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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.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.

VIPsight International

Article Index

VIPsight - 3rd Edition 2020




Wirecard AG: Everybody talks about Wirecard,

...and so do we.

Although there is still a lot of smoke covering the details of what happened, at least one can say that the Financial Times was right that unusual things were going on with Wirecard. The information uncovered so far points into the direction of criminal activities of several people, including members of the Management Board.

Amidst the volumes involved, the case enjoys its share of public attention, and it is discussed from various perspectives, including the usual suspects from politics and lobby groups. Therefore, I am convinced that everything that can be done to uncover what happened and correct mistakes will be done, scapegoats identified and law and order can be expected to be reestablished soon. Except for, well, it looks like two questions need a little more attention:

How could this happen?

Leaving aside the volumes involved, Wirecard is not an isolated event. What happened is a systemic problem of the German financial system and the result of a general lack of responsibility. Or could it be, that BaFin did not know how to address doubts and concerns, but refrained from a clear warning about its limitations? Let´s take a look at the smallest listed company in Germany, KREMLIN AG. In 2016 it turned out that the company had lost control over its assets several years ago, ad hoc-releases and corporate publications where either wrong or misleading, and for several years the company did not even have a managing director. Trading in the shares continued nonetheless, and the auditors issued unqualified audit statements for non-existing accounts for at least two business years. Consequences? Yes, BaFin sent questionnaires. For legal reasons, DPRG could not act, and the prosecutors rummage in this mud even till today without any visible consequences. The way things are, it doesn´t even ring a bell that Wirecard and KREMLIN shared the same notary in 2016. But it should worry about those responsible at BaFin that these problems did not only arise in one large case.

Follow the Money

For obvious reasons, everyone is currently looking for the missing 1.9 bn EUR. But think about the likely fate of Wirecard from the perspective of somebody involved in the dubious transactions. Why would you try to take a share of the 1.9 bn EUR? The risk that the authorities would find this money is far too high. It doesn´t take much mind to take a different and safer path. Secure your share in this money through indirect transactions that cannot be linked to you at first glance. Does anybody look into the short-selling activities in the past years from this perspective?


Commerzbank AG: Everything has it´s Time

Wirecard currently dominates the news. But somewhere in the past few days, Commerzbank, which recently dropped out of the DAX, sent a call for help. It is not clear to the outside observer whether the announcement made by the bank on July 3rd was this call, or perhaps already the previous letter from Cerberus pushing for a change.

Many investors were shocked when they heard on July 3rd that the Chairman of the Board of Managing Directors and the Chairman of the Supervisory Board would step down. Martin Zielke, the Chairman of the Board of Managing Directors, offered to resign early on the basis of mutual termination of his Board membership if such resignation is in the interest of Commerzbank. On July 8th, the Supervisory Board of Commerzbank has agreed to the mutual termination of the appointment and contract. Mr. Zielke did agree to continue to perform his duties until a successor has been appointed. He will step down from his office at the latest on 31st December 2020. Stefan Schmittmann, the Chairman of the Supervisory Board, has announced to resign from office with effect from August 3rd, 2020.

The timing of the letter from Cerberus and the bank´s subsequent publications probably came as a surprise to most observers, the content, however, less so. Since the strategically and economically disadvantageous takeover of Dresdner Bank, Commerzbank has taken a leisurely path under the care of the German government. A small step here, a little correction there, and from time to time a rebranding of the same thing. The results were a disaster. A course correction was urgently needed. And as it turned out later, the German Finance Ministry maintained close contacts with Cerberus.  But the question remains, why only now and not much earlier?


Deutsche Bank AG: For a good Friend a Bank sometimes puts its Hand in the Fire

…just to learn later that it can burn. Deutsche Bank also had this experience. But banks are not abstract data and money stores, and they need someone to act for them. All too often, perpetrators can hide behind the walls of the institution without fear of consequences. But times are changing.

In early July the New York Times informed that the New York Department of Financial Services and Deutsche Bank agreed that the bank shall pay a 150 million USD fine for its dealings with Mr. Epstein, etc. Epstein is a sex criminal and financier, and Deutsche Bank was one of his financial enablers. The article quoted the department´s statement that Mr. Epstein`s bankers “created the very real risk” that payments through the bank “could be used to further or cover up criminal activity and perhaps even to endanger more young woman”. Linda A. Lacewell, the department´s superintendent, summed it up as follows: “Despite knowing Mr. Epstein´s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions”.

On July 13th, the New York Times added important information. According to the paper, Deutsche Bank executives approved Mr. Epstein as a client in 2013 and then kept working with him, even though employees worried in early 2015 in internal communications about Mr. Epstein about the fact that “40 underage girls had come forward with the testimony of Epstein sexually assaulting them”. Deutsche Bank declined to publicly identify any individuals involved, and the authorities didn´t demand it. However, the New York Times claims that based on descriptions of the employees in the consent order and interviews with current and former Deutsche Bank officials, it was able to identify nearly every person anonymously described in the order. Furthermore, the paper stated that at least one high-ranking executive remained in her position: Jan Ford, the bank´s head of compliance in the Americas.

Interesting. How does Deutsche Bank intend to improve its reputation if it continues to employ people with such a track record, and is it really necessary that the costs fall entirely on shareholders?


Airbus SE: Is the Deck now clean?

Airbus and Boeing have been throwing stones at each other for many years. The main war zone is allegations of allegedly unclean trading and subsidy practices. Therefore, the EU and the US have interfered regularly in these processes. More recently, however, it became apparent that Boeing´s management was not up to the task and massive strategic errors have maneuvered the company into difficult waters. In contrast, Airbus has systematically worked up deficits in the past few years.

Another important milestone was reached this month to deal with the difficult past. Airbus announced that it has reached an agreement with governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts so that it no longer qualifies as subsidies. This step means that after 16 years of litigation at the World Trade Organisation (WTO), this is the final step to end a long-standing dispute.

Airbus even claims that it removes any justification for US tariffs imposed by the United States Trade Representative (USTR) and the company considers itself in complete compliance with all WRO rulings. The move was welcomed by the EU amidst the expectation that the US would lift the punitive tariffs on EU goods amidst the compliance of Airbus in this case. Investors shouldn´t relax yet, though. The US administration has moved slowly in recent years. While this is primarily a corporate governance problem in the US, it is now a problem for Airbus and its investors as well. What is more, Boeing is considered to be a cornerstone of the US economy. While after 16 years Airbus found a way out of a dead-end, Boeing´s options for action currently seem to be rather limited despite the EU´s WTO action against Boeing still running. Investors should therefore not have too great expectations until the US elections.


RHÖN-KLINIKUM AG: The Takeover Battle is over

The fierce struggle for control over RHÖN-KLINIKUM is over. A lot was at stake for everyone involved, not least the future strategic positioning of their own. The decisive phase was the weeks before the Extraordinary General Meeting of shareholders, and the meeting itself.

The anomalies begin with the fact that there were two requests to convene the meeting. RHÖN-KLINIKUM invited shareholders at the request of the two shareholders B. Braun Melsungen AG (April 18th) and Asklepios Kliniken GmbH & Co KGaA (April 20th), who called for this meeting to be convened independently of each other in connection with the voluntary public takeover offer published by Asklepios. Hence, the Board of Management of RHÖN-KLINIKUM was placed between two chairs. On April 27th, 2020, the Board decided to allow in full the request made by Asklepios, and in part the request by B. Braun, as regards the organization and agenda of the meeting.

B.Braun invoked the local court in Schweinfurt with several matters related to the meeting, including authorizing the convening of the EGM, the addition of additional items to the agenda of the meeting, and asking the court to determine the chairman of the meeting. The local court confirmed the position of RHÖN-KLINIKUM, however, and an appeal to the higher regional court by B. Braun failed.

The agenda of the extraordinary shareholders´ meeting on June 3rd, 2020, comprised a discussion and where appropriate resolution on the takeover offer of Asklepios, a proposal to raise the quorum for AGM-decisions to a three-quarters majority, and several votes on members of the Supervisory Board. After all, this meeting was more about information rather than decision making, since it allowed the parties to measure their strength. On June 17th, 2020, B. Braun informed via press release that it accepted the voluntary public takeover offer by Asklepios and submitted its shares in RHÖN-KLINIKUM.


thyssenkrupp AG: Who scared this Flock of Sheep?

July 17th, 2020, is a day the investor relations team of thyssenkrupp will probably not forget so quickly. In the German market, the story of the day was the “news” that the company faces a deep loss in Q3 due to coronavirus effects. According to the press reports, this information was disclosed in a letter of thyssenkrupp to its employees. The sensation received considerable media. Consequently, the shares tanked in an otherwise positive market environment. At some point, thyssenkrupp shares even lost 2.5%.

But wait a minute, did you notice the audience? The letter was addressed to employees, not investors, analysts, or financial journalists. But wouldn´t you think that investors should have received this news first?  So didn´t  investor relations address shareholders properly (i.e. timely), or what else happened here?

I´m not sure if every journalist would like to hear the answer, but here it is. Let´s go back for a few weeks. Mid-May would be the right timing when thyssenkrupp informed about the Q2 data and business development. And of course, that includes the outlook for the following quarter. Not everyone will remember the details disclosed at the time to analysts, journalists, and investors. But the internet can help to refresh memories.

For example, we can still find the presentation “newtk and Q2 FY 2019/20 Facts and Figures June 2020” here: https://d2zo35mdb530wx.cloudfront.net/_binary/UCPthyssenkruppAG/de/investoren/berichterstattung-und-publikationen/link-2020602_Charts-on-Q2_19_20_Presentation_June_FINAL.pdf 

No scroll down to page 20, and you´ll find the Q3 outlook information as follows: “In Q3 – given the currently unforeseeable effects of the pandemic on demand and supply chains and depending on the speed of production resumption by our customers – a loss in the high 3-digit million EUR range is likely and up to a good 1 bn EUR cannot be ruled out.”  

I guess it would be unfair to blame the delayed response by some media on COVID, wouldn´t it?


Linde plc: Exceptions prove the Rule

With the recent closures of consulates, relations between China and the US have reached a new low. This is not a conducive climate for economic cooperation, not at all. A current initiative from Linde is therefore all the more surprising. In July, the company, that emerged from the merger of Praxair and the German Linde AG, surprised market participants with two new initiatives towards the Chinese market.

Linde and China National Offshore Oil Corporation´s subsidiary, CNOOC Energy Technology & Services, announced the intention to jointly develop the hydrogen energy industry in China. The partners will explore the option to invest in hydrogen and filling facilities, and further the use of hydrogen in industrial applications, particularly mobility.  While Linde expects that the partners will leverage the complementary strengths and work towards a more sustainable. Low-carbon future for China, CNOOC is looking forward to collaborating with Linde´s “industry-leading expertise in hydrogen and hydrogen refueling technology”. I couldn´t have put that better.

Another cooperation with a Chinese company was announced a week earlier. Linde signed a Memorandum of Understanding with Beijing Green Hydrogen Technology Development Co., Ltd., a subsidiary of China Power International Development Ltd, to jointly promote the application and development of green hydrogen in China. The partners plan to collaborate on a variety of green hydrogen initiatives, including hydrogen technology research and development, and the implementation of green hydrogen mobility solutions during China´s inaugural hosting of the 2022 Winter Olympics.

That reads interesting at first glance. But the main obstacle for the success of the initiatives will probably be found in the political environment rather than at the business level.


MTU Aero Engines AG: Everything stays the same

The German language is known to be precise, but also complicated. Here´s an example:

- Alles bleibt beim alten (everything stays the same)

- Alles bleibt beim Alten (everything stays with the old man).

Google translate doesn´t even realize the small difference, and the pronunciation is identical. But even if you know the different meanings, there are occasions where one cannot assign the meaning of a publication. A perfect example of such a dilemma is a recent Ad hoc-release by MTU. Mid-June, the company informed that Klaus Eberhardt will continue to lead the Supervisory Board. This was decided unanimously by the Board.

Well, let´s see. The purpose of an Ad hoc-release is to disseminate information that has not been available to the public yet, and which potentially might trigger a relevant share price movement caused by actions (buy or sell) of investors.

Accepted, this information was new to the market, but which investors will buy or sell shares on a larger scale? Perhaps the reason for the Board decision might help to find an answer to this question. “Maintaining continuity at the helm of the Supervisory Board is a response to the special challenges by the coronavirus crisis.” Sounds fine to me. But this argument would only be valid if the response is adequate to the challenges. One can only speculate what kind or specific challenges arise by the coronavirus crisis, that required an ad hoc-release regarding this decision.

At the same meeting, the news goes on, the Supervisory Board also decided unanimously to raise the previously valid age limit for its members in general to 75. This is a forward-looking decision. We all tend to get older on a year-by-year basis and early retirement is not everyone´s cup of tea. The release used different wording, though: “Given a general increase in life expectancy, this step will contribute to being able to secure valuable expertise and experience…”.

In an attempt to apply the aforementioned experience, the release closes with the following statement: “The Annual General Meeting of MTU Aero Engines AG will be held virtually on August 5, 2020. Re-election of Eberhardt is not necessary, since his Supervisory Board mandate lasts until 2023.”


LEG Immobilien AG / TAG Immobilien AG: The little ones are always hit a little harder

When you open the TAG investor relations pages on the TAG website, the first page provides “five reasons to invest”. The presentation is clear and straight: This is the stock you should by. Nowadays, such a hardcore selling approach is rarely used by investor relations. Despite being a bit outdated, it still seems to work occasionally. And perhaps it is even the reason, why LEG Immobilien AG and TAG Immobilien AG started to flirt with each other in May this year.

More or less nothing is stated on the TAG Immobilien site about this event. Which, in a way, makes sense considered that TAG Immobilien was probably the more discreet partner and dealt with information for investors much more cautiously than LEG Immobilien. On the other hand, LEG Immobilien is almost gossipy, but also reliable and precise: “The Management Board of LEG Immobilien AG confirms that it is in talks with TAG Immobilien AG about a potential combination of the businesses of both companies. For this purpose, LEG would offer to the TAG shareholders to exchange their shares into LEG shares. At this stage it is uncertain whether an agreement will be reached and whether a transaction will be announced.”  

The uncertainty didn´t last long. Just four days later the public learned that the Boards of the two companies decided to terminate the talks on a possible combination of the two companies, as no agreement could be reached particularly about a possible exchange ratio. We don´t know the details of why the two didn´t come together. But many investors saw the potential of the combination, which can be described by referring to the complementary location of the two property portfolios and economies of scale. If you follow this logic, it is no surprise that the termination of the talks put the share price of the smaller partner, i.e. TAG Immobilien, under pressure.