Ken Altman is the President and founder of The Altman Group. This post is based on an Altman Group Governance & Proxy Review article by Asha Doogah and Frank J. Cifarelli.
About a decade or so ago, publicly traded German operating companies were characterized by stable management boards with mostly German nationals serving as board members, and stable shareholder bases characterized by a preponderance of cross-holdings by German banks, insurance companies and other operating companies. In general, there was little shareholder activism and German companies were run using a consensus style basis, with different parties giving input and decisions being made that strived for unified outcomes among the different stakeholders. This source of stability aided the German economy and allowed Germany to develop into one of the wealthiest, most prosperous Western Democracies in the world. In fact, Germany became the world’s leading exporter until only overtaken by China this past year.
However, Germany’s foray into the global economy now makes German companies recognize the important topic of corporate governance, which is a world-wide phenomenon that publicly traded companies must address. Currently, foreign investors are investing in German companies to a larger degree than in the past and activist shareholders are making their views known to management and taking action as a result. In their 22nd of August, 2008 edition, the highly respected German newspaper, Handelsblatt, published their leading story with the headline “Foreigners increase pressure on companies – international investors use general meetings for criticism.”