Sovereign wealth funds out of the supervisory boards: an appeal to Marco Buschmann and Theodor Weimer

Dear readers of GermanBoardNews,

in the economic war between democracies and dictatorships, are companies now being targeted? The attack by Singapore’s sovereign wealth fund Temasek on Bayer Management Board member Werner Baumann makes me wonder. There are good reasons for Bayer’s criticism; I, too, am skeptical about some of its activities. But the timing raises serious questions (see our current analysis).

Shareholder advocates have, in my view, rightly criticized the attack as coming at an “inopportune” time. But Temasek scolding is cheap if we leave it at that and don’t draw the right conclusions. So what to do?

To me, it is clear that we are witnessing the prelude to a long-running economic war. The fact that China is not turning away from Russia despite the atrocities shows impressively what Beijing is all about: In the long term, the Middle Kingdom wants to form a kind of Eastern Bloc 4.0 that is not dependent on Western democracies. And any ally will do, even the war criminal Putin.

The arm of the autocrats reaches all the way to the supervisory boards

We therefore urgently need an agenda to protect our economy from influence from China and allied dictatorships. The problem: In many cases, the autocrats have long had a foot in the door after sovereign wealth funds or connected investors bought blocks of shares. Sometimes the autocrats’ arm even reaches into the supervisory boards.

This is exactly where we need to start now: Deutsche Börse should clarify in its listing criteria that investors from dictatorships are not allowed to send representatives to supervisory boards. At most, this should be reserved for shareholders from countries that belong to the planned “Alliance of Democracies” around the G7.

I would even go one step further and exclude all investor representatives, as we proposed in the #FutureGoodGovernance initiative (the proposed wording at the time was: “Employer representatives on the supervisory board must be independent and, in particular, may not work for shareholders or business partners”).

Higher governance standards protect against sovereign wealth funds

Unfortunately, this proposal did not prevail in the reform of the Dax criteria last year. I therefore appeal to stock exchange chief Theodor Weimer to now at least effectively limit the influence of investors from China & Co. Higher corporate governance standards and especially independent supervisory boards are an important bulwark in the economic war!

We also need stricter rules for takeovers and shareholdings from autocratic states. We have been too naive here for a long time, especially with regard to China. Federal Minister of Justice Marco Buschmann should therefore now have proposals drawn up under stock corporation law.

At present, we often read that management and supervisory boards must now rethink their approach not only in Russia, but also with regard to China. That is correct. But the stock exchange and the German government are also called upon to do so now – and urgently.

With this appeal, we take our leave for the Easter break. We will be back at the beginning of May and will hopefully be able to report on positive reactions.

Best wishes and happy Easter,

Yours, Peter H. Dehnen