Deutsche bosses live down to unfortunate tradition

(This comment has been initially published as a Reuters Breakingviews comment on 17 December 2012.)

In one way, Jürgen Fitschen has just proven himself a suitable choice to help helm Deutsche Bank. The co-chief executive has shown that he fits in the German bank’s tradition of gaffe-prone leadership.

After a police raid last week in connection with a tax fraud investigation, Fitschen wallowed publicly in self-pity. He also personally called up the state governor and, according to a report in a German magazine, whinged about the crackdown. His co-CEO Anshu Jain had shown his own gift for poor public relations a few weeks earlier, by not pushing to testify at a German parliamentary hearing on Libor manipulation.

It brings back memories. In 1994, CEO Hilmar Kopper described the career-threatening losses of small businessmen as “peanuts”, a remark that still haunts the bank domestically. His successor Rolf Breuer questioned the solvency of Leo Kirch, an exaggeration which led a successful lawsuit from the representatives of the deceased media mogul. Josef Ackermann, the next man at the top and the predecessor of the current duo, looked callous when he made a casual victory sign at the beginning of a criminal trial over his approval of multi-million-deutschmark bonus payments to ease Vodafone’s takeover of Mannesmann.

Fitschen and Jain may feel unfairly persecuted, perhaps because this is an election year in Germany. They shouldn’t think that way. The German judicial system is not known to be the stooge of politicians. Moreover, the right response to criticism from outsiders is not defensiveness but a thorough investigation.

The recent PR blunders come at the worst possible moment, when bankers are struggling to win the hearts and minds of an embittered public. Fitschen is certainly on the defensive. He recently felt obliged to reassure employees that they should still be proud to be with the bank. The bank has declared its commitment to cultural change. It’s hard to believe when top managers still act as if they consider themselves untouchable.

Deutsche doesn’t need an expensive consultant to tell it what to do next. The co-CEOs should move from self-pity to humility. When you’re in a hole, the first thing to do is stop digging.

Context News

After about 500 armed policemen and tax investigators searched the Deutsche Bank headquarters and a number of offices and private residences on Dec. 12, Deutsche Bank co-CEO personally called up the state governor of the state of Hesse, Volker Bouffier, and complained about the raid, news magazine Der Spiegel reported on Monday.

According to the report, Fitschen criticised the massive use of force by the police and claimed that this tarnishes the reputation of the bank. The home secretary is reported to have pointed to the fact that it was up to the prosecutors to decide the scope of their investigations. Deutsche Bank confirmed that the call took place but declined to comment on its content.

The bank was being searched by prosecutors probing a tax evasion scheme involving the trading of carbon permits. Fitschen himself as well as CFO Stefan Krause are among the 25 employees under investigation by the police. Four Deutsche employees are being held in “investigative custody” while the inquiries continue.

(This comment has been initially published as a Reuters Breakingviews comment on 17 December 2012.)

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