The Corporate Governance
Introduction
This paper compares the corporate governance in German-based Hugo Boss and UK based Blueberry Plc.
1. Does the geographical location of the two businesses mentioned above have an impact on their corporate governance structures? If yes, critically review these differences.
Hugo Boss is a German based corporate entity and it has to comply with the German Corporate Governance Code. The Code prescribes dual board system as a corporate governance structure for German stock corporations such as Hugo Boss. The dual board structure comprises of Management Board and Supervisory Board in order to ensure long term survival of the corporation and value creation in accordance with the tenets of social market economy. Thus, the Management Board is entrusted with the responsibility of managing the corporate enterprise. The Chairman of the Management Board is required to coordinate the functions of the Management Board.
The Supervisory Board appoints the members of the Management Board and supervises and advises the members. The supervisory board takes major decisions that are of fundamental importance to the company. The Chairman of the Supervisory Board coordinates the functioning of the Supervisory Board. The shareholders of the company elect the members of the Supervisory Board at the General Meeting. Where there are more than 500 or 2000 employees in Germany, employees also receive representation in the Supervisory Board. The strength of employee representatives in the Board shall be one third in the cases of more than 500 employees and one half in the cases of more than 2000 employees. The Chairman of the Supervisory Board in the cases of more than 2000 employees acts as a representative of the shareholders and holds the casting votes when there are split resolutions. The Code recommends mandatory compliance which the companies can deviate from subject to the condition that deviations are disclosed annually. The Code applies not only to the listed companies but also group companies that are designated by the term “enterprise” instead of “company” (Unodc.org, n.d.). Burberry Plc is a UK based corporation and is governed by the UK Corporate Governance Code latest version of which came into force in 2014. The Code requires that every company should be headed by an effective board which should be responsible for long-term survival of the company.
Thus, while German Code requires a dual board, UK code requires a unitary board chairman of which is responsible for effective functioning of the board in all respects. The Chief executive of the company can become its Chairman under exceptional circumstances provided the board consults major shareholders in advance and justify the appointment both at the time of appointment and in the next annual report. There shall also be non-executive directors who should scrutinize the performance of the management and ensure financial information is true. The non-executive directors decide the remuneration of executive directors. They also play a main role in the appointment and removal of executive directors. One of the independent non-executive directors shall be appointed by …
