Buhlmann's Corner

Hey, corporate governance is more important than ever - in Germany!

What all happens just before Easter, Ascension and Pentecost in Germany? There's a judge in Frankfurt who ruled in 2012 that a strike was illegal, given the circumstances. Well, that can happen, so you just stop striking, and go to court for damages and costs. This case is decided by the same judge, who a few days ago came to the conclusion that those causing the illegal strike shall not be answerable for the consequences. One can only hope that the judge’s children did not notice the surprising logic and the lack of backbone.

Something similar befell the hapless Deutsche Bank. It had already failed last year for bias in a judge, and this year seems likely to be hauled in front of the same judge. Actually there is in Germany a lawful judge, not a free choice of judge – anyway, when you could still talk of something like the rule of law. This year the Deutsche Bank wanted to help the auditor, who although elected by the owners and appointed by the Supervisory Board now had his pants full: maybe I'm not properly appointed, so can I still work sensibly? The bank did not want to live with that answer, or rather negation of an answer. Now it’s making coffee again for all the shareholders, having called an extraordinary meeting. Before Pentecost – because after Pentecost the stamped annual accounts are to be laid before the shareholders – quite ordinarily. How much backbone do people need, and what is to be done, if there’s no third party to repair the ailing backbone? Because good advice is expensive, and where are the values ​​to come from?

The solution is Corporate Governance – quite simply. If bad behaviour leads to strikes and conflict over appointed auditors, then the rules of best practice help in any situation. You just have to stick to them. And value – as we have seen – is also created: EADS abolishes the special rights and already its market value – and exchange value – rises, although there’s neither a screwdriver more in the workshop nor a single A380 more sold: just like that, a proper set of rules, and things settle themselves.

Perhaps a model for ThyssenKrupp – they’ve just lost the thinker of the German steel industry, Gerhard Cromme, who is often dubbed as the old guardian of Corporate governance. Almost as evidence, he has fixed all the evils of bad practice for himself and ThyssenKrupp as examples in the Code. To be sure, only as a deterrent example (two former executive board members on the Supervisory Board, or a shareholder’s right of appointment making him the sole ruler). But Cromme was not this ruler, and is forced to watch while foster father Berthold Beitz again directs the Thyssen, or rather the KRUPP, numbers. He cannot ask judges, but if he asks me, I see a single value-creating logic that will do, without a waiver of the special rights of the Foundation to bypass the shareholders in appointing the Supervisory Board members at ThyssenKrupp:

Berthold Beitz must bring the Foundation onto the stock market in an Initial Public Offering (IPO), and then we’ll finally get a traceable value for the special right introduced in 2007 at ThyssenKrupp – VIP opposed it then, and in counting the shareholders’ votes the notary stopped at 24.9% No votes.

EADS has proved it: special rights have a mercantile value, and judges are the worst helpers of businessmen.

Aha, so corporate governance is more important than ever – and not only in Germany!