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VIPsight

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

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

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Buhlmann's Corner


The Supervisory Board – an (un)known quantity?

The unsung hero of Corporate Governance in Germany, Christian Strenger, was right yet again. He got the legal ruling he was looking for in the wake of the 2011 general meeting on the subordinate status of the Supervisory Board of Solar World vis-à-vis the Roi Soleil Frank Asbeck. The dire straits the company is presently in speaks volumes about the far from irreprehensible conduct of the Board at the time.  The issue, though, hardly seems to be causing Asbeck sleepless nights. In theory, he could still seek admission to the Board, a feat that not even Frank Bsirske could accomplish given that he is both Deputy Chair of Lufthansa at the same time as being Chair of the Green party trade union. In 2002 his application for admission was rejected expressly on grounds of conflict of interests.

The issue of supervisory board independence is set to be a focal point in the   upcoming 2014 voting, too, thanks to the specialist who drafted the guidelines for voting in ISS (&Co). The issue it boils down to is this; does having one third independence mean having a completely free hand? My question is should situations like what Linde is squaring up for in 2014 on such a crucial issue as cooling-off be subject to a hard and fast guideline with no obligation towards sounding the market or the shareholders? Wolfgang Reitzle may be the best Supervisory Board Chair that Linde has ever had, but who is aware of the fact? I, personally, know that he is in a league of his own, and that his (re)structuring of the company, increasing its worth by a double figure percentage, was nothing short of brilliant. I am also sure that in a case like this, an exception to the rule can be trusted, also (but not only) because the working efficiency of Linde’s Board of Management is light years ahead of its Supervisory Board’s. His Chairing of Linde’s Board of Management did nothing to hinder his success as Chair of Continental’s Supervisory Board where he turned the company’s fortunes around, taking it from rags to riches. Who could have done better?

Independence and the capability to shoulder responsibility go hand in hand with the courage to take decisions as basic requisites for a (well) functioning supervisory board. A strong Supervisory Board shoulders its responsibilities and doesn’t delegate them. The lowest common denominator, though, is a balanced make up in the power structure.

There is one aspect that stands out a mile. The concentration of control and government had been identified and understood as one of the roots of all evil as late as the monarchy of Louis 14th . And yet as recently as 2003, the chairman of a company’s board of management could attest to the independence that the law demands from prospective candidates, including himself, seeking election to a seat on a Supervisory Board, a vestige which, in the meantime, has been deservedly consigned to the dustbin of history.

Yet there are still countries, France and the United States for example, who by favouring their own single-tier board systems, manifestly approve the overlapping of government and control. But what happens when the enforcer takes it upon himself to play the additional roles of judge, jury and executioner? Decision-making is certainly simpler and less hampered by disagreement, and despite its rather démodé sound and the inherent problems, PDGs are still being appointed. Here’s to Phitrust progressing in its quest for the post to be  abolished.

Fresenius is an example of how a major shareholder (independently of the extent of its holding) can do good. Alas, the opposite is also true, as Haniel has shown in its holding in  (Celesio, Metro & Co.). There is no doubt that the influence wielded by major players ought to be curtailed to prevent ‘dependence’ and to forestall situations like that of Volkswagen and MAN. A session of creative vote counting together with, then, a 30% stake assured the car manufacturer unlimited power over MAN.

The tasks assigned to the supervisory board have not increased at the same rate as their remuneration; the increase over the last ten years has been in the thoroughness and the transparency with which their agendas have been carried out. Supervisory boards are expected to keep the Board of Directors on a tight rein,, they must harness the horses that pull the cart. Both of these tasks have to function, but there’s little else to it.

Private intrigues (Solarworld) or functional muddling as in appointing PDGs; both run counter to the interests of the community as a whole, just as though one of the horses of the team were made to ride in the coach box. Responsibility measured with a ruler; would you call simple-minded or just careless.