Over the next two years, German corporate governance will get a much-needed shot in the arm: Nearly 350 supervisory board seats are becoming vacant, giving top managers an opportunity to import tried-and-true talent and benefit more fully from Germany's economic boom.
Deutsche Bank, Germany's struggling market leader, is hoping the new blood will energize its restructuring and profitability. Conscious of how much is at stake, its managers aren't shying away from controversial steps to get things done. Last week, Deutsche announced it would offer John Thain, a Wall Street veteran and former head of US investment bank Merrill Lynch, a seat on its supervisory board. Mr. Thain's new job was first reported last week by our sister publication, Wirtschaftswoche, who also revealed the bank is looking for a replacement for CEO John Cryan.
While at Merrill, Mr. Thain was pilloried for his exorbitant income, expenses and performance bonuses, which looked all the more questionable after a last-ditch merger with Bank of America in the financial crisis. Initially, he was hailed as one of Wall Street's saviors who staved off an even deeper collapse. But in early 2009, when Merrill revealed an unexpected loss of $15 billion for the fourth quarter of 2008, Mr. Thain was swiftly and unceremoniously fired.
There is grudging respect in German banking circles for the investment banking savvy of Mr. Thain.
Deutsche Bank declined to comment but financial sources said Mr. Thain, who is due to join in May, will be one of four new additions this year to the bank’s supervisory board, the German quasi-counterpart to America's board of directors. Supervisory board members whose terms expire this year are Johannes Teyssen, Dina Dublon, Henning Kagermann, and Louise M. Parent.
The outgoing boss of German operations at auditor PwC, Norbert Winkeljohann, is expected to join Deutsche's supervisory board in August. Michele Trogni and Mayree Clark, former bankers at UBS and Morgan Stanley respectively, will most probably get the green light at the bank's annual shareholders’ meeting on May 24.
It’s unclear when and how Mr. Cryan will be replaced. But it’s seen as virtually certain that his days at Deutsche are numbered after three consecutive annual losses and a share price that has more than halved on his watch.
Criticism of supervisory board chairman Paul Achleitner has also been mounting. Major investors say Mr. Achleitner shares the blame for the bank’s woes, and the supervisory board reshuffle is unlikely to silence the critics. Doubts over his tenure at Merrill notwithstanding, there is grudging respect in German banking circles for the investment banking savvy of Mr. Thain, whom Mr. Achleitner knows from their days at Goldman Sachs. After leaving Merrill in 2009, Mr. Thain turned around the fortunes of US financial services group CIT, and currently sits on the board of directors of ride-hailing service Uber.
In Germany it's surprising that the proportion of supervisors with a foreign passport is so low. Thomas Tomkos, Consultant at Russell Reynolds
The reshuffle at Deutsche precedes a long string of supervisory board changes elsewhere. A record number of such vacancies are opening in Germany this year – 190 in the 80 top listed companies, which amounts to almost one-third of all the seats representing shareholders. Under Germany's rules of codetermination, the supervisory board's seats are split between representatives of shareholders and employees, with the chairman casting the deciding vote whenever the board is deadlocked. The big reshuffle will continue next year, when 156 seats come up for renewal.
At many top firms, the supervisory shift will help to master challenges of the digital age. Auto group Daimler plans to recruit IBM manager and Blockchain expert Marie Wieck. Business software giant SAP wants Google’s cloud specialist Diane Greene to join its board.
International experts with digital know-how are in high demand, said recruitment consultant Thomas Tomkos of Russell Reynolds, an executive search firm. “For an exporting nation like Germany it's surprising that the proportion of supervisors with a foreign passport is so low,” he said. It’s been below 30 percent for years, and the share of non-Europeans is less than 10 percent. The dearth of foreigners is particularly striking given blue-chip firms in the DAX 30 index are majority-owned by foreigners.
Mr. Tomkos said German firms have struggled to lure top foreign talent because they don’t pay much by international comparison, even though the average salary for a supervisory board member at a DAX-index company has increased by more than half to €412,000 ($506,000) over the past decade. As it happens, Mr. Achleitner of Deutsche Bank is the best paid at €800,000.
Jeremy Gray is an editor with Handelsblatt Global in Berlin. Dieter Fockenbrock is Handelsblatt's chief companies and markets correspondent. To contact the authors: [email protected], [email protected]