Buhlmann's Corner

The German Corporate Governance Code gets wrinkles.

On the German Code Commission sit personalities – although no one knows how they come to be there or who chooses them and according to what criteria, but they are personalities and characters, which indeed need not be inherently bad. In these days, they in any case grind off their edges and corners, and the German Code thereby loses its profile.

First a consultation process was invented – without it becoming clear how the opinions incorporated were “evaluated/considered”. If an ageing Code approximates to an “lcd – lowest common denominator” that is not necessarily bad; at any rate it’s human. But the fact is that thereby the laboriously litigated and sweated-over “relevance to actions for rescission” is defined away, or at any rate that someone wants to define it away. Consider the following.

It was clarified that the recommendation to disclose is limited to circumstances that in the opinion of the supervisory board – rather like the Catholic ex-cathedra – would to a shareholder judging objectively be regarded as decisive for his voting decisions. What the shareholder has to think and to regard as decisive is now to be decided by the supervisory board. Thus the risk that voting decisions may be voidable because of an incorrect declaration of compliance is contained.

This is like the proverbial shooting oneself in the foot – there is a Code, a Commission made ​​of flesh and blood, perhaps even with brains and dedication, but corporate governance is defined in the following terms: legal relevance is not wanted, and codes are limited to their effect on paper – along with often outrageous and stultifying statements.

Examples:

Contrary to the Code, we conclude five-year contracts even with new board members, because we want to bind the board for five years. Those who see something rotten here have only themselves to blame!

So one need not wonder when a European Court of Justice finds, after years of litigation, that even a not-yet-fact is already subject to ad-hoc disclosure. That was after Schrempp became such a burden at Daimler that even a common cold was ad-hoc notifiable (as with Ferdinand Piëch at Volkswagen, Porsche, Scania & Co.). The Court rightly castigates on the one hand shareholders who although they ranted at the time did not act on their democratic right to vote, and on the other hand the managements, which simply produce minutes of resolutions only once the story “is over”. The broth must as usual be spooned up by the honest, the reputable managements that now have steroidal legal legs and arms from their ad-hoc duties, so doped are they by advisory lawyers they can barely walk, let alone decide. Compliance and legal affairs, for all their necessity and justification, should once again be what they are: auxiliary sciences, not an ethical Inquisition. Only with dignity and honour can​​ an adaptive enterprise be conducted – as soon as something goes awry, the shareholders should get up and act, instead of waiting for someone else to make the first move and find that global screening would be better.

Now the European Court of Justice has spoken – Bravo! No one knows how this can be implemented in daily business, and everyone is waiting for the ensuing BGH solution – a great help, after seven years and still no result: children may starve and businesses thirst – all that is sustainable there is the uncertainty, whereas what is needed is precisely the opposite!

Think of Chancellor Angela Merkel on the terrace of the German Chancellery, making ​​a hair-raising as well as purposeful statement on bank deposits in October 2008 – had she failed, she would have been overthrown. Or of French President François Hollande, who up to the elections (presidential and parliamentary) distributed expansive promises, only immediately after, supported by “expert opinion”, to do exactly the opposite – even if he is right now, he has still sustainably destroyed the image of “the politician” for a whole generation of voters.