What is correct and acceptable temperament.

What is considered faulty and unacceptable temperament.

Temperament IS genetic. Temperament CANNOT be changed. Temperament is the core which determines the type of behavior and response to a given situation.

Behavior is a learned response to various stimuli. Behavior can be modified only to the degree of which temperament will allow.

Any German Shepherd Dog that displays shyness or fear has a serious fault in Temperament. The German Shepherd Dog should be aloof. When not confronted with a threat, the German Shepherd Dog should be approachable.

A puppy with a shy or fearful temperament, when older, will never stand and hold its ground if confronted with a threatening situation. With constant positive training (conditioning), in time it can learn to accept and deal with some stressful situations, but if this puppy is pushed too far or has poor training (conditioning) this puppy can go the other way and become a fear biter.

Signs of weak / poor temperament: any signs of avoidance; barking / growling while backing away; tail tucking; hiding behind its owner or under chairs or tables; not willing to approach people or things and check them out.

From the German Shepherd Dog Standard regarding Temperament

Temperament

The breed has a distinct personality marked by direct and fearless, but not hostile, expression, self-confidence and a certain aloofness that does not lend itself to immediate and indiscriminate friendships. The dog must be approachable, quietly standing its ground and showing confidence and willingness to meet overtures without itself making them. It is poised, but when the occasion demands, eager and alert; both fit and willing to serve in its capacity as companion, watchdog, blind leader, herding dog, or guardian, whichever the circumstances may demand. The dog must not be timid, shrinking behind its master or handler; it should not be nervous, looking about or upward with anxious expression or showing nervous reactions, such as tucking of tail, to strange sounds or sights. Lack of confidence under any surroundings is not typical of good character. Any of the above deficiencies in character which indicate shyness must be penalized as very serious faults and any dog exhibiting pronounced indications of these must be excused from the ring. It must be possible for the judge to observe the teeth and to determine that both testicles are descended. Any dog that attempts to bite the judge must be disqualified. The ideal dog is a working animal with an incorruptible character combined with body and gait suitable for the arduous work that constitutes its primary purpose.

What the German Shepherd Dog Club of America advises about buying a "SHY" puppy. 

Shy Puppies