International interdisciplinary Corporate Governance consulting

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​​Corporate Governance consulting is as indispensable as it is complex. Interdisciplinary, customised advice offered to company management is worth its weight in gold here. Clear structures with specific and transparent guidelines regarding the organisation of all business operations are a must in terms of what is required today to have an economical and efficient company management system.

What are the benefits of Corporate Governance?

As business and economic challenges are increasingly changing and stakeholders become more and more networked, complexity is growing, too. More decisions have to be taken under more restrictive conditions. Failure to take a certain decision or action often triggers liability.

We minimise such risk as far as possible and thus ensure responsible corporate management.​

GOOD CORPORATE GOVERNANCE: MORE THAN AN EMPTY BUZZWORD

Corporate Governance is an umbrella term covering all management and control processes in a company. They can be generally divided into internal processes, in particular the monitoring of management by shareholders and a supervisory board, and external processes concerning the company's legal and environmental relationships with the outside world, such as with suppliers, authorities, and interest groups.

 

The German Corporate Governance Code ("Code") adopted on 26 February 2002 contains, in the form of recommendations and suggestions, standards for good and responsible corporate governance – primarily for listed companies.

The Code's guidelines are recommendations ("shall") and suggestions ("should"), and thus a source of so-called soft laws. This means that they cannot be relied on in court. However, it is possible to incorporate the guidelines into companies' existing internal regulations, such as articles of association or management regulations, and thus translate the Code's "regulatory corset" into a source of binding laws (so-called hard laws). Furthermore, in its preamble, the Code expressly states that its contents apply to all capital market-oriented companies.


Also, the adjective good emphasises the responsible establishment and implementation of the recommended regulatory corset.

But choosing the right design is not about following a boilerplate regulatory framework. The shareholders should set up a structure:

  • that fairly and consciously balances interests of all parties involved
  • that takes environmental protection (carbon footprint) into consideration 
  • that ensures transparency (supply chains) or
  • that gives the departments involved a say

A PRACTICAL EXAMPLE: DIVISION OF RESPONSIBILITIES

“Division of responsibilities" is an instrument of Good Corporate Governance that has proven its worth in practice. The aim is to allocate the responsibility for company's departments that influence its operations to members of management in a structured way.

Apart from decisions that must be taken by management as a whole, the company is free to decide how to allocate responsibility for the respective departments to members of management (“horizontal delegation").

Very often, for example, the commercial and technical management of the company are separated from each other. The Human Resources and Finance departments are also usually kept separate. There are many parameters, based on which responsibilities can be delegated.
 
This creates an effective and functional organisation where responsibilities for departments are delegated to managers transparently and in a practical way. It is also advisable to take into account the professional interests of the managers when allocating the roles and responsibilities. This will promote a motivated way of working and will thus ensure efficient decision-making.​ 

INTERNATIONAL NATURE

Good Corporate Governance often involves international issues due to the international nature of the corporate structure of many companies. In many cases, operational decisions and the associated developments do not have only an isolated effect on the foreign branch concerned.

If a foreign subsidiary or sister company makes wrong decisions and/or has problems with supplies – for example, because no clear and appropriate management structures were established or resources were not properly planned – the parent company in Germany also suffers losses on this account by having to pay compensation of any kind.

Companies that are experiencing massive international growth are often faced with such problems. This happens, for example, when not only local representative offices but also subsidiaries are established in various countries but without setting up a corporate structure with an overarching governance system.

Without such a system, the parent company will be increasingly losing control of the management bodies of the foreign subsidiaries. Such a loss of control is reflected in the parent's inability to take business decisions at the local entity or in their slow implementation, and in the poor exchange of information with the parent company.

 

To prevent this from happening, we take the following steps:

      1. As part of a first review, we examine which legal and actual control and management mechanisms  have already been implemented by the individual foreign subsidiaries.
      2. Next, after analysing the results, an international corporate governance architecture is established with the involvement of the foreign branches and colleagues. In this process, it should be taken into account that almost every legal system in Europe has its own regulations regarding an effective and responsible corporate governance, for example, the ÖCGK in Austria, the “Swiss Code" in Switzerland, or the Corporate Governance in the UK.​

In the USA, the corporate governance landscape is totally different.

Due to the greater freedom of drafting articles of association, internal company regulations (statutes/by-laws) play a greater role in the USA.

There, the trend is that institutional investors, especially pension funds, have increasingly sought to assert their own ideas for responsible corporate governance. It is important to keep an eye on this trend, as recent amendments to the United States Corporate Governance Code show that the Commission is increasingly focussing on the institutional investors’ ideas for governance, the importance of which has been reflected in the preamble to the Code since 2017.​

INTERDISCIPLINARY NATURE

Corporate Governance as a legal and factual regulatory framework for the management and supervision of your company requires management to use its best judgement to determine the manner ensuring compliance of its business operations with its own guidelines and with statutory regulations.

This includes measures in the areas of Compliance Management, internal audit systems, risk management, internal control systems, and policy management, which together form the GRC universe.​

CORPORATE GOVERNANCE: INTERDISCIPLINARY CONSULTING SERVICES OFFERED BY RÖDL & PARTNER

Establishing and developing systems and structures that ensure that management receives the necessary information and that the measures taken by management are effectively implemented in order to ensure proper business operations, requires an interdisciplinary approach.

The GRC structures must be tailored to the size and specific conditions, needs and entrepreneurial future of the respective company, so specialists from different areas (business administration, tax and other legal areas, but also IT) should be involved. Rödl & Partner offers you high-quality, interdisciplinary consulting on this topic from a single source.

Legal specialists can support companies, for example, in the planning and implementation of risk assessments to identify legal risks to which the company is exposed when running its business operations. However, this is only the first step towards implementing an effective corporate governance system.

Also auditors are actively involved in the process of setting up the relevant systems and structures , because many of the process-related tasks involved in information management have a business administration aspect.  With its auditing standards PS 980 - 983, the Institute of Public Auditors in Germany (IDW) provides widely recognised guidelines for implementing and auditing such systems.​

Our experienced auditors at Rödl & Partner focus on advising medium-sized and internationally operating (family-owned) companies as well as players in sectors such as healthcare industry,non-profit, energy industrypublic companiessportsautomotive industryindustrial production, and real estate industry. We also have considerable expertise in IPO readiness.


Contact

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Markus Mainka-Klein

Partner

+49 89 9287 805 12

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