At the same time, I am a strong advocate of regular reflection and discussion for the benefit of an evolving corporate governance culture.

Dr. Stefan Wolf

Dr. Stefan Wolf
Chairman of the Management Board of ElringKlinger AG

We spoke to Dr. Stefan Wolf about #FutureGoodGovernance.

A ship needs a captain. There is a lot of talk about new leadership concepts, about participation and freedom. How much leadership will a company still need in the future and how much agility can it tolerate? How do you envision corporate leadership in the future?

To stay in the picture: I am convinced that, especially in today’s world, a company benefits from a strong captain who can navigate the ship safely through troubled waters. At the same time, a good captain also needs to trust his crew one hundred percent and be prepared to transfer responsibility to them. From my point of view, it is always a sign of good management when responsibilities are spread over several shoulders.

In today’s world, management is increasingly confronted with challenges whose complexity is constantly growing. As a captain, you are therefore well advised to have the right experts on board – this is just as true today as it will be in the future.

The Gretas of the world have also turned their attention to companies and their fields of action. What challenges do you anticipate for social responsibility and thus sustainability in the company?

Even if I personally consider the euphoria surrounding Greta Thunberg and the “Fridays for Future” movement to be exaggerated, at the latest this should have made every decision-maker aware that sustainability is not a shadowy existence in society and does not only serve to create a positive image for the company. Today, global companies in particular are more in the public eye than ever before and must live up to their responsibility to society as a whole. In the USA, too, a new, holistic approach is beginning to take hold as companies quietly turn away from the idea of pure shareholder value.

Irrespective of the current debate, I believe that awareness of sustainable corporate management under ESG (environment, social and governance) aspects has gained broad acceptance in recent years, even if the three dimensions are still weighted very differently. In this context, I see the development of uniform sustainability indicators and their objective comparability as a challenge.

Trust is good, control is better. Today, it is still primarily about numbers and compliance. However, artificial intelligence is changing perspectives and thinking in this area as well. How can you imagine a future system for monitoring the management board? Will a supervisory board still be watching over the management in the near future, or will ‘monitoring’ soon be replaced by a technically highly equipped external service provider?

In an increasingly digital and connected world, AI-based software can certainly be a valuable support in identifying and evaluating relevant influencing factors for corporate management. But in my opinion, the whole thing also has its limits somewhere. The original tasks of the supervisory board, namely to monitor and advise the management board, can neither be performed by an external service provider nor by a machine. Particularly in the relationship between the management board and the supervisory board, a great deal still takes place in interpersonal exchanges. For this reason, the idea that soon only a machine will be watching over the management is not conceivable to me, nor does it serve any purpose. How, for example, is the experience of artificial intelligence to be brought to bear in a meaningful way?

In short, technical support, provided it is used effectively, should continue to find its way into corporate management, but it cannot replace the current constellation between management and supervisory bodies.

Companies are subject to a constant process of change. What challenges do you expect your company to face in the next 10 years? How will these change your company? What will change for the employment and qualification of the employees?

The automotive industry is currently facing the biggest transformation process in its history. The shift from the combustion engine to alternative drive systems poses major challenges for automotive manufacturers and suppliers.

We at ElringKlinger prepared for this at an early stage by entering the field of research and development into fuel cell technology almost 20 years ago, followed by battery technology a few years later. As a result, our current product portfolio already includes complete battery modules and fuel cell stacks. With its strategic focus on the future fields of lightweight construction and electromobility, the ElringKlinger Group will undergo significant change over the next ten years, offering not only innovative components but also complete systems.

The change in the type of drive will naturally also have an impact on the job situation – particularly in the traditional technology fields surrounding the combustion engine, jobs will be lost. But new ones will also be created. To make this change socially acceptable, employees must be willing to train and fill jobs in other areas.”

There is much debate about centrality vs. decentrality, agility and core competency in organizations. Will companies even exist in today’s sense 20 years from now? What changes in terms of business organization and finance do you expect or would you like to see?

It is perfectly normal that organizations are constantly in motion and are therefore always subject to natural change. I think that’s a good thing, because standing still is a step backwards, relatively speaking. It’s impossible to reliably predict what a company’s organization will look like in 20 years; that would be like looking into a crystal ball. Moreover, it is not possible to make general statements; you cannot compare a 10-person start-up with a large corporation.

For a global corporation like ElringKlinger with more than 40 subsidiaries, decentralized structures are crucial – different markets and regions require local decision-making freedom and lean processes. Structural and process organization must go hand in hand. The decentralized trend will be reflected not only in corporate organization but also in corporate financing, i.e. it will become increasingly diversified in terms of lenders and forms of financing.

Car manufacturers will become mobility service providers, food manufacturers will become lifestyle providers, media houses will become data science companies. Where will your industry go? Will industries – as we know them today – even exist in ten years? What will come then?

There is no denying that the automotive industry is currently undergoing an unprecedented transformation and will therefore change fundamentally. Automobile manufacturers are confronted with a number of forward-looking topics – be it electromobility, autonomous driving, digital networking or shared mobility offerings. Mobility must therefore be rethought from the ground up.

For manufacturers, the challenge is to evolve from a pure carmaker to a holistic mobility provider. In 20 years, vehicle ownership will probably no longer play a role in metropolitan regions. So-called robotaxis will dominate the cityscape and combine individual mobility needs with local public transport. In rural regions, this will initially look different.

This far-reaching change will naturally also have an impact on suppliers, who will have to question their existing business model and adapt it to future requirements. One thing is clear: If you have not yet positioned yourself for the technologies of the future, you will have a very difficult time in the future and will be exposed to the pressure to consolidate.

In view of the immense scale of the transformation, strategic partnerships will also play a role in the future fields of the industry in order to leverage synergies. I therefore assume that the number of both cooperations and acquisitions in our industry will continue to increase.

Today, corporate leaders are asked from various sides about the company’s purpose or its specific mission. How do you meet this demand? What positive or critical lessons have you learned? What advice would you give to a CEO in another industry on how best to approach this issue.

ElringKlinger is committed to making the mobility of today and tomorrow as environmentally friendly as possible. With our forward-looking product portfolio centered around the core issues ofCO2 reduction and alternative drive technologies, we are making a significant contribution to reducing or avoiding the emission of greenhouse gases and other pollutants. Innovative technologies must, of course, be accompanied by environmentally friendly production processes that meet applicable environmental and quality standards. To achieve this, we need motivated and qualified employees whose concerns we take care of. I also see it as our corporate responsibility to make a contribution to the well-being of society.

Innovative products, quality and environmental awareness, employee responsibility and social commitment – these dimensions form the basis for sustainable economic development at ElringKlinger. As CEO of ElringKlinger, I not only try to exemplify this holistic approach on a daily basis, but I also demand it from our managers.

In this context, it is difficult to give advice to other company leaders due to the specific characteristics of each industry and company. But I think you should have a plausible answer to the question of what your company stands for, what your vision is and how you bring your own aspirations to life.

The so-called stakeholders, especially the (institutional) shareholders, are much more aware of their ownership rights and obligations than they were just a few years ago. It is therefore no longer enough to simply tick off the requirements of a code (“comply-or-explain”). Internationally, the intensive and permanent communication/interaction of stakeholders with company management is on the rise (“apply-and-explain”). What trends do you see here and how do you assess them?

The planned introduction of a supplementary “apply-and-explain” principle, according to which the management board and supervisory board would have to explain in concrete terms how they apply the principles of the German Corporate Governance Code (DCGK), would first and foremost mean an enormous additional, bureaucratic burden on companies. The added value, on the other hand, is questionable. The wave of outrage at this proposal was therefore no accident.

Fortunately, the government commission around Prof. Nonnenmacher moved away from it again in the code reform presented in May 2019.

At the same time, I am a strong advocate of regular reflection and discussion for the benefit of an evolving corporate governance culture. The increasing demands placed on companies by various stakeholders, including shareholders in particular, are obvious and undeniable. At a time when investment decisions are also being made by shareholders according to ESG criteria, the need for information beyond the normal financial ratios continues to increase. This will not remain a short-term trend, but will continue to gain weight.

At present, #FutureGoodGovernance is still comparable to a crystal ball in many areas. What future aspects of good governance are you most concerned about? What would you wish for if you had three wishes free? Where do you see a challenge for politics? And what responsibilities will companies and their managers have in the future?

In my opinion, the best practice discussion of corporate governance should be much more oriented to reality, i.e. to the current challenges with regard to the future viability of companies. Essential governance issues relevant to the future of companies are not, or only inadequately, considered in the DCGK. This is because the dynamic changes currently being observed in a wide range of industries pose new challenges not only for management boards but also for supervisory boards, which must inevitably lead to changed perspectives and ways of working.

A study by the Boston Consulting Group published at the end of 2018 came to the conclusion that supervisory boards no longer just want to control, but would like a more active role. Less ex-post control, and instead ex-ante constructive discussion when it comes to strategic direction – this is how I, too, could imagine a forward-looking model between the management board and the supervisory board for fundamental decisions of a company.

Thank you very much for the interview!