Good corporate governance: Supervisory boards should be liable like shareholders

The chairman of the supervisory board of Lufthansa and E.ON, Karl-Ludwig Kley, presented reform approaches of a working group under the leadership of the Heidelberg law professors Peter Hommelhoff and Dirk Verse in the FAZ on April 19.

The aim of the following article is to expand the reform discussion and to bring in the interests of society and the point of view of the shareholders from a business ethical point of view.

Against the background of the experience of the last few decades - starting with Enron through the financial crisis to the current Wirecard fraud case - this seems urgently necessary.

All of these crises were the result of misconduct by managers, costing society and shareholders trillions of euros and numerous jobs.

Since May 2007, Deutsche Bank has lost around 86 percent of its investor portfolio value.

At the same time, there were fines for numerous violations of the law, which made it necessary for shareholders to increase equity.

Incorrect incentives, a lack of control and liability lead to weaknesses in corporate governance.

Scandals up to and including a new financial crisis can result.

There is a need for action.

How can the owners assert their interests against the managers?

The problem of objective representation of interests can only be solved if the manager is liable like the shareholder.

This also applies to the supervisory board as the owner's representative.

It also makes little social sense to punish companies for violations, but to leave managers unmolested with their bonuses.

Only people can be liable, not companies

Only people can act independently in a business ethical sense, and that is the manager and not the company. However, companies are legally held accountable. It is only at VW-Dieselgate that a new chapter seems to be opening with the criminal prosecution of the former CEO Winterkorn and other managers, which, as in the case of Siemens' corruption at the time, is being largely driven by the USA.

The aim must be that at least the supervisory board has the same interests as the shareholders. Remuneration and liability must therefore be structured like that of a shareholder. In addition, if the supervisory board is to represent the shareholders as owners, the time intensity and the rights of intervention must be aligned with those of the owners. Furthermore, personal and professional qualifications are required in order to be able to represent the interests of the shareholders in a professional manner. So it would be important that the most important board departments are covered by appropriately designated members of the supervisory board.

In this regard, the working group criticizes the fact that the legislature has specified the requirements for personal integrity for the management board, but not for the supervisory board. In addition, when proposing candidates at the Annual General Meeting, the Supervisory Board should make it clear why a candidate meets the required requirement profile. However, this should also apply to the members of the supervisory board. To make internal promotions based on relationships more difficult, the qualifications of key managers in the company should also be published on the Internet.

A fundamental problem is that a supervisory board only has access to the information that the board of directors presents to it. In this way, all decisions of the management board can ultimately be presented in a light that has to be approved by the supervisory board. In this context, the working group proposes a direct right of information for the supervisory board to employees. However, this is not enough, as the supervisory board can only take action if it learns anything about the misconduct at all. Business ethics can help against this.