GERMANY – The European Corporate Governance Service (ECGS) has welcomed the final version of Germany’s code on corporate governance, presented to finance minister, Herta Däubler-Gmelin, by a special governance commission chaired by Gerhard Cromme.

Institutional groups such as pension funds, and especially insurance companies in Germany, stand to benefit from the new code which is designed to generate greater transparency in the companies they invest in, says a spokesman for ECGS’s German office in Düsseldorf.

The ECGS claims the new code is the first set of nationally recognised rules on corporate governance in Germany and tries to tackle the much-criticised German corporate governance area, including:
•inadequate focus on shareholder interests.
•inadequate transparency of German corporate governance.
•inadequate independence of German supervisory boards.
•limited independence of financial auditors.

However, the ECGS remains concerned that the code’s disclosure requirements remain voluntary and it does not become officially applicable before 2004. Moreover, it doesn’t address the position of the new take-over law in Germany that allows companies to adopt measures without shareholder approval which prevents them being acquired. The ECGS calls for an immediate review of this law.

Says a spokesman for ECGS: “The commission’s non-binding recommendation that management boards convene an extraordinary meeting in relation to the new takeover law is a bad compromise. We believe the law should be reviewed to ensure that shareholders’ interests are properly served.”

Overall, though, he says the code is a step in the right direction. “The code is at least another step in improving the way companies approach the issue of governance in Europe. The onus is now on what we call ‘Germany AG’. By that we mean that we hope that companies in Germany will act proactively and adhere to the code. Even though it is voluntary at the moment, the ECGS will be monitoring its impact,” he comments.

ECGS is an alliance comprising pan-European independent investment research and consultancy firms that cametogether to provide governance assessments and informed proxy voting advice for institutions looking to invest in European companies.
Its current representative members come from France, Germany, Italy, the Netherlands, the Nordic Region, Spain, Switzerland and the UK.

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