “Anatomy of an ascent”, it has a melancholic effect, because it is an unfinished tale, mired in conflict and rejection. It is like a concerto – Ackermann is after all a keen amateur musician – which has concluded prematurely at the end of the depressing middle movement. We wait with interest to hear the defiant resolution of the finale, whether it is performed in Germany or not.
* Erik Nolmans Josef Ackerman und die Deutsche Bank – Anatomie eines Aufstiegs (“Josef Ackermann and Deutsche Bank – anatomy of an ascent”) (Zürich, Orell Füssli Verlag, 2006, SFr39.90 ISBN: 3280052025)