Paul Achleitner's move to Deutsche Bank AG's supervisory board installs a dealmaker with deep connections to the German establishment and defuses a potential conflict with shareholders as well as future co-chiefs Anshu Jain and Juergen Fitschen.

Achleitner will join Deutsche Bank in May 2012, after an 11-year stint as finance chief of Europe's largest insurer Allianz, and 11 years working as an investment banker at Goldman Sachs.

Shareholders welcomed plans to appoint the 55-year-old Austrian, which came after Chief Executive Josef Ackermann withdrew his candidacy to become supervisory board chairman when he retires in 2012 after facing an uphill battle to win shareholder backing.

From a shareholder perspective we welcome the decision, since Ackermann's candidacy would have led to potential conflicts of interest with reputational risks for Deutsche Bank, said Ingo Speich, senior portfolio manager of Union Investment.

German corporate governance rules discourage the elevation of former chief executives to the role of independent director, given the temptation for such executives to avoid dealing with legacy issues.

For Ackermann to take over at the supervisory board without a two-year hiatus, as required by German corporate governance rules, at least 25 percent of shareholders would need to vote in favor.

Ackermann acknowledged that current market turmoil prevented him from spending the necessary time to convince shareholders about the move, but painted an upbeat picture.

Do I look sad or depressed, Ackermann said upon being asked how handing over the reins to Achleitner made him feel.

SMOOTHER RELATIONS

Achleitner's move also smoothes relations between the management and the supervisory board as Germany's largest lender prepares to outline its new strategy after Ackermann leaves the post of chief executive in May next year.

Efforts to install 63-year-old Ackermann as chairman came as part of efforts to cement a shift toward a more conservative strategy at the German lender amid widespread suspicion of investment banking.

Ackermann's relations with investment banking chief Jain and Germany chief Fitschen suffered after the Swiss executive made an unsuccessful attempt to install an external candidate -- former Bundesbank executive Axel Weber -- to be his successor.

Fears that Deutsche Bank could neglect its German roots and expand risk-taking activities prompted key members of the supervisory board to opt for the dual CEO model, combining 63-year-old Fitschen's contact book in Germany with 48-year-old Jain's ability to deliver profits.

The supervisory board wants to ensure that non-investment banking activities such as retail and wealth management will continue to gain resources under Deutsche's new leadership structure.

We hope that Achleitner will endorse both sides of the bank and act as an integrating figure, said Klaus Nieding, a shareholder activist at DSW, the association for private shareholders.

Bespectacled and short, Achleitner's influence at Deutsche will be considerable given that the supervisory board appoints, supervises and advises the company's board of management and is directly involved in decisions of fundamental importance.

At Deutsche Bank the Chairman of the Supervisory Board maintains regular contact with the Management Board, and consults on strategy, the development of business and risk management.

MANDATE FOR CHANGE

Like Ackermann at Deutsche Bank, Achleitner played a key role in introducing a shareholder-driven system of corporate governance to replace a post-war establishment which had come to be known as Deutschland AG.

For decades Deutsche Bank and Allianz helped steer Europe's largest economy as they held large stakes in companies like Daimler-Benz, Beiersdorf, Siemens and Thyssen.

Using their stakes they could protect German industry from foreign takeovers and provide a system of mutual support in the event of large-scale bankruptcies.

Achleitner who studied economics at the University of St. Gallen, Switzerland, was hired by Allianz from Goldman to unwind the insurer's network of cross-shareholdings. He oversaw the sale of a 44 percent stake in skin care products maker Beiersdorf to Hamburg-based Tchibo Holding.

His most controversial move was to engineer the purchase of Dresdner Bank in 2001 by Allianz, only to sell it again in 2008 after it became clear that efforts to cross-sell banking and insurance products proved ineffective.

Ralf Groenemeyer, analyst at Silvia Quandt research said Achleitner was part of the board which agreed on the acquisition of Dresdner Bank, the worst investment in the company's history.

A fund manager and holder of Deutsche Bank stock who declined to be named said the switch from Ackermann to Achleitner was a victory for corporate governance fetishists.

We're normally all in favor of a cooling off period, but Ackermann's track record is clearly more impressive than Achleitner's.

(Reporting By Edward Taylor and Philipp Halstrick; Additional reporting by Kathrin Jones and Ludwig Burger; Editing by David Cowell)