The Importance of Corporate Governance

 

So far, there is no worldwide recognized definition or understanding of what ‘Corporate Governance’ is. The German company ThyssenKrupp (ThyssenKrupp AG, 2014) defines it very well:
"The term corporate governance stands for responsible management geared to long-term value creation and control of companies. Efficient cooperation between the Executive Board and supervisory board, respect for shareholder interests, openness and transparency of corporate communications are key aspects of good corporate governance."
Generally it can be said that Corporate Governance is the aggregate of shareholder interest-oriented principles, which strive for transparency and a balance of management and control while maintaining decision-making capacity and efficiency at the highest corporate level (v. Werder, n.d.). In general spoken Corporate Governance is the manner in which companies are led, managed and controlled (Solomon & Solomon, 2004, p. 1). Since dealing with Corporate Governance in Europe for a long time was a primarily academic discipline, Corporate Governance is highly topical on the European continent at the latest since Enron and Vivendi Universal. International capital market-related conditions were set with the publication of the OECD’s ‘Principles of Corporate Governance’ in 1999, which are essential for the pursuit of good governance in the corporate sector. An intense debate is also still required to meet the micro - and macro-economic importance of the issue. In the following, four issues will be discussed which may be considered the core elements to realize the importance of Corporate Governance:

• Integrity
• The regulatory framework
• Bonus culture
• Directors' training

INTEGRITY

The perception is in the eye of the beholder, and while corporate governance is rather a technical term for accountants, lawyers and the like, buzzwords such as honesty, decency, and fairness are well-known among the readers of the popular newspapers. What the professional in this field would call questionable practice the public would rather name with critical words like rip-off or scam. The central question today in the area of corporate governance is not whether the big companies comply with various provisions of the Combined Code, Sarbanes-Oxley, King, etc. The point is rather whether the top management of large companies especially, but actually the business world in general is considered ethically in the eyes of the public (McDonough, 2002). The policies, procedures and standards of ethics, honesty and integrity throughout the company, promoted and adopted by the management, should be designed to follow the ethical tenor set by the organization’s board (Deloitte Risk Journal, 2013). And it is exactly this integrity – the perceived and the real one – which emphasize the importance of Corporate Governance, because it represents the tool with which integrity can be encouraged, measured and projected (Applied-Corporate-Governance, 2014).

THE REGULATORY FRAMEWORK

One can certainly debate if the ‘The Importance of Corporate Governance’ may be rephrased as ‘The Importance of Good Management’. But in simple words, one could just say good governance is good management and failures in governance just reflect bad management (Lipman & Lipman, 2006, pp. 3-8). The regulatory framework, consisting of mandatory laws and rules, such as in Ireland, the Companies Acts 1963 to 2003, and non-mandatory codes, policies and procedures is the base on which organizations operate their corporate governance. In the face of the recent financial crisis it still seems that reforms are necessary although it is quite clear that more regulation does not automatically mean better regulation. The excellent legislation that is already in place, which forced companies to generally act in a fair manner, disclose information and reduce costs and charges should be utilized to build upon instead of inventing more legislation which can simply be checked off (Aggarwal & Williamson, 2006).

BONUS CULTURE

Director’s remuneration and bonus culture are often discussed in the media and again the perception is in the eye of the beholder. While a normal workman will never understand how a single person can get a year’s end bonus in a dimension of what he would never be able to earn in all his life time of hard labour, in a well-run organization good performance has to be rewarded to attract talent, high performance and people dedicated to improving performance. The OECD also recognizes in its Principles of Corporate Governance (OECD, 2004, p. 11) that “(. . .) proper incentives for the board and management [should be provided] to pursue objectives that are in the interests of the company and its shareholders (. . .)”. So it is not about the principle which needs to be discussed but the execution and realization. While a board, management and perhaps even shareholders may feel that remunerations in two-digit millions height may sound appropriate it is quite obvious that such corporate policies may not be in accordance with the public judgement.

DIRECTOR’S TRAINING

Following the OECD’s Principles of Corporate Governance “Board members should act on a fully informed basis (. . .)” (OECD, 2004, p. 59). This requires at least a basic level of competence and experience which certainly varies on the size of the company, the type of business and the complexity of the organization. The required competency to be ‘fully informed’ therefore should comprise basic financial literacy, a comprehension of the strategic planning process and an insight of human resource formation. Some Asian countries require director training to support the fulfilment of such requirement. Such Training and education should not be limited to director’s basic legal and governance duties but also include the fields of developing business strategies, budgets, risk policies and the understanding and monitoring of internal control systems (OECD, 2011, p. 39). In Europe there has never been a formal requirement for a qualification to run a company or to be a director although in the recent past qualifications like the ‘Chartered Director’ have been introduced. It may seem obvious that the ‘Importance of Corporate Governance’ will have a major influence on developments like this. Corporate Governance is very well accentuated by the ‘Institute of Directors in Ireland’ as a significant element in their qualifications (IoD, 2014). Corporate Governance is a highly complex issue and although there is still the need for a clear and precise definition the principles and those who are the responsible for its operational execution are clear (Anand, 2008). All of the above points to one central point in the discussion about the importance of corporate governance. Christine Mallin expresses brief but accurately, proper corporate governance “therefore helps a firm to be sustainable in the longer term” (Mallin, 2006, p. 3).

REFERENCES

Aggarwal, R. & Williamson, R., 2006. Did New Regulations Target the Relevant Corporate Governance Attributes?. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=859264

Anand, S., 2008. Essentials of corporate governance. 1st ed. Hoboken(NJ): John Wiley & Sons, Inc..

Applied-Corporate-Governance, 2014. Applied Corporate Governance. Available at: http://www.applied-corporate-governance.com/importance-of-corporate-governance.html

Deloitte Risk Journal, 2013. The Role and Benefits of a Corporate Governance Framework. Available at: http://deloitte.wsj.com/riskandcompliance/2013/05/24/the-role-and-benefits-of-a-corporate-governance-framework/

IoD, 2014. Bespoke Board Training in Corporate Governance. Available at: https://www.iodireland.ie/director-development/bespoke-board-training-in-corporate-governance

Lipman, F. D. & Lipman, L., 2006. Corporate Governance Best Practices: Strategies for Public, Private, and Not-For-Profit Organizations. 1st ed. Hoboken(NJ): John Wiley & Sons, Inc.

Mallin, C. A., 2006. Handbook on International Corporate Governance - Country Analyses. 1st ed. Cheltenham: Edward Elgar Publishing Ltd.

McDonough, W. J., 2002. Issues in Corporate Governance. Current Issues in Economics and Finance, 09, 8(8).

OECD, 2004. OECD Principles of Corporate Governance. Available at: http://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf

OECD, 2011. Reform Priorities in Asia: Taking Corporate Governance to a Higher Level. Available at: http://www.oecd.org/corporate/ca/49801431.pdf

Solomon, J. & Solomon, A., 2004. Corporate Governance and Accountability. 1st ed. Chichester: John Wiley & Sons Ltd.

ThyssenKrupp AG, 2014. Corporate Governance. Available at: http://www.thyssenkrupp.com/en/investor/corporate-governance.html

v. Werder, A., n.d. Corporate Governance. Available at: http://wirtschaftslexikon.gabler.de/Archiv/55268/corporate-governance-v7.html

Brooklyn Bridge, NYC

Brooklyn Bridge for me is one of the most exciting buildings in New York. Spanning over the East River it connects New York's boroughs Manhattan and Brooklyn. The bridge is 486m long, 84m high and is the first steel-wire suspension bridge ever constructed. By the US government it was designated a National Historic Landmark by the National Park Service in 1964, a New York City Landmark by the Landmarks Preservation Commission in 1967 and a National Historic Civil Engineering Landmark in 1972.

Construction of the bridge began as early as in 1869 and it was initially designed by a German-born, how else could it be, engineer, Johann August Roebling. Roebling never saw his bridge, he died after an accident in the early time of construction. His son, Washington Roebling, finished the supervision of the construction after his father’s death.

The bridge was opened for public use on May 24, 1883. Emily Warren Roebling, Johann August’s widow and Washington Roebling’s mother was the first to cross the bridge. On that day it was the only land passage between Manhattan and Brooklyn and 1,800 vehicles and 150,300 people crossed the bridge. Six days later rumors were spread that the bridge is collapsing which caused a stampede and at least twelve people died. P.T. Barnum helped to squelch doubts about the bridge’s stability – on May 17, 1884 one of his most famous attractions, Jumbo, led a parade of 21 elephants over the Brooklyn Bridge.

 

In the days of its opening, and for a long time afterwards, Brooklyn Bridge was the longest suspension bridge in the world. Today more than 120,000 vehicles, 4,000 pedestrians and 3,100 bicyclists cross the Brooklyn Bridge every day.

Every time I visit New York I spend the first morning, jet-lagged, crossing the bridge by foot at sunrise. The best views from Manhattan’s skyline and of course of Brooklyn’s can be caught from there …

Brooklyn Bridge at sunrise

Manhattan's Skyline, view from Brooklyn Bridge




Brooklyn, view from Brooklyn Bridge

Patrician families of Munich

According to Titus Livius Patavinus in ancient Rome it was the first 100 men appointed senators by Romulus that were called the fathers (patres) and their descendants became the patrician class. Originally referring to these ruling class families, they were distinct from the plebeians because they had wider political influence in ancient Rome, the term patrician (Latin: patricius, Greek: πατρίκιος, patrikios) was re-defined in medieval times and subsequently in many countries became a vague term for aristocrats and the higher bourgeoisie.

In medieval German cities the patrician class emerged in the 11^th century from the former local nobility or the local ministerials. They called themselves "Geschlechter", German for families or tribes but in old Latin documents this was translated to "patricius". These families occupied the Council and other important municipal offices and tried to maintain an exclusive right to these. It was only by the early 16^th century that the term patrician was used to clearly distinct the noble urban families and many of these were nobilitated by German sovereigns.

In Munich the political and social elite of the city arose from the members of the city council. The patrician families mostly came from the merchant class and even from richer craftsmen. This closed, exclusive circle of patricians, for the membership, the election to the Inner Council was a decisive criterion, ruled the city for a long time. Since the 17th century the Bavarian sovereigns bestowed hereditary "Patriziatsdiplome" and the last time such a privilege was granted in 1800.

The creation of this upper-class civil community and the emergence of the Munich Council went hand in hand. For the first time the city council of Munich was mentioned in a document from 1286 ("consules civitatis Monacensis"). In the "Rudolfinum" from 1294, the oldest surviving town charter, the council is already the central "authority" of the city and in possession of the statutes of autonomy, the police and lower judiciary.
Basically the patriciate always consisted of about 20 to 30 closely related families. Their names are preserved in the oldest council lists since 1295: these are old families of Munich like the Sendlinger (since 1170), the Pütrich (since 1189), the Rudolf (since 1237), the Guldein (Aureus) (since 1239), the Wilbrecht (since 1239/42), the Freimanner (since 1253), the Draechsel (since 1269), the Ligsalz (since 1269), the Schrenck (since 1269), the Schluder (since 1271), the Bart (since 1272) and the Ridler (since 1295). Some other names and families already vanished again from Munich dying out like the Katzmair (1533), the Astaler (1475), the Tulbeck (1476), the Gießer (1494), the Tömlinger (1519/25), the Wilbrecht (1526/48), the Schluder (1535) and the Pötschner (1541).

These families, represented inside the council, mostly married amongst each other, many of them were related by marriage, so for example the Katzmair with the Schrenck, the Rudolf, the Schluder and the Pötschner. However, the corporative unity and exclusivity has never been as great as for example in Nuremberg. Marriage connections with the "Reichspatriziat" of Regensburg, Nuremberg and Augsburg were not uncommon, as well with the squirearchy in the 14th century.

The Katzmair of Munich

Katzmair Crest of Arms

The Katzmair once were one of Munich’s most influencial and important families. They were part of the patrician elite that “ruled” the city being members of the city’s inner and outer council. As some of the other families like the Astaler or the Pötschner the family died out in 1533 although there was an illegitimate son mentioned in the early 16^th century who may have kept the surname Katzmair and preserved the name.

1. Martin I¹ Katzmair was born about 1286 in Munich, Bavaria, Germany and he died about 1336 in Munich. He married Sophie Küchel, from Munich, the daughter of Ludwig I Küchel who was mentioned as a member of Munich's council on 25.02.1335. She had three brothers, Heinrich, Liebhart and Ludwig II.

From 10.02.1318 Martin I appears as a member of the council in Munich and in 1319 he was mentioned as "Pfleger des Salzes" (lit. 'guardian of the salt'). From about 1329 he was the chamberlain of the city and on 24.08.1334 he acts as a member of the inner council while on 25.02.1335 he is mentioned being in the sworn council in Munich.

Children of Martin I Katzmair and Sophie Küchel were:

2 i Anna² Katzmair was born Munich and died there. After 1353 she married Heinrich II Rudolph, born 1310 in Munich and died between Feb 22 1378 and Mar 26 1378 in Munich. In he was first mentioned in Munich on 22.01.1333. Between 1334 and 1340 he was Munich's chamberlain and between 1365 and 1374 he acted as mayor of Munich. In 1377 he is mentioned as Grand-Master of the "Heiliggeistspital". In the years 1367-1369 and 1375 he was taxed as the second richest citizen of Munich. He was the son of Heinrich I Rudolph, who since 10.02.1318 appeared to be a member of the outer council and from 1320 in the inner council, and Katharina Weissenfelder. Anna was his second wife. His first wife Katharina Pötschner died 14 Aug 1353. The Rudolph family appears as well as one of Munich's most influential families. Finally in 1533 they will be the ones to inherit all the Katzmairs property and belongings after the family dies with Georg III. 

3 ii Jakob² Katzmair , born and died in Munich.

4 iii Johannes I² Katzmair , born in Munich and died 30 Nov 1384 in Munich. He married Elisabeth Rudolph .

5 iv Konrad² Katzmair , born in Munich and died 29 Dec 1346 in Munich. Between 1337 and 1346 he acts several times as a member of the council of Munich and on the 12.08.1346 he appears as a member of the sworn council.

Generation 2

4. Johannes I² Katzmair (Martin I¹), born in Munich, died 30 Nov 1384 in Munich, Bavaria, Germany. He married Elisabeth Rudolph , from Munich, she died 2 Jul 1405 in Munich. Since 1362 Johannes repeatedly appeared to be a member in the inner and outer council of Munich. In 1367 he was Church Provost and from 1372 he was a member of the sworn council. He was a merchant, trading with wine and horses. Johannes Katzmair bought Lake Wörth including the island and the entire vicinity on the 8th September 1369.

Children of Johannes I Katzmair and Elisabeth Rudolph were as follows:

6 i Agnes I³ Katzmair , born in Munich, she died between Sep 1415 and Nov 1416 in Munich. She married Heinrich Schluder , born in Munich, died abt 1369 in Munich. Heinrich and his father Konrad were banned from Munich in 1317 after disputes about the city council's constitution. After Heinrich died in 1369 Agnes returned to Munich re-married again aroun 1370/71. Her second husband was Erwart Herwart, born in Augsburg, Bavaria, Germany and he died about 1375 in Munich.

7 ii Georg `Joerg`³ Katzmair , born in Munich, died 5 Mar 1417 in Munich. He married Katharina Käuzl .

8 iii Hans II³ Katzmair , born aft 1364 in Munich, died before 1384 in Munich.

9 iv Martin II³ Katzmair , born in Munich, died before 1384 in Munich.

Generation 3

7. Georg `Joerg`³ Katzmair (Johannes I², Martin I¹), born in Munich and died 5 Mar 1417 in Munich. He married Katharina Käuzl , born in Salzburg, Bavaria (yes, there was no Austria at that time !!), and she died 14 Apr 1427 in Munich. Since 1386 ‘Joerg’ appears as member of the inner council and several times as mayor of the city of Munich. Most famous he became with the report he wrote on the riots in the city of Munich between 1397 and 1403. He had to flee the city on 03.08.1398, lost most of his real estate and possessions, and sought refuge at the court of the Dukes Ernest and William. It was only 1403 he could return to the city being reinstated to all his offices and receiving back his wealth.

Children of Georg `Joerg` Katzmair and Katharina Käuzl were:

10 i Agnes II⁴ Katzmair , born bef 1424 in Munich. Agnes appeared to be a nun in the Franciscan monastery "St. Jakob am Anger" as part of the "Order of St. Clare". Since the early 13th century this was the start of the Bavarian part of the "Camiño de Santiago" the way of the apostle St. James to Santiago de Compostela.

Kloster St. Klara bei St. Jakob am Anger

11 ii Hans III⁴ Katzmair , born abt 1398 in Munich and died about 1420 in Munich. 

12 iii Martin III⁴ Katzmair , born abt 1401 in Munich and died 4 Nov 1481 in Munich. He married Anna Pötschner .

Generation 4

12. Martin III⁴ Katzmair (Georg `Joerg`³, Johannes I², Martin I¹) was born about 1401 in Munich where he died on 4 Nov 1481. He married Anna Pötschner , born and died in Munich, the daughter of Peter Pötschner and Anna Schrenck . Martin II. 1429 was a member of Munich's council and from 1430 acted as the first chamberlain of the council. In May 1431 he held the first time the mayor's office and as such denied the officials of the Corpus Christi procession the "Geyrenmall and Fressgeltt". Katzmair had caused a scandal by subband those hitherto usual strength at the expense of the city.

In the documents of the 1430s Katzmair occurs variously as legal spokesperson at the "Hofgericht" and as co-decider ("veriecher") in arbitration cases.

Castle Wörth

1446 a castle was built on his behalf on the island in Lake Wörth which was acquired by his grandfather Johannes in 1396 from the Greifenberger family. 

In 1468, still being a member of Munich's council, he was mentioned as church provost ("kirchenpropst Martein Katzmair von innderm rat").

Children of Martin III Katzmair and Anna Pötschner were as follows:

13 i Anna⁵ Katzmair , born abt 1425 in Munichand died in Munich. She married Balthasar I Ridler , born about 1410 in Munich, died abt 1491 in Munich.

14 ii Georg II⁵ Katzmair , born abt 1430 in Munich, died 24 Jun 1485 in Munich. He married (1) Beatrix von Hausen and after her death (2) Dorothea Stupf .

15 iii Hans IV⁵ Katzmair , born about 1435 in Munich, died aft 1494 in Munich. He married Clara Ridler , born in Munich, died aft 28 Jul 1536 in Munich. Hans IV was a member of the outer council of Munich between 1484 and 1486.

Generation 5

14. Georg II⁵ Katzmair (Martin III⁴, Georg `Joerg`³, Johannes I², Martin I¹), born about 1430 in Munich, died 24 Jun 1485 in Munich. He married (1) Dorothea Stupf before 1450 in Munich and after she died on 19 Dec 1471 he married (2) Beatrix von Hausen , died about 1485 in Munich.

Children of Georg II Katzmair and Beatrix von Hausen were as follows:

16 i Jakob II⁶ Katzmair , born abt 1472 in Munich, died in Munich. His wife’s name remains unknown.

17 ii Niklas⁶ Katzmair , born aft 1471 in Munich, died abt 1523 in Munich. He married Katharina Rudolph.

Children of Georg II Katzmair and Dorothea Stupf were as follows:

18 i Hans V⁶ Katzmair , born between 1450 and 1471 in Munich, died about 1515 in Munich. He was married to the daughter of Hans Schluder zu Weilbach .

19 ii N.N.⁶ Katzmair , born in Munich, died in Munich, Bavaria, Germany. She married Albrecht Fröschel .

Generation 6

16. Jakob II⁶ Katzmair (Georg II⁵, Martin III⁴, Georg `Joerg`³, Johannes I², Martin I¹), born about 1472 in Munich, died in Munich. A contract from 27.01.1506 indicates that Jakob was mentally ill "plödigkeitshalber seins leibs". His brother Hans (18) committed in the contract to take care of him and his illegitimate son. At that time they live at Rindermarkt 7B. Jakob’s son, his given name remains unknown, must have been born about 1506 in Munich. We can not rule out that he kept his father's name and carried it forward. In young years he was living with his uncle Hans V. Katzmair. After his cousin Georg III Katzmair died in 1533 he was most probably the last living Katzmair of Munich. However he was excluded from Georg's inheritance which went completely to the Rudolph family, namely Paul Rudolph and his sister Margaretha, being his cousins from his mother's side.

17. Niklas⁶ Katzmair (Georg II⁵, Martin III⁴, Georg `Joerg`³, Johannes I², Martin I¹), born aft 1471 in Munich, died abt 1523 in Munich. He married Katharina Rudolph , born and died in Munich, daughter of Thomas I Rudolph and Veronica Schluder .

Children of Niklas Katzmair and Katharina Rudolph were as follows:

21 i Barbara⁷ Katzmair , born in Munich, died 10 Aug 1520 in Munich. From her gravestone: "anno 1520 des 10. tages octobris starb jungfrau Barbara, Niclas Kaczmars dochter"

22 ii Georg III⁷ Katzmair , born bef 1523 in Munich, died about 1533 in Munich.