Ackermann, Esser and Welteke exemplify the loss of trust in Germany’s economic elites – the Corporate Governance Code aims to make up for the loss of trust
“What times, what customs!”, the Roman consul Marcus Tullius Cicero began in 64 v.Chr. His speech in defense of the republic. Today the status quo is no longer threatened by a military dictatorship. At the moment the elites of the globalized societies give themselves more than a small image problem by a kind of moral self-decay. In recent weeks, political observers such as the journalist Peter Scholl-Latour, the playwright Rolf Hochhuth and the historian Arnulf Baring, all of whom are not exactly suspected of being among the initiators of the left-wing party initiative, have described the developments as no longer acceptable.
Reports of self-enrichment, charges of embezzlement and fraud, and exploitation of privileges – the list of legal and moral charges is long, the Mannesmann trial and the Welteke case, the former president of the Bundesbank, the “Adlon affair” examples of this. To prevent the amoral barrel from finally overflowing and in order to protect itself “re-regulate”, In 2002, representatives from business and science worked out a standard of conduct for German companies ( German Corporate Governance Code) for the first time in the Government Commission on the German Corporate Governance Code. No one from politics was present.
Transparency, control and shareholder interests are in the foreground
Unfortunately, like many voluntary commitments, this confidence-building measure was not allowed to prove particularly effective. Nor should it. At least not for all those who have associated the term “code” with the establishment of ethics and morals as the guiding principles of German managers. Although anchored in the preamble, the addressees seem to be found less in the population and among the employees than on the international financial markets, namely the institutional investors, who are supposed to acquire a greater taste for Deutschland AG by adopting international standards and transparency.
The Code is intended to make the German corporate governance system transparent and comprehensible. It aims to demand the trust of international and national investors, customers, employees and the public in the management and supervision of German listed stock corporations. The Code clarifies the rights of shareholders, who provide the Company with the necessary equity capital and bear the entrepreneurial risk.
German Corporate Governance Code, Preamble
Control is not far behind either. In terms of requirements, examples such as the accounting fraud scandals of recent years should be made impossible through the control of management boards by supervisory boards. In practice, there is an implementation problem because, according to recent studies, many supervisory boards are still unable to act independently of the management board. Thus, as far as the level of information is concerned, they are dependent on him, so sometimes they have an information deficit. In addition, the supervisory boards are still largely made up of board members, i.e. the very bodies they are supposed to supervise later on.
Does good performance mean good pay – or is it the other way around??
However, the supervisory board also has the important task of setting performance-related pay for top management. The remuneration of the board members is said to be “be set at an appropriate level and on the basis of a performance appraisal”, so the default.
But it is precisely the now indecent quality of the elites’ severance, transition and salary arrangements that has increasingly become the source of resentment among a large part of the population. Admittedly, it’s a somewhat odd, but nevertheless meaningful comparison: If an average earner (2003: 26.700 euros gross) themselves the 30.000.000 euros in severance pay from ex-Mannesmann boss Manfred Esser, he had to do for a long time, namely around 1.124 years. In comparison, the salary of a Bundesbank president, who is after all the best-paid civil servant in Germany, looks downright paltry: 350.000 euros a year.
But if the market allows it, why for God’s sake is such a fuss made about the Ackermanns and Weltekes?? Obviously, the prevailing moral consensus of the majority of society is increasingly called into question, especially when this majority has to save money. The top salaries themselves are not questioned, but the fairness of performance and the relationship between salaries are. Plato already saw the divergence of social income classes as a cause of moral and social decay. When it comes to performance-related pay, with managers receiving six to seven-figure monthly salaries, the ordinary skilled worker today wonders what his work is worth in comparison.
It is simply an unproven dogma that high income also means gross performance, even top performance. But there are enough examples of the opposite to be taken seriously.
Prof. Fedmund Malik, University of St. Gallen
Also J.P. Morgan, a founding figure of capitalist America and the namesake of a bank, noted in the early 20. In the early twentieth century, Malik elaborated on what constituted good and bad corporate development:
It was the difference between the respective income levels in the company. In the successful companies, this difference from level to level did not exceed 30 percent, while in the unsuccessful companies, this proportion was invariably out of whack.
Prof. Fredmund Malik, University of St. Gallen
In addition to the personal performance of the board members, the economic environment and the future prospects of the company are decisive criteria for determining the income of CEOs. However, these code guidelines do not always coincide with the practice of the major German DAX companies. Rising salaries and falling stock market prices are eloquent examples of the. The case of the departed Deutsche Telekom CEO Ron Sommer, who despite the crash of the “People’s Share” had to put up with no salary sacrifices and with “the golden handshake” was passed.
Brother in the Code: Ackermann, Esser, Weltecke and Co.
The upcoming acquittals of Ernst Welteke and the defendants in the Mannesmann trial show that neither laws nor voluntary commitments can prevent moral misconduct. On the contrary: according to the logic of the Code, Klaus Esser has honestly earned his severance pay, because the shareholders’ interests are to be strengthened.
The Bundesbank, on the other hand, has appointed an ethics officer after the forced departure of Welteke. The examines not only the conduct of the Executive Board, but also whether the Code of Ethics of the European Central Bank is compatible with the Bundesbank Act, the Statute of the Bundesbank and the German Criminal Code. The results are to be presented at the end of May.
The most recent discussion in connection with the DCGK concerns the disclosure of executive board salaries of German stock corporations. If at least 80 to 90 percent of companies do not disclose the names of their board members, as required by the German Corporate Governance Code (DCGK), this is to be enforced by legislation, Federal Justice Minister Brigitte Zypries threatened. In June, the third Corporate Governance Code Conference will review the effectiveness and implementation of the Code. Perhaps one should show mercy to the average wage earner and voluntarily refrain from publishing top salaries.