Europe makes a fresh start - Roland Berger Strategy Consultants

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Europe makes a fresh start
The European model manifests itself in the following ways, for example:
New work models are developed in collaboration with employee councils
and trade unions in order to protect jobs and company sites, e.g. the
"Flexicurity" model (see http://www.euractiv.com) In other words,
employee councils and trade unions do not merely seek to defend their
"acquired rights" and represent short-term interests. Instead, they play an
active part in crafting solutions that will affect the future of the company as
a whole. European companies leverage the creative potential of employee
councils and trade unions to arrive at solutions that are based on consensus.
Management compensation is tied more closely to long-term company
performance than in the USA. Board members in Europe have significantly
longer tenures than their counterparts in the USA. In addition, the ratio of
fixed compensation components to performance-linked bonuses and shortterm
stock option programs is more balanced in Europe than in the USA. In
the USA, packages containing millions of stock options often constitute the
principal component of top management compensation. Since they appear
neither on the income statement nor on the balance sheet, however, they
are beyond the control of shareholders. Accordingly, stock options with a
short-term focus have made numerous US American managers rich while
plunging the companies they led into deep crisis only a short time later.
Companies take criticism from consumer protection and environmental
activists seriously. They do not merely react to such criticism, but also
proactively address issues such as product safety and environmental impact.
Compared with companies in other parts of the world, European firms
attach greatest importance to the subject of corporate responsibility. This
contention is substantiated by the "Accountability Rating 2005", a global
study of corporate responsibility (see http://www.accountabilityrating.
com). The rating found that 88 percent of European companies agree
with internationally recognized standards of human rights and environmental
protection – against only 24 percent in the United States. Moreover,
American companies evidence little inclination to align their policies
with the needs of other stakeholders. It therefore comes as no surprise
that European companies – BP, Shell Group, Vodafone, HSBC Holdings
and Carrefour – occupy the top five slots in the published ratings.
Conflicts of interest between different stakeholders can, of course, occur.
In such cases, companies are forced to weigh up these divergent interests.
Yet it is precisely here that the focus cited above – a commitment to longterm
company value growth – provides the best yardstick against which
to measure conflicting interests. Long-term value growth programs only