Bio- and regenera- tive Medicine as an important growth Market

20 HHL RESEARCH REPORT 2012 finAnCE, ACCOunTing And CORPORATE gOvERnAnCE 21
center For corporate governance
the Success of
corporate governance
The Center for Corporate Governance
(CCG) at HHL Leipzig was initiated
in April 2010. The research focus
includes the following topics: performance
relevance of good governance,
governance ratings and scoring
systems, diversity-related questions
and the development of corporate
governance in emerging markets.
A Center for “Good”
Corporate Governance
Following an initiative by Prof . Dr .
Bernhardt Schwetzler and Christian
Strenger – who was already associat ed
with HHL through his teaching activities
– the center was founded in
November 2010 to establish “corporate
governance” as a separate research
focus within HHL . In addition to
Christian Strenger, Prof . Dr . Marc Steffen
Rapp (Philipps-Universität Marburg)
and Prof . Dr . Michael Wolff (Georg-
August Universität Göttingen) – both
HHL alumni – agreed to act as founding
Co-Directors of the center . Since its
foundation, the center has been supported
by the sponsors DWS Investment,
Bertelsmann and KPMG to stimulate
excellence in research and teaching .
Additionally, the CCG is well connected
internationally and has co-operations
with highly respected institutions such
as the Global Corporate Governance
Forum of the IFC/Worldbank .
A research focus of the Center in 2011
was the acceptance level of the German
Corporate Governance Code (GCGC) and
the efficiency of such a soft-law in contrast
to hard regulation . To supplement
the research in Corporate Governance,
the center initiated an independent
’HHL Research Paper Series in Corporate
Governance‘, which has produced seven
working papers so far . Additionally, the
Center‘s research results were placed in
refereed journals and edited publications
as well as presented at international
conferences .
In October 2011, the ‘Workshop on
Corporate Governance and Investment’
was held at HHL to further strengthen
the Center‘s position in the academic
community . Over 55 researchers from
Europe and the US participated in the
symposium, which was held for the
twelfth time, to exchange the latest
research results and its implications
for politics and the economy .
Since fall 2011, the topic ’Corporate
Governance in Emerging Markets’ has
been researched and dealt with intensively
. The Fritz Thyssen Foundation was
won as significant external supporter
of this research topic . In June 2012 the
Center –in collaboration with the Global
Corporate Governance Forum– brought
together senior representatives from
academia, development institutions,
companies and investors for a conference
on ’Key Corporate Governance
Issues in Emerging Markets’ at HHL .
The conference provided a futureoriented
assessment of the governance
situation in three important regions of
the world - Africa, Asia and Southern
Europe . Two sessions of the conference
focused on key governance issues
with global relevance: the performance
value of ‘good governance‘ in emerging
markets, based on the latest academic
research and practical insights from
large international investors, as well as
corruption and practical ways of dealing
with this major governance problem .
The Center for Corporate Governance
is equally involved in HHLs curriculum .
Corporate Governance courses are
offered within the MBA - and MSc
Programs as well as the Ph .D . Program .
Research Insights on
the German Corporate
Governance Code
In February 2002 the Government
Commission appointed by the German
Justice Minister presented the first
version of the German Corporate
Governance Code . Ten years later the
Center examined two fundamental
questions: (i) the general acceptance
levels of the GCGC by listed German
firms and (ii) whether soft regulation
with standardized reporting following
the code’s comply-or-explain principle
dominates hard regulation of corporate
governance practices .
Code Acceptance
2012 – the results:
1
On average, the DAX and MDAX
listed companies comply with 97
percent of the code recommendations
. Only a minority rejects more
than 10 percent of the recommendations
. Mainly referring to the
D&O insurance, the compensation
cap in management contracts, the
disclosure of individual compensation,
variable compensation of
supervisory board member and
issues of diversity on the board
show the highest levels of deviation .
2
Large companies show higher
compliance levels as well as widely
held firms . From an economic point
of view this represents an efficient
“substitution effect” between the
GCGC and the external governance
structure of a company .
3
Differentiating various dimensions
of the code reveals that
almost all DAX firms achieve very
high standards with regard to
transparency, monitoring/control
and incentive systems . In contrast,
MDAX firms show much higher
variability . The diversity index
shows the highest heterogeneity:
with an average acceptance level of
89 percent of the index constituents,
there are also index values
below 70 percent up to multiple
minimum values of 33 percent .
Conclusion:
“Our study shows the positive fact
of an already very high acceptance
level of the code by DAX and MDAX
firms, however there is certainly
potential for rising compliance
rates for example in terms of
diversity on boards.”
Code Acceptance
Study 2012
To evaluate the acceptance levels of the
code by listed German firms, the CCG
systematically examined the annual
compliance statements according to
§161 AktG (Stock Corporation Act)
of German listed firms . The analysis
provided a detailed impression of the
compliance behavior with regard to
the different code recommendations
as well as the influence on the latter by
various corporate characteristics such
as firm size and ownership structure .
Finally the Center translated the firms’
compliance levels into four specially
constructed indices to obtain a measure
of the individual governance quality of
German firms .
Is soft regulation of
corporate governance
practices efficient?
Being one of the very few studies on
soft regulation of corporate governance
practices, the paper “Hard or soft
regulation of Corporate Governance?”
discusses whether the often criticized
approach of soft regulation works well
in the context of corporate governance
practices using the experience with
the German Corporate Governance
Code . To analyze whether the code’s
comply-or-explain principle dominates
hard regulation of corporate governance
practices, CCG researchers used a novel,
specially selected panel dataset . The
finding is that while on the one hand
widely-held firms benefit from high
levels of compliance, on the other hand
high levels of compliance jeopardize
firm performance in dominated firms .
In a second step, the paper shows that
firm-specific agency costs increase the
compliance level, indicating that managers
voluntarily use code compliance as a
substitute for other governance devices .
The Center’s existing research on the
GCGC contributes to the debate between
supporters and opponents of the code .
While supporters emphasize, amongst
other things, the transparency function
of voluntary self-regulation and the
successful response to the challenge of
global competition, opponents deem it a
regulatory instrument of the economy .
center For corporate governance
SupporterS
• dWS investment gmbH
• Bertelsmann Business
Consulting gmbH
• KPMg Wirtschaftsprüfungs-
gesellschaft Ag
• fritz Thyssen foundation
acadeMic directorS
Prof. dr. Marc Steffen Rapp
Christian Strenger
Prof. dr. Michael Wolff
From left to right: Prof. Dr. Marc Steffen Rapp,
Christian Strenger, Prof. Dr. Michael Wolff –
the academic directors of the Center.
future Research
Further research by the Center for
Corporate Governance in the area of
the GCGC aims to further deepen the
academic understanding and public
perception of soft regulation . For instance,
one project will examine the role
of the GCGC for family controlled firms .
Beyond that, the Center will intensify
its research activities on Corporate
Governance in Emerging Markets, in
particular regarding local regulation
and their effectiveness . Furthermore,
all research activities of the Center aim
to contribute to the understanding of
the performance implications of “good”
Corporate Governance .
core coMpetencieS/
reSearcH intereSt
• performance relevance of
good governance
• governance ratings and scoring
systems
• diversity related questions
• development of corporate governance
in emerging markets
contact
www.hhl.de/ccg