Buhlmann's Corner
The German law on joint stock companies celebrates its fiftieth anniversary on September 6, 2015. Many of its provisions affected company legislation in other countries, at least up to the 1990s. The rules that became enshrined in law then are today a true reflection today of corporate governance best practice. The separation of company organs into management and supervision is the bedrock on which so-called paritätische Mitbestimmung [equality in co-determination] stands and hinges on the presence of representatives of the capital (namely the employers) and of the company (namely the employees) on the Supervisory Board. Outside Germany co-determination is not very popular.
Despite the many reforms, updates and amendments, in particular from the 1980s to the present day (in April 2015 alone there were two), the main guidelines for this law have remained intact, and flexible enough to turn the world upside down.
A former trade-union leader chairs the AGM of the (still) second largest car maker in the world, a German company listed on the DAX stock-mark index. Some years ago – I can’t remember whether it was under Toni Schmücker (the man who saved Audi) or his successor Carl H. Hahn (Jr) – a similar state of affairs was scuppered at the last minute. Not this time. At last month’s Volkswagen AGM, the capitalists’ cards were played by a former trade-union leader – incidentally the most expensive AGM chair of all 2015.
At that point, everyone and their uncle felt impelled to flood the media with their written and vocal comments. But nothing bad happened nor did the world come to an end. Berthold Huber (vice chair of the Volkswagen Supervisory Board) is a pragmatic and responsible man, a trade-union leader of the old school. I shudder to think what the like of Frank Bsirske would have got up to in similar circumstances.
Admittedly, the Federal Chancellor in office (at the time of writing Angela Merkel) retains the right to appoint representatives to the VW Supervisory Board. The very idea that the VW board of management is about to be reorganised by a former trade-unionist and, in the case in point, by the chair of an all-powerful works council is bizarre in the extreme unless, that is, under the table, the levers of power are instead very much in the firm grip of the chair of the board of management(who will soon be standing down).
The AGM went off without a hitch. It would appear that being handed a first assignment consisting of leading a global player by its AGM while it is beset by low earnings in its core business, and dogged by heated, uncertain debate is not such a big deal after all. Who knows why it should be so costly?
Commerzbank could learn something here. The AGM focused on management bonuses – just like the adolescent who asks her mother if she could stay out an extra hour at the disco, and if the answer was going to be “no”, was ready to announce “fine; from now on I’ll be staying out an extra hour all the time”.