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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

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Buhlmann's Corner

Is the world that way, OR is it just people that are?

Finally someone has said it, finally someone had the courage. Now quick, get to work and implement it! Or rather, think about it?

Nikolaus von Bomhard, boss (CEO) of the world’s largest reinsurer MunichRe (Münchener Rückversicherungs-Gesellschaft AG) and someone I esteem, hesitated a little and then clearly and audibly stated: there is a higher intelligence with which banks can be divided.... He said the goal was to avoid anything “too big to fail”. Well said, and (almost) everyone was happy – now why is no one doing anything about it?

The economy minister in Bomhard’s Land, the experienced Philipp Rösler, will surely immediately have called him. “I’ll see to it,” he will have told him, “but first I have two questions:

  • MunichRe is the biggest reinsurer. Earlier there was a bigger one, which my colleague in the U.S. rehabilitated so that the banks would do well again; but the creditors, shareholders and the public debt exploded. Can that happen to a SwissRe or a MunichRe too – if necessary, through the Federal Ministry of Economics and Technology, I’ll solve the problem in one go?

  • MunichRe is clearly structured: there is a substantial reinsurance business and also a repeatedly vociferous primary insurance business – perhaps both together make a “too big to fail.” Or, the Minister asks the executive, have you made the separation proposal just because of bad experiences at home? I could settle that too, almost by the way.

Once the Minister has initiated his legal colleague (the women’s quota, in the Federal Ministry of Justice), both ponder the question of “small enough to fail”. Already in their mental journey they have arrived at Zorneding, southeast of Munich. Raiffeisen Bank Zorneding eG is a good destination: the website tells little and sells everything (savings, insurance and even credit, but no balance-sheet data – just like a good bank should). Especially since the total assets of nearly €400 million not only fit into a ministerial budget, but even a lady minister’s budget. We’re safe here then, the Ministers assure us and each other: neither of us can help the ThyssenKrupps of this world in Brazil without asking the government first! Zorneding is the goal ....

The Zorneding board is immediately called, and as an exercise is to help determine the Libor, starting tomorrow. Shyly they ask on the phone how it works – but the Minister of Justice can quickly reassure them, because the Chancellor has explained it to her: no one used to know, and all had relied upon all-round decency as the only systemic control. Only now it had been found that for years the entire financial world had believed something that came from a handful of unknown traders, everyone was disappointed that these had at times been in contact with each other and pursued interests of their own – yet the system was designed so beautifully, the Chancellor had told her! So the Libor will soon be coming from Zorneding, and the two directors Martin Schottenheim and Oliver Brandhuber will provide the same regulator-free lack of transparency as in “the good old Libor times”. Minister Rösler is already working on the renaming of the Libor as Bibor – because Zibor is already a medical brand name and Bibor will finally put an FDP mark on the CSU State of Bavaria....

It is even optimally prepared, since the Deutsche Bank already has its twin-header on the board – that should make a split less painful. And the MunichRe executive is right to contribute his opinion to the shareholders’ meeting with his share votes. Is it not even a duty in the interests of MunichRe and its customers?

How good would the world be if more than only 34% of the owners at the Deutsche Bank helped decide, and if someone finally got upset that in Spanish AGM minutes 103% of shareholders are logged “present” by a notary? Where are the shareholders demanding responsibility for discharge from the managers, and asking:

What did the ThyssenKrupp Supervisory Board know about Brazil?

What has the BP Supervisory Board contributed to safety?

What has the Commerzbank Supervisory Board contributed to strategy?

What has the Glencore Supervisory Board.....

Why was the Supervisory Board of MAN elected in 2011 with 51% abstentions?

It is better that we begin to build, rather than break up. Start that, my dear Mr von Bomhard! Demonstrate the responsibility as a shareholder which I ascribe to you as a person and a CEO – bring all the voting shares under your responsibility to the meeting. Talk of responsibility, but also act with responsibility – just imagine, it’s AGM and the shareholders come ... all of them, reliably and error free.