How to Evaluate the Share Price Performance During CEO Tenure: The Case of Josef Ackermann’s Stewardship at Deutsche Bank

Abstract

This clinical paper gives guidance on how to correctly compute and evaluate the share price performance of a corporation during a specific CEO tenure. Although the emphasis is on Deutsche Bank’s share price performance between 2002 and 2012, a lot of general questions relevant for this kind of assessment are tackled as well. For instance it is shown that currency adjustments are essential when comparing global companies if their shares are listed in different currency areas. In addition, the differences of dollar-weighted versus time-weighted returns for peer groups during consecutive observation periods are discussed.At Deutsche Bank’s AGM at the end of May 2012, the CEO tenure of Josef Ackermann officially ended after ten years in office. During his stewardship, Deutsche Bank established itself in the bulge bracket of investment banking and was one of the few global banks which survived the financial crisis without any direct government support. Whether his regime was successful for shareholders is controversial. It is shown that in spite of the fact that Deutsche Bank’s original share price performance during Ackermann’s stewardship has been negative by −50 %; it significantly outperformed other German financial institutions, international sector indices or hand-selected investment banking peer groups. However, it is not clear if this relative outperformance is solely attributable to Ackermann’s and his board members’ management capabilities or perhaps a result of implicit guarantees by the German government.Moreover, share price performance figures published by Deutsche Bank are reviewed. It turns out that some figures overstate the real performance. The same is true for e.g. Morgan Stanley’s performance graph in its latest 10-K report. This finally raises the question, how reliable share price performance figures presented by companies are. This is important for the ongoing pay-for-performance discussion because already the underlying data of share price performance could be biased.