Boards behaving badly - Why the leading citizens of corporate Germany are so scandal-prone
THE streets of Germany’s main cities still throng with shoppers; no shops are shuttered. Much credit for that is due to the country’s famed industrial champions, which have been model corporate citizens throughout the recession, keeping employees on the payroll and investing for the long-term. Yet many of them are also remarkably scandal-prone. Big companies such as Deutsche Bank, Deutsche Telekom, Deutsche Bahn and Lidl have been caught spying on workers, journalists or board members. Siemens has confessed to bribing customers and MAN is being investigated for the same. At Volkswagen, a manager was caught paying off a member of its supervisory board. Schaeffler and Porsche are in trouble after launching murky, ill-conceived takeovers involving derivatives and mountains of debt. Yet these two seemingly contradictory aspects of German corporate behaviour may be opposite sides of the same coin.
One reason why Germany’s biggest firms have not cut many jobs is its cherished model of stakeholder capitalism, which took root after the second world war and contributed to its rapid economic growth until the 1980s. Under this model, workers’ representatives fill half the seats on firms’ supervisory boards. A separate management board is responsible for running the business day to day. Companies are also required to act in the interest of all “stakeholders”, not just of shareholders.
See full Article.
Posts
