[A-List] Germany: corporate governance changes

["Michael Keaney" <michael.keaney@xxxxxx>]

The head of the corporate governance commission whose proposals inspired
this was Gerhard Cromme, CEO of ThyssenKrupp and a leading light of the
European Round Table, the collection of CEO's founded by Pehr Gyllenhammar
in 1983 that is a major source of European Commission policy.


German plan to tighten company law
By Hugh Williamson in Berlin
Financial Times: February 26 2003

Germany yesterday announced plans to make its companies more attractive to
investors by making executives take personal responsibility for misleading
shareholders.

They will also face longer prison sentences for financial crimes while
auditors, financial analysts and credit rating agencies will be subject to
tighter rules.

Ministers admitted that the proposals, which come a day after Dutch retailer
Ahold shocked markets with news that its US profits had been overstated,
were a response to corporate scandals in the US.

Hans Eichel, finance minister, said the 10-point plan was aimed at
"increasing transparency and stability in German financial markets", thereby
boosting shareholder confidence and making the country more attractive to
investors.

Under the proposals, to be introduced in several separate laws to take
effect from January 2005, small shareholders will be able to launch
joint-action civil cases against individual executives and supervisory board
members if they are suspected of spreading misleading information.

The share ownership threshold above which shareholders can file for damages
is to be lowered from 10 per cent of base capital to 1 per cent.

Brigitte Zypries, justice minister, said she was assessing plans to extend
the maximum sentence for capital market crimes from three to five years.

A powerful financial task force is to be established within Bafin, the
federal financial supervisory agency, to conduct snap investigations of
companies suspected of malpractice. Bafin will also supervise a new
independent "enforcement" body to check that company auditing is conducted
properly.

A stricter separation for auditors between auditing and consultancy
activities is envisaged. BAFin is to maintain a list of registered auditors,
and will be empowered to de-list companies that break the rules.

The time period within which listed companies have to publish annual reports
is to be shortened to three months from 12 months, and greater adherence to
international accounting standards is expected.

Ms Zypries said greater transparency on executive pay was needed, and
suggested that draft laws may be extended to disclosures of individual
executives' salaries and benefits.

The 10-point plan, which was first discussed last year, has its origins in a
commission to improve corporate governance that reported in 2001.

Shareholder groups welcomed the announcements.