Buhlmann's Corner

Dear German Supervisory Board, whither……?

It’s taking time, but the Government Committee on the Code of Corporate Governance chaired by Manfred Gentz is beginning to get the point that Supervisory Boards in Germany ought not to become just more costly but should also function better and become more internationally minded. The never ending cuts in the number of members and the increase in red tape for each bench (co-determination in Germany is composed of two benches – one to represent the interests of the shareholders and the other to represent those of the employees) and in the committees makes it ever more difficult to select high-profile members and ever more complicated to identify possible successors..

There are some who are loathe to go, reneging on promises made on campaigning for election (see Siemens) and those who would have left ages ago if only a successor could be found (see RWE). Other Supervisory Boards make life difficult for themselves by blithely accepting members’ resignations, and then attempt to re-appoint them for a further term (according to the law, confirmation can only be given 12 months or less prior to the expiry date of the mandate, which is how it should be). The chair of Daimler’s Supervisory Board made a promise to a member of the company’s board of management much earlier, perhaps to fuel the candidate’s motivation?

Commerzbank, too, had a lesson to learn. Seeking to make a lasting mark, the Supervisory Board set out to give new direction to the board of management (that it, itself, had appointed and put together), with fewer members, only to be faced with a tribunal ruling that obliged them to reverse their handiwork. My own opinion is that the Supervisory Board ought to foot the bill, first and foremost the chair, and then all the other members in order of importance, including the employees’ representatives according to the principle of “cling together, swing together

There is a certain feeling of having settled a score in imagining the old members of the Supervisory Board relegated back to their desks – no way should the Supervisory Board attempt to buy a sentence using shareholders’ money! The employees representatives who sit on the Supervisory Board also need to get ready for change. So far only employees working in Germany were eligible, but according to a recent ruling (not yet final), colleagues who work in, say, Bangladesh have the right to participate in co-determination.

It’s taking time, but it’s beginning to look like Monsieur Landau’s (Adidas) aren’t the only cobwebs that need to be swept away. – the danger is that the Warren Buffetts of this world will seize not only Heinz and Kraft but also, through cunning and stealth, seats on Supervisory Boards. And here I’m thinking of both those created and shared..