Published in the Financial Times on 10 April 2018

Germany’s biggest lender dramatically ousted the Briton over the weekend, with its chairman, Paul Achleitner, saying his bank needed a “new execution dynamic” in its leadership. Christian Sewing, a Deutsche lifer who most recently ran its retail bank, was appointed chief executive.

 Less than a fortnight earlier, Mr Cryan had assured his 98,000 staff that he was “absolutely committed” to staying on and that there was “no difference of opinion” between his management team and the bank’s supervisory board, chaired by Mr Achleitner.

 Mr Cryan’s term had been due to run to July 2020, when the bank would have been on the final leg of the Strategy 2020 restructuring plan that promised to cut costs, overhaul a flagging IT system and cull less profitable activities. Mr Cryan, who was criticised for his unrelentingly blunt assessment of Deutsche’s shortcomings, had even spoken of staying on for a second term.

 The bank’s annual report shows that Mr Cryan and any member of Deutsche’s management board is entitled to “a severance payment upon early termination of their appointment at the bank’s initiative” as long as the bank does not terminate “for cause”.

 “The severance payment, as a rule, is two annual compensation amounts and is limited to the claims to compensation for the remaining term of the contract,” the annual report continues.

 The payment is based on the executive’s most recent year’s remuneration and their expected pay in the coming year. Mr Cryan’s total remuneration for 2017 was €3.4m, implying a pay-off figure of around €7m depending on the treatment of pension contributions and fringe benefits.

 A Frankfurt-based spokeswoman for the bank would not comment on the details of the payment but said: “John will get the amount of deferred compensation he is contractually entitled to over the coming five years.”

 A friend of Mr Cryan’s said that the banker, who refused a bonus for each of his three years at Deutsche and famously said he had “no idea” why one was part of his package, was likely to seek what he was owed on his departure. Mr Cryan did not respond to requests for comment.

 Deutsche bankers, disillusioned with penny-pinching and their own paltry bonuses for the past few years, may protest at the payment but it is unlikely to attract the ire of investors. “I think if there’s one thing we don’t need to worry about it’s the pay-off of John Cryan,” said one analyst, adding that Deutsche had much more existential strategic problems of what to do with its underperforming US investment bank and how to tackle a bloated cost base that Mr Cryan’s team could not shrink as fast as they promised.

Ronnie Fox, an expert for Fox & Partners in negotiating departure arrangements, said that employers typically reached severance agreements with departing senior executives since “it’s in nobody’s interests” for the issue to be argued in court.

 Deutsche’s annual report shows that Jeff Urwin, the former investment banking chief who stepped down last year, did not receive any severance pay because his service was “terminated by mutual agreement”.

The same is likely to apply to his successor, Marcus Schenck, whose departure was also announced last week, since Deutsche’s statement alluded to “his decision” to leave.

 

Laura Noonan, CFA
Investment Banking Correspondent