Corporate Governance

Corporate Governance ( German: Principles of Corporate Governance ) is the framework for the management and supervision of companies. The regulatory framework is largely determined by legislators and owners. The concrete design is up to the Board practices and corporate governance.

The company-specific corporate governance system consists of the totality of relevant laws, regulations, codes, letters of intent, mission statement, and the habit management and monitoring.

• 5.1 OECD
• 5.2 Financial Services
• 5.3 Public Institutions
• 5.4 European Union

Generally

So far there is still no common understanding of the world or a uniform definition of what corporate governance means exactly or includes. More generally, can be understood as the totality of all international and national rules, regulations, values ​​and corporate governance principles but which apply to businesses and determine how they performed and monitored. In the literature (although this is rarely stated explicitly ) discussed about good corporate governance or improving existing corporate governance on a regular basis.

Hallmarks of good corporate governance:

• Appropriate handling of risks
• Formal and transparent procedure for nomination and election of board members (eg broad spectrum of people include )
• Functional management
• No interlocking relationship between the remuneration committees of various companies
• Management decisions are focused on long -term value creation
• Transparency in corporate communication
• True the interests of different groups (eg the stakeholders)
• Purposeful cooperation of the management and monitoring

Corporate governance is very complex and includes compulsory and voluntary action: the adherence to laws and regulations (compliance), the follow accepted standards and recommendations as well as developing and following their own corporate guidelines. Another aspect of corporate governance is the design and implementation of management and control structures.

Good corporate governance ensures that responsible, professional, transparent and on the long- term success oriented guide and is intended as the organization itself, its owners, but also external stakeholders ( donors, sales and procurement markets, society, citizens ) are used.

In addition, there are efforts for some time, to make the idea of corporate governance for other organizations in the public and semi -private sector efficiencies, such as cooperatives ( Cooperative Governance ), foundations, associations ( nonprofit governance ) or public businesses and institutions ( Public Corporate Governance ). In terms of sustainability, the term governance is increasingly being used for natural resources and infrastructure of the network industries ( Water Governance, Infrastructure Governance ).

Corporate governance is not a uniform international rules but apart from a few internationally recognized, common principles a country-specific understanding of responsible corporate management. In addition to country-specific corporate governance provisions but there are also transnational industry-specific regulations.

Distinguish from the term management

Corporate governance and management are often " corporate governance " translated with the same term. This translation does not apply to corporate governance. Management is the management that is possible even without taking account of corporate governance rules. Corporate governance, however, is the " responsible corporate management and control " that must be implemented primarily by the management.

History

The starting point for the declaration and implementation of corporate governance lies in the 1930s, when the divergence of interests of shareholders and corporate governance was first recognized. An important book for proposals was published in 1932 under the title The Modern Corporation and Private Property by Adolf Augustus Berle and Gardiner C. Means.

Under this title, the term first appeared in 1976, but was only by the Cadbury Report (1992 ), the Greenbury Report ( 1995) and the Hampel Report (1998 ) is known, which reported on practical experience with it.

These reports encouraged the worldwide efforts of the company, its principles of good corporate governance (see also: Good Governance ) to put on paper. These principles formulate the one hand, the main legal rules on corporate governance and monitoring, on the other hand but also mere recommendations in the form of accounting and auditing or to the work of the board and the supervisory bodies (eg supervisory board) of the company.

National regulations

Germany

In Germany, the corporate governance principles in the so-called German Corporate Governance Code have been fixed. A government commission set up by the Federal Ministry of Justice in September 2001 adopted this Code on 26 February 2002. The Code contains important legal rules on corporate governance and disclosure numerous recommendations and suggestions for the management and supervision of listed companies.

The legal foundations of corporate governance are in the German Stock Corporation Act ( AktG). Significant legislative initiatives with regard to corporate governance, for example, the Law on Control and Transparency in Business (KonTraG, 1998), the Law on further reform of company and accounting law, transparency and publicity (TransPuG, 2002), the Accounting Law Reform Act ( BilReG, 2004) and the Executive compensation Disclosure Act ( VorstOG, 2005).

The question of the substantive aspect of the action and management maxim is to answer particular law of the Federal Court in the Mannesmann process with reference to the Company's interests. The interests of shareholders and employees are the minimum interests that are to be drawn approach to define the interests of the company. The company's interest is limited according to the current supreme court the discretion of the Board in accordance with § 76 para 1 AktG.

Since 2007, persists through the Federal Ministry of Finance, the desire to explicitly extend through the publication of a Public Corporate Governance Code, the scope for public-sector companies, or for companies with public participation.

France

There are, among others, the Loi de Sécurité Financière of 2003.

Great Britain

The Cadbury Report (1992 ), the Greenbury Report ( 1995) and the Hampel Report ( 1998) form the basis for corporate governance in the UK.

The relevant today for listed companies Turnbull report is revised by the Commission Flint 2005.

In July 2010, also the Stewardship Code was published.

Canada

Austria

As in Switzerland, the situation in Austria. The Austrian " Working Group for Corporate Governance " has created the Austrian Corporate Governance Code. If a company wants to be listed on the Vienna stock exchange, it must agree to abide by this Code. The Code includes:

• L rules: are copied from different laws, therefore binding anyway ( "Law " ),
• C rules: if a company deviates, it must justify this ("comply or explain"), the " maximum sentence " that the company loses the listing of, and
• R Rules: recommendations without special effects for a company that does not comply with the rule ( "recommended ").

Switzerland

In the conditions of admission to trading on the SIX some minimum requirements on corporate governance are defined for business. 2003, the University of Zurich has verified compliance with the corporate governance rules of the SIX in a study commissioned by the SIX. At that time 85% of the guidelines were implemented. If information is not disclosed, it must be justified separately and substantially.

Since 1 July 2002, also the Swiss Code of Best Practice ( or " Swiss Code " ) exists by the Federation of the Swiss economy ( economiesuisse ). This lists rules of behavior which are necessary for an exemplary corporate governance. The application of the code is voluntary. This Swiss Code of Best Practice has been extended to ten recommendations on the remuneration of directors and senior management in 2007.

On the federal level, the Federal Council adopted the Corporate Governance Report on 13 September 2006. Specifically, the report answers the following questions:

• What are the responsibilities of the central federal suitable for outsourcing? (→ typology of tasks );
• How are entrusted with the fulfillment of these tasks company legally to design and control? (→ 28 principles );
• How does the federal government has to organize internally in the exercise of its owner interests? (→ Principles of roles ).

With the combination of task typology and guiding principles of the Corporate Governance Report creates a model that ensures the fulfillment of federal tasks in the public interest even after removal from storage and ensuring the consistent control of things the federal government. In-depth explanations of the 28 guiding principles can be found in a explanatory report of the Federal Finance Administration.

2007 Articles 663b and 663c were introduced in the Swiss Code of Obligations ( OR). This mean that companies transparency regarding the remuneration of Directors and senior management members. As a result of this provision, the compensation of the management organs must be reported in the annual report since 2007.

From the Ethos a study on corporate governance of 100 annually since 2005 carried out (since 2008 or 50), the largest publicly traded companies. The study focuses on the compensation for the directors and executive officers.

Since 2009, the independent asset managers zCapital created an annual ranking of corporate governance at the 150 largest publicly traded Swiss company. These are analyzed per company over 50 criteria of corporate governance. The first study in 2009 showed that companies with good corporate governance have a better share price performance. Another result of the study showed that companies with a large shareholder who holds more than one-third of the voting rights, on a deeper CG level than companies whose shares are split smaller.

Further legal bases concerning corporate governance be pursued within the framework of company law reform. The end of 2005, the Federal Council has opened the consultation on the revision of company and accounting law. In 2007, he was working out a message from the consultation results, which was adopted in late 2007. The company law reform was to strengthen shareholders' rights primarily to the goal.

In February 2008, Thomas Minder has the federal popular initiative "Against rip-off " filed. In particular, the initiative contains provisions on the remuneration of executive members who will apply for the listed both at home and abroad Swiss joint-stock companies. The Federal Council decided in 2008 to transform the current company law reform in a counter-proposal to minority initiative. This, although it was not in the company law reform primarily to compensation. Thus, the Federal Council has been adapted and provided with a supplementary message. The parliamentary debate on corporate law reform is still in progress.

United States

Base form, inter alia, which are based on the work of the Treadway Commission COSO control models (1992) and COSO ERM ( 2004). Since 2002, the Sarbanes -Oxley Act ( SOX) for all companies binding, which are listed on a U.S. stock exchange.

International regulations

OECD

The OECD Principles of Corporate Governance were first published in 1999 and updated in 2004.

Financial Services

The end of 1974 was established by the central banks of the G10 countries in the Bank for International Settlements the " Basel Committee on Banking Supervision ".

The " effective banking supervision core principles " revised in 2006 by the BIS published and the associated " Core Principles Methodology" outlines the requirements of the regulators to the management of a financial services provider.

Public institutions

Using existing, for the private sector imaginary " Corporate Governance Guidelines " also adopted a policy for public institutions (English) by the OECD in May 2005; these proposals were developed with representatives of INTOSAI and EUROSAI.

European Union

At European level, the European Commission has set up for testing the proven methods in the Member States in October 2004 a "European Corporate Governance Forum ". This forum aims to promote the convergence of national corporate governance codes and advise the Commission. The Forum comprises fifteen experts with different professional backgrounds. Forum members are appointed for 3 years.

In April 2011, the Commission presented the Green Paper The EU corporate governance framework and hereby various reforms, particularly in the area of ​​shareholder participation and the appointment of directors, is proposed. The aim is to change the short-term thinking of the shareholders on the one hand and the structure of the Board, in particular with regard to the introduction of a quota for women and a greater variety when selecting the other.

The Commission's proposals are controversial among experts. In particular, the inclusion of a diversity clause in the Code constitutes, in the opinion of many experts, a breach of the subsidiarity principle of the European Union, because the Commission so deeply intrude into member state structures, for which no authorization basis exists. In addition, especially the need for a pan-European corporate governance framework is called into question.

Overall, however, the Commission and the professionals agree that action is needed in some areas of corporate governance. Accordingly, statutory changes are expected in this field in the future.

Family: Family Business Governance

Corporate governance in the family differs from the governance of a typical public company listed on the stock exchange. The governance of family businesses is called Family Business Governance. A separate Governance Code for Family is family recommendations for situation- adequate design of their corporate governance. This is characterized by, for example, the identity of management and ownership, the independence of the capital market, the succession in management by the family or strangers, as well as the withdrawal of shareholders.

Social Services

The issue of corporate governance, as well as good and transparent corporate governance, also constantly increasing importance in the social economy and thus in education institutions, organizations in the social sector. Thus, the Social Service Agency has the Diakonischen Corporate Governance Code issued .. The facilities of Caritas is recommended to be based on the work support of the German Bishops' Conference for social institutions in Catholic-run economic and supervision. But not only the major carriers develop such conduct but also smaller, such as life coaching, make the subject more into focus.

Recently also claims from the policy were heard calling for a general code of the social economy. Through this especially more transparency in the use of funds and donations to be made, but also be regulated as supervisory bodies to be filled.

Language and conceptual history

In English, governance is an old concept of the general policy language for describing, assessing and comparing the way of state governance (cf. John Fortescue, The Governance of England, London 1470 ). He stood linguistically in competition with government, the ambiguous " governance " (in the sense of a substantivized improvement, also: the governing ) and "the government " (in the sense of an institution ) can mean. Governance seems to have been less and less used in the 20th century and considered obsolete.

From 1976 Governance has been revived in the U.S. economy, language in the composite concept of corporate governance with the new importance of responsible corporate management. It was not only in English, but worldwide, rezipiert also in the German business jargon and more widespread. A decade later, the World Bank, introduced with headquarters in the USA, governance in the new composition of "good governance" with the importance of good governance in the jargon of international development policy and aid, and thus coined a widespread word of today's world language. Not only chronologically must be concluded on that " good governance " is to and from the success of " Corporate Governance " grow up.

To governance has now been solved by these parallel specialized language normative terms and is again as an independent descriptive term historian and political science language returned to the general. "Corporate Governance" and "good governance" are now classified as foreign words of the German language due to its massive use.