Prof. Dr. Carl-Friedrich Leuschner, Chief Executive Officer German Cooperative and Raiffeisen...
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Transcript of Prof. Dr. Carl-Friedrich Leuschner, Chief Executive Officer German Cooperative and Raiffeisen...
Prof. Dr. Carl-Friedrich Leuschner,
Chief Executive Officer
German Cooperative and Raiffeisen Confederation
Second European Corporate Governance Conference
Luxembourg 28 June 2005
Cooperatives – between Corporate and Cooperative Governance
– 2 –
Content
1. The need for a corporate governance code
for cooperatives
2. Elements of the corporate governance code
for cooperatives
3. Further development and prospects
– 3 –
Content
1. The need for a corporate governance code
for cooperatives
2. Elements of the corporate governance code
for cooperatives
3. Further development and prospects
– 4 –
The need for a corporate governance code for cooperatives (1/2)
Despite similarities in the character of eG (reg. co-op) and AG
(stock company), there are significant differences which justify
a (separate) code.
facilitates the description of specific features ofthe legal and corporate form of a reg. co-op
3 major differences:
1. identity principle
2. mandate to provide benefits to members (Förder- auftrag) pursuant to §1 para 1 of the Co-op Act
3. compulsory audit
– 5 –
The need for a corporate governance code for cooperatives (2/2)
The cooperative code is a voluntary offer.
It sets out guidelines which focus on the specific corporate culture of cooperatives:
• focus on member values
• no application of the code in the form of „comply or explain“
• cooperative members are directly involved in corporate governance
– 6 –
Content
1. The need for a corporate governance code
for cooperatives
2. Elements of the corporate governance code for
cooperatives
3. Further development and prospects
– 7 –
I. Preamble
• scope
- cooperatives with a focus on capital markets(credit cooperatives)
- other forms of cooperatives, e.g. those with a full-time board of directors and/or annual audit
• member orientation of a reg. co-op
– 8 –
II. Members and General Meeting
• members are shareholders and customers at the same
time
• voting rules according to the principle:
1 member, 1 vote
problem: multiple voting rights
• „power of the purse“ of members
– 9 –
III. Board of Directors and Supervisory Board (1/3)
• position on the boards is linked to membership
• attention paid to member interests
• participatory rights of the supervisory board
• no „hostile“ takeover of reg. co-op
• extensive lending requirements
– 10 –
III. Board of Directors and Supervisory Board (2/3)
• remuneration of board members
- fixed and variable amounts
- individualised records
current debate
• stock option incentives are balanced by member status
of the board of directors
– 11 –
III. Board of Directors and Supervisory Board (3/3)
• remuneration of members of the supervisory board
- § 338 para 3 German Commercial Code
- no remuneration by results: § 36 para 2 Co-op Act
- setting-up of qualified committees
• age limit for members of the board of directors: 65 years
• supervisory board: no former members of the board of
directors
– 12 –
IV. Accounting and Auditing
• annual financial statements and consolidated statement, if required; no obligation to submit semi-annual reports
• cooperative auditing association
• no transparency requirements as regards the choice of auditor
- reason: statutory auditing mandate for the cooperative auditing federation responsible
- rules for conflicts of interest contained in the Co-op Act if impartiality is challenged
– 13 –
Content
1. The need for a corporate governance code
for cooperatives
2. Elements for the corporate governance code
for cooperatives
3. Further development and prospects
– 14 –
Development
• democratic legal form
• older corporate governance structure than stock companies
• ideal for solving our society problems:
- privatisation of public tasks
- public health
- small trade
code for reg. co-op owing to specific differences in legal form
– 15 –
• no European code in the pipeline, but:
• draft EU-directive of 27-10-2004 to amend the 4th and 7th company law directives
• EU recommendations
- of 14-12-2004 as regards adequacy of remuneration of board of directors
- of 15-02-2005 as regards the functions of supervisory board members
Development at EU-Level
thank [email protected]