Monday, 25 July 2011

The succession at Deutsche Bank

Does nationality still play a major part in deciding who should become the Chairman or Chief Executive of the company. It shouldn't, right? But of course it does. Except, to its eternal credit, in the United States of America. A country pretty much devoted to meritocracy and where, by and large, only merit counts. It doesn't matter where you are from or whether you are white or black or yellow or grey or blue. Perhaps to a large extent in the United Kingdom as well. But that's it. Everywhere else, it seems only a local can be a boss.

Consider the succession saga at the mighty Deutsche Bank in Germany. The current CEO, Josef Ackermann is expected to be kicked upstairs to the Supervisory Board. A new CEO is to be appointed. There is general consensus that the best candidate is Anshuman Jain. The problem is that he is Indian, not German. And to add insult to injury, he reportedly does not speak much German either.

This apparently won't do as the boss of Deutsche Bank will have to have "close contact with Germany's political and business elite" whatever that means. Yes we know what it means. Cosying up to the power lobbies and doing backroom deals. Is that how business really ought to be run ??

Yes, I know Deutsche Bank is very German and very special to Germany. But it might have esaped attention that the bank is now a truly global bank. It has some 100,000 employees and operates in 70+ countries. Its listed in Frankfurt and New York. For such a bank, the best man ought to lead it. The best man means the man who will run the bank the best and maximise the returns to its shareholders. Not the man who can wink wink, nod nod with politicians.

Of course, that's Utopian thinking. On Tuesday, the bank is most likely to announce co CEOs - with Anshu Jain running the bank and Juergen Fitschen presumably maintaining the "close contact". Nice compromise and life goes on. And this is exactly the sort of a thing what would happen in France or Japan or China or India.

Now do we understand why Amercian business is where it is. The Chairman of Coca Cola was born in Turkey. The Chairman of Pepsico was born in India. The Chairman of Colgate Palmolive is British. The CEO of Citigroup was born in India. The CEO of Alcoa is German. Senior and middle management in US companies is like the United Nations.

Meritocracy is not just the best policy. It should be the only policy.

21 comments:

Hansjoerg said...

Ramesh,
I appreciate your views shared with all of us in your blog, however I am afraid you missed the point in terms of Deutsche Bank. It was not about that Anshuman Jain is a not a German this was not the point in the public, Ackermann is Swiss and the majority of ownership of Deutsche is not with German investors. No, the issue is that Anshu Jain is an investment banker and investment bankers do not have a good image in Germany to say the least. Rightfully or not investment bankers are ranked lowest in the public esteem only next to politicians. This country still believes in solidity in business and not in the creation of financial instruments as source of economical wealth. It is see as a limitation that Anshu Jain does not speak German. As far as I know all these foreign leaders in the US you named do speak very well English. Deutsche Bank is not only a big international player but serves through its Postbank arm millions of German clients with small savings accounts. These clients do not understand anything of that big business and do also not understand English. Given the two faces of Deutsche Bank the international business and the local business it make a lot of sense to have two chairpersons to represent these very different businesses. It is actually not uncommon in Germany to have two chair person in a board look at SAP they have it since years, currently both are not German. Actually we do not have the concept of the CEO similar to the US or France and be reminded that 50% of the supervisory board, the highest governance board in a company are employee representatives. The supervisory board elects each Executive Board member. The governance model follows the concept of a collegial board concept in which the different board members are responsible for their respective function with a chairperson or chairpersons representing the company to the outside stake holders. The mess we saw around this appointment was, that Ackermann and the chair of the supervisory board Clemens Börsig fought a battle on who would succeed whom. Börsig wanted to trade chairs, Ackermann refused that deal, because he believed that Börsig is not the right person to lead Deutsche. As it looks now Ackermann has won and he will become at some point the chair of the supervisory board. Though, in fact it was a battle to get the best person or persons to succeed Ackermann and to lead Deutsche Bank. It is worth to mention that according to the rules of good corporate governance in Germany the chair of the board should not directly move to become chairperson the supervisory board. Ackermann probably will in 12 month. I am afraid this got a bit long at the end, I hope you don’t mind.

Ramesh said...

@Hansjoerg - Thanks for your detailed perspective. Being a German and in a leading corporate, your views are priceless, esepcially as you are a real global citizen. I don't buy the disqualification of an investment banker, but completely buy the point about speaking German. Anshu Jain should clearly have become fluent in German.I hadn't appreciated the intrigue around Börsig - the English press seemed to have missed the shenanigans - perfect example of your point regarding the language.

Sandhya Sriram said...

how lucky we are... we have an insightful from one leader and we get a equally insightful retort from another corporate leader.

Both perspectives amazing... what we would never get to read or interpret ourselves... thanks to you for opening your elite platform to ordinary people like us.

While the context is set very high for people like me to comment, but still, taking that liberty on..

as organizations are going more global, they still cater to local markets, local people, local emotions and need to be very integrally connected to the local vibrations to be truly successful. it is impossible for any individaul to call himself truly global.

Each organization is evolving its own mix and how do they play this game. but it is still an evolution and there is no right or wrong at this point.

http://consulting.prats.co.in said...

I am not very sure if it is correct and ethical.

You know it would feel weird if Tatas & Reliance are not run by Indians, I think Germans might feel the same about Deutsche Bank.

I think that corporations are not only a wealth creating engines which we see them and judge them on a quarter to quarter basis. But they are also a reflection of the society they have emerged from, the kind of honor and belonging for the country they have originated from. I still agree that meritocracy should be the best policy. But these aspects make that decision a bit difficult.

Ramesh said...

@Sandhya - Yes, its true that local knowledge and understanding is important, but I think that's an overplayed card in many markets. See the way America welcomes talent and embraces it - part of the reason why they are so successful

@Prats - You summed it up very well - yes it would be strange to find an expat leading Tatas. But that's exactly my point - if the best qualified guy is an expat ; then rightfully it should be so. The problem with Indian companies is that we rarely accept non Indian nationals at any level; without a doubt we, along with the Japanese must rank as the most insular and self centred management. The Japanese at least have language as a defence. We have none.

hemarao said...

Yes, embracing talent irrespective of origin will build in a lot of meritocracy in the system.
In this context, yes, not knowing German has become a major drawback for Mr.Jain. May be overplayed, but seems to be a worthy debate.
Btw, lets not forget Ratan Tata's remark that he is looking for an able successor and it could well be an expat if he/she happens to be the best.
http://articles.timesofindia.indiatimes.com/2009-11-19/india-business/28111493_1_ratan-tata-cyrus-mistry-tata-group-chairman.
Thats something I would say.

Kiwibloke said...

First post from a a real kiwibloke, now in Auckland. Just heard that my old employer in NZ (Fonterra, 14B USD Dairy co) is hiring a new CEO - a Dutch gentlman from Freisland Campina, to replace the current incumbent who is ex Tate and Lyle a Canadian! Much of the A team in Fonterra looks like the UN. Notwithstanding the fact that kiwis are darn good dairy farmers, to run a large corporate, Fonterra believes it is best to hire the best from whereever they come from in the world.

Ramesh said...

@Hema - I would be stunned if Ratan Tata's successor is a non Indian. In fact I would even be surprised if the successor was not a Parsi.

Correction on Ashu Jain speaking German. I believe he has learned it for 2 years and being the sharp man he is, no doubt speaks it adequately. But I suppose he can never speak it as a native.

@kiwi - You were always a "real" kiwibloke :) If I am permitted the liberty of taking a dig, there is no option for Fonterra but to look outside as there simply aren't enough human beings in kiwi land !!!! :):)

J said...

Interesting debate but I guess corporations like Citibank, etc do not contribute that much to the American identity the way that probably Deutsche bank does for the Germans and that complicates matters. I had the exact same thought on how we would accept an expat CEO running the tatas. I am sure the first thought would be how come there wasn't even one Indian who met the bill. Great comments by all but particularly Hansjoerg.

zeno said...

Ah time again and again it is proved why your blog is so special :)

Can't resist giving this link ;)
http://www.espncricinfo.com/page2/content/story/524887.html?selected=1

Vishal said...

Great post! Indeed, what you said happened today. May be, right for the DB from German perspective!

In many cultures, local candidates do score higher on acceptability ground, but as you say, they are not there to do wink wink with politicians. One who can reach out to the mass of global culture and deliver sustainable results for the stakeholders is indeed global.

Ramesh said...

@J - What can be more American than Coke and yet Americans, by nature are more willing to embrace talent than anywherelse. Maybe its because it is a country of immigrants. But every other country, bar the UK, seems to consider its busines houses as exclusive preserve of its nations.

@zeno - Ha Ha Ha

@Vishal - The "acceptability" is, I believe, a display of narrow parochialism. Didn't India accept many decades ago Holck Larsen when he set up L&T.

Ravi Rajagopalan said...

Dear Ramesh, You raise a valid point, and I appreciate the response from Hansjoerg. I happen to know Anshu socially, and the point is that he is frighteningly intelligent, self-confident and focussed - so focussed that he can be ruthless in the pursuit of corporate goals. However, he has never earned the kind of opprobrium that fellow bankers in Goldman Sachs have acquired due to egregious bonuses - note that Anshu is no slouch in the earnings department. But somehow he has always managed to stay a bit under the radar, is seen is extremely competent, and very responsible. I do not buy Hansjoerg's argument about image, but do accept that there is a politically significant domestic aspect of DB's operations which needs to be taken not of. What happens now is going to be interesting. Is the point of the co-CEO appointments is to let Anshu become more attuned to Germany's political constituency, to eventually take the top job? Or do they hope that the hugely ambitious Anshu will get fed up and leave. But where will he go next. The only comparable position for him is if Lloyd Blankfein quits and the Board of Goldman brings in Anshu as CEO. In the meantime I predict Anshu will turn his prodigious energies to winning over the German establishment.

May I share an anecdote with your readers. It is usual for us slaves of American capitalism to go into meetings and have baseball terminology thrown at us "We are in the 9th inning guys" " Thats a curve ball" - etc. Well when Anshu became head of Bankers Trust UK, he came to his first morning meeting of the desk, and said to this bunch of Americans, "Its cloudy and overcast in Trent Bridge today and the wicket looks green. How many slips shall we have?" The looks on the faces of the Americans was apparently priceless.

Ravi said...

Great post and equally good comments...

Its a global village...

Ramesh said...

@Ravi - Ha Ha Ha - the quip on cricket. Priceless, the looks might have been.

Oh no - Anshu is not in the Goldman Sachs league. This is the end of th road for him. Ackermann hasn't gone away - he has become the Chair of the Supervisory Board. He will breathe down his neck all the time. So they really have 3 CEOs.

Ramesh said...

@Ravi - Welcome to this space and thanks for your comment.

zeno said...

I am sorry that was not the link that i intended to give.

http://www.time.com/time/magazine/article/0,9171,2084441,00.html

Here you go with the link!

Ramesh said...

@zeno - Thanks. Yes Indians have flown high, disproportionate to leaders from any other country. Just makes you wonder - if India had not gone that disastrous route to socialism for 50 years, where would we have been with all that talent.

zeno said...

Possibly it was the socialism and the move away from socialism that churned out all this talent!
I strongly believe it is the contraints that bring out the best in us.
Not sure is it an appropriate link or not for this still i will give.
Socialism or not, people always found a way to thrive[either by right or wrong means]
http://idlyvadai.blogspot.com/2011/02/blog-post.html

rads said...

I'm all for American meritocracy, it shud b followed everywhere...

Ramesh said...

@Rads - Totally so.

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