Office on the Board of Management or Supervisory Board: The legal risks

Next goal: New Office

Blind trust in the employer can have fatal consequences.

(Photo: mauritius images / Ikon Images)

Dusseldorf When Jürgen Koller (name changed by the editorial staff), head of a German insurance group, is offered a managing director position in Singapore, he is enthusiastic about this career opportunity. With his family he moves to Southeast Asia to lead the local subsidiary.

Shortly after taking office, then the evil surprise: The US Securities and Exchange Commission invites him. Black box office and bribery officials to come to government contracts, is the allegation. The German manager should be responsible for the failures of his predecessor and the damage incurred by the insurance.

Cases like these are not uncommon for attorney Christoph Abeln. In the specific case, the specialist lawyer for labor law succeeded in tearing up the German manager. The Berlin lawyer warns, however, emphatically: "Often even experienced managers take over new CEO or executive office too blue-eyed."

Anyone who is appointed the new managing director or board member, partner or supervisory board member of a group company – the possible risks are often unclear. Because who serves high in the company for years, too trust the employer, too rarely question the conditions of his new position, knows Abeln – a fatal carelessness.

With the appointment to the managing director or executive committee, the previous employment contract of a manager can be suspended and thus all legal regulations on remuneration, working hours, vacation entitlement and dismissal protection. Liability and reputational risks, on the other hand, are rising.

It goes without saying that all employees of international consulting firms or commercial law firms, who are offered the status of a partner, should familiarize themselves with the newly acquired risks. "I have to do my homework as managing director or candidate for the board and carefully examine the contract," says Helmuth Uder of the organizational and personnel consultancy Korn Ferry.

The situation is very similar for the members of the Supervisory Board. Many forget in the first euphoria, to make sense of each other "With the risks as well as the high temporal and contents requirements many concern themselves only after the fact", says Peter Ruhwedel. The economics professor is an expert on matters related to the supervisory board and points out that overseers are also personally liable for making wrong decisions – for example, if they have agreed to over-compensation of the executive board in the supervisory body

It is also rewarding to deal with the topic of remuneration. "Anyone who moves to such exposed positions should renegotiate their compensation package," advises Uder. This is proven, for example, by analyzes of Dax companies with independent subsidiaries: a compensation increase of 20 to 30 percent can be achieved by managing directors and board members there.

The contract on time plus an increased risk of success are sweetened by increased variable remuneration components. That's attractive. However, the underlying incentive systems of short-term bonuses and long-term incentives, such as stock options, should be fully understood.

Remuneration and liability are important elements to be regulated before taking office. In addition, there are other important details to note. "For example, to make it clear that a contract extension is being discussed with the Supervisory Board for three or better six months before the end of the contract," says Uder. Only then can the person in question plan his future career and prevent a contract extension at the last minute.

The latest case study is the luckless one BMW-Chef Harald Krüger. The 53-year-old graduate engineer recently went on to BMW supervisory board chief Norbert Reithofer himself, when he realized that he was missing after two prognoses decreases the backing of the majority shareholders. Instead of a second term, there was a premature termination of the contract. Well, who has an exit agreement already in his pocket.

What newcomers also need to know before taking office, betrayed labor lawyer Christoph Abeln, manager liability specialist Michael Hendricks and compensation professional Helmuth Uder in the following:

Agenda (t) Weekend (t) Career (t) Rise (t) Manager (t) Board (t) Partner (t) Supervisory Board (t) new position (t) Remuneration (t) Salary (t) Contract (t) Employment contract (t) Insurance (t) Manager remuneration (t) Executive and Supervisory Board (t) Manager executive (t) Legal area (t) Liability (t) BMW (t) Korn Ferry (t) SEC (t) VW (t) Christoph Abeln (t) Michael Hendricks


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