German exchange chief says it’s absurd to have CEO serve as board chair

Anglo-Saxon firms could learn from Germany, says Faber

Joachim Faber, the chairman of exchange group Deutsche Börse and former chief executive of Allianz Global Investors (AGI), has called the ‘Anglo-Saxon’ practice of permitting chief executives to serve as board chairman an “absurdity.”

Responding to a question at a conference about whether Anglo-Saxon firms could learn anything from German corporate governance, Faber said they could by ensuring that the CEO and chairman were not the same person.

“What is overdue is a split between the roles of chief executive and chairman at the companies where this is the same person. The notion that the chief executive should supervise himself as chairman is an absurdity,” he said. Faber made the remarks during a conference in Berlin on the state of German corporate governance hosted by Union Investment, the Frankfurt-based asset manager.

Since leaving AGI in late 2011, Faber – who sits on the board of HSBC – has become very involved with German corporate governance. He is a member of the government’s special commission on the issue and helped draft the German Sustainability Code, a set of guidelines for corporate sustainability reporting that has been embraced by several firms traded on the blue-chip Dax 30 equity index (see RI interview the US, there have been repeated attempts by shareholders to split the CEO/chairman role – such as at JP Morgan’s last annual general meeting.

But Germany also had a few things to learn from the way Anglo-Saxon firms are governed, said Wulf von Schimmelmann, chairman of Deutsche Post who also sits on the boards of Canadian media firm ThomsonReuters and Accenture, the US business consultancy. Most important was amending German corporate governance law so that shareholders could no longer legally challenge an AGM’s procedure. “This is something peculiar to Germany and a real problem, as shareholders can tie up the AGM with talk for hours about irrelevant matters,” said von Schimmelmann.

The last time the AGM procedure of a listed German firm was challenged was a year ago. Back then, lawyers representing the heirs to media mogul Leo Kirch went to court to force Deutsche Bank to hold an extraordinary shareholder meeting about three agenda items that were already approved by the bank’s shareholders at the 2012 AGM. Kirch and his heirs have been in a legal fight with Deutsche since 2002.