Wirecard is a wake-up call! We need a corporate governance master plan.


Dear readers of GermanBoardNews,

while the German government is acquiring shares in Lufthansa and ‘delegates’ its representatives to the Supervisory Board, the other prominent shareholder, Commerzbank, has the Chairman of the Board of Managing Directors and the Chairman of the Supervisory Board, because they obviously cannot/do not want to withstand pressure from an investor (see our top vs. flop today).

I would like to first of all dedicate myself again today (and certainly not for the last time) to the WIRECARD scandal. For I am particularly concerned with the question:

Where was and is the board of directors?

I know I will get a beating for these lines, but for me the Wirecard case is a disgrace for and a loss of confidence in the profession of the supervisory board! We should therefore stop patting ourselves on the back and talk things up. Because we will not get anywhere like that. Which serious person with a reputation will take on a supervisory board position in the future? How can investors be expected to have confidence in the German capital market and buy shares? There are committees with financial experts, regulations and audits, compliance systems and artificial intelligence, the German Corporate Governance Code … and there is still the Wirecard case? I can’t get that into my head. Not in 2020.

The failure of the supervisory board (and the legal consequences)

Certainly: We have experienced a total failure of the German corporate governance system. The auditors, the FREP, the Bafin – they are only part of the chain of failure. For me, however, the Supervisory Board is right at the front of the chain of responsibility! It is unlikely that the competence of the players (as can be read in their CVs) and the women’s quota (exemplary) were the reasons – at least since the restructuring of the board that began two years ago. What did the old Chairman of the Supervisory Board know and how did he hand over his mandate to the new one? Was there any onboarding for new supervisory board members and what did it look like? Why is that important?

In criminal law, the presumption of innocence applies; in stock corporation law, the reversal of the burden of proof applies: the supervisory board (in addition to the management board) is personally (!) and jointly and severally liable for damages caused by it if they have violated their duties of care. §Section 93 (2) sentence 2 AktG: “If it is disputed whether they exercised the due care and diligence of a prudent and conscientious manager, the burden of proof shall lie with them.”

It is very difficult, if not impossible, for executive and supervisory boards to win this ‘game’ against an insolvency administrator. The D&O insurance (if there is one) is only liable to the extent of the sum insured. For (non-intentional) boards of directors and the coverage of their defence costs this means: if you are late, life will punish you. I could go on here for a long time (NB: none of us would like to swap with one of the Wirecard supervisory boards), but in essence there is more at stake, namely the big picture.

A code does not prevent scandals (but then what?)

Therefore, let us first take a look back: In 2001, ENRON turned the world of corporate governance upside down. Incredible things had happened. It is to this scandal that we ultimately owe our German Corporate Governance Code.

In Germany such a scandal is unthinkable? Fiddlesticks. Even before Enron we had FLOWTEX AG (construction machinery that did not exist) and about 20 years later the P&R bankruptcy (containers that did not exist). Largely quietly and almost unnoticed by the German capital market, the balance sheet scandal STEINHOFF took place as early as 2017 (11 billion Euro price loss in a very short time). At that point at the latest, we should have woken up and realized that a well-intentioned code is not enough.

As early as January 2018, the Association of Supervisory Boards in Germany (VARD) therefore proposed making high corporate governance standards a condition for a listing on the German Stock Exchange (please come this way).

The list of criminal scandals is of course much longer. Not always was the Bafin, but almost always auditors and supervisory boards were involved. And in the driver seat there were always big egos with a great greed for fame, money and power. Is there anything concrete that can be done about this? If so, who and what?

Our agenda for better corporate governance

Recognizing the problem, calling it by its name and not simply carrying on as before is certainly the first big step. There will always be criminal machinations, but every investor should know what he can rely on:

  1. maximum transparency for all stakeholders with an obligation to communicate;
  2. fewer, but all the more clearly defined legal and regulatory requirements;
  3. consistent monitoring (“zero tolerance”);
  4. a tangible code of professional ethics for supervisory and management boards;
  5. financial liability and moral sanctions.

These are principles that now need to be given substance. The Federal Ministry of Finance and Olaf Scholz have already taken up the ball – and we hope that Deutsche Börse will follow suit. The legislator for stock corporation law is also called upon.

From our point of view, point 4 is particularly important: a tangible professional ethic for supervisory and management boards. As a first step we therefore propose to make the VARD professional principles for supervisory boards generally binding – as a kind of Hippocratic oath for decision makers.

In order to develop these and other ideas further, we now need a dialogue, a kind of “round table”. This is not about giving the patched tire more patches. We need a new tyre – casing, tube and valve.


We at VARD are happy to contribute our ideas and our international experience. Our initiative #FutureGoodGovernance shows the way.


With summer greetingsYourPeter

H. Dehnen


PS. With this issue we say goodbye to the summer break and report back in August. But we will continue to monitor current developments and keep you up to date – on our LinkedIn and Twitter channels as well as on futuregoodgovernance.de.


Additions, remarks, objections? I look forward to your feedback