Deutsche Bank's announcement of job cuts after it posted a 87 percent increase in net profit raised a furor in Germany. It has many asking if the country's corporations have abandoned any notion of social responsibility.
Protester at Deutsche Bank, where 20,000 have lost jobs in three years
The timing couldn't have been worse.
Just on the heels of a report released earlier this month that more than five million people in Germany are unemployed -- a level not seen since 1933 -- Deutsche Bank announced it plans to slash 6,400 jobs worldwide, including 1,940 in Germany.
To rub salt in an already deep wound, the cuts at Germany's biggest bank come after the bank ran up profits of €2.5 billion ($3.2 billion) in 2004, the highest in four years.
The connection between cutting jobs while the company is flush with cash hit many Germans -- saddled by an economy skating just a few tenth of a percentage point above recession and unemployment rates surpassing 20 percent in some areas -- where it hurts and the outrage was heard loud and clear, from people on the street and politicians on both sides of the political spectrum.
In a newspaper interview, Chancellor Gerhard Schröder criticized the Deutsche Bank policy that led to the decision to lay off workers. The staff cuts will help the bank attain a 25 percent return on equity and boost its market capitalization, allowing it in essence to join the ranks of the globe's leading financial institutions. Deutsche Bank is currently ranked only 23 in international comparisons of large banks.
Alfred Herrhausen at a 1988 annual report meeting Frankfurt
The chancellor encouraged the bank to take as a model one of the bank's earlier heads, Alfred Herrhausen, who he said put the interests of Deutsche Bank employees and its home country on an equal footing with those of shareholders.
The conservatives didn't like the layoff announcement any better. Edmund Stoiber, premier of Bavaria and head of the Christian Social Union, called Deutsche Bank's actions "tasteless, inept (and) unacceptable."
Calls for action
Jürgen Peters, the head of the IG Metall union, accused Deutsche Bank's management of callousness and called on the government to tighten rules governing corporate layoffs. "Profit maximization at the expense of the public is a betrayal of our society. Such companies should be ostracized," he told the mass-circulation newspaper Bild.
Several politicians called on Deutsche Bank's clients to consider taking their business elsewhere, for example, to Germany's state-owned savings banks, or Sparkassen. Andrea Ypsilanti, head of the Social Democrats (SPD) in the state of Hesse, where Germany's financial center Frankfurt and Deutsche Bank's headquarters are located, led the calls for a boycott of the bank, saying it was playing a "cynical game" with German society.
"It's a development that we've seen in the past few years of companies, not just Deutsche Bank, putting profit targets ahead of questions of corporate responsibility," said Gert-Uwe Mende, spokesman for the SPD in Hesse. "Germany's Basic Law stipulates that property brings with it obligations and there is a certain social duty associated with assets that we firmly believe in."
In good company
Many say that duty is being neglected in times of globalization and while Deutsche Bank's job cuts received the brunt of the outrage, the bankers are not alone in their strategy of cutting personnel costs even though their numbers are firmly in the black.
Insurance giant Allianz saw its profits triple in 2004, but cut staff by 17 percent. Pharmaceuticals concern Schering reported its earnings jumped by 13 percent in 2004 but plans to cut 2,000 jobs. Engineering giant Siemens watched its bottom line improve last year but has said its communications division will be the target of drastic cuts this year.
Josef Ackermann, Deutsche Bank head
Joseph Ackermann, Deutsche Bank's CEO, has firmly defended his restructuring plans, saying they are a necessary measure to ensure the company's competitiveness. He has found supporters among many economists and business leaders.
"When companies are active globally, they can't always keep the local sites and personnel at whatever the cost," said Thomas Hühe, a spokesman for the Federation of German Industry. He said managers have to take a hard look at the economic realities and sometimes make equally hard decisions.
"It would be nice to keep local workforce going if conditions allow it. But it's not always possible," he said.
What kind of social responsibility do corporations have? Read more on the next page