by Prof. Dr. Uwe H. Schneider, Director of the Center of German and International Law of Financial Services, Johannes Gutenberg-University Mainz, Germany.

 

 

Globalisation has lead to an open market without common legal rules. However, there are a number of common standards, principles etc. such as:

 

 

-         the OECD Corporate Governance Principles

-         the OECD Guidelines for Multinational Enterprises

-         the UN Global Compact and

-         the Basel Committee Principles: Enhancing corporate governance for banking organisations.

 

 

These principles are a useful start for a common framework for national, cross border and international behaviour of market participants. Recently we have learnt a lesson from the financial crisis. This urges us to revise these codes, principles etc. Among others the duty to implement a risk management has to be laid down in the OECD Principles of Corporate Governance.

 

 

But why do we need a new Global Standard? The idea is persuasive! It is obvious that such a Global Standard should not just repeat what has already been regulated. So, what is the added value to the existing codes, principles etc.? After consensus about the benefit of a Global Standard we should be more concrete.

 

 

First: What type of principles and standards are we talking about? It is a common place that companies and their directors should follow legal rules such as anti-bribery-rules, anti-trust-rules, tax-rules, etc. These legal rules are national rules; they may differ and create conflicts in a global market. National rules are complemented by international principles and standards.

 

But for many reasons the legislator has reached the limits of his scope of action. Ethical rules cannot be decreed, trust cannot be ordered, evasion cannot successfully be regulated and to often the law can not be executed. The actual financial crisis is both namely a crisis of the rule of law and a rebirth in the trust into a common rules.

 

 

But: We need a new, an additional level of standards.

 

 

Therefore: The principles and standards of the Global Standard should connect and limit. They should connect all addressees global wide and they should limit their behaviour. The Global Standard should contain ethical and social standards for the behaviour of all addresses in the market. The Global Standard should stress propriety and integrity, sustainability and transparency.

 

 

Second: Who should be the addressee of the Global Standard? Only the directors and the members of the board? Legal duties are only imposed on the company, its directors and to some extend to the shareholders. The Global Standard should have wider implications. The well being of the company is in the interest of all stakeholders, even in the interest of the society. And the common principles should address all stakeholders including the legislator and the administration.

 

 

Third: The Global Standard should recognise self-determination of individuals, freedom of contract, freedom to form companies, a free market including cross border and international trade. But the goal of the Global Standard is to bring into mind that there are limits for human behaviour, short term and long term responsibilities and ethical rules.

 

 

Fourth: One of the most important reasons for the actual crisis is the permanent attempt of the intellectual elite to find a way to evade rules. Evasion of accounting rules, supervisory rules, tax rules, etc. has become a global sport – and a big business. “Evasion” is one of the hottest issues in town – even in countries where principle based regulation has a long tradition. For the national legislator it is nearly impossible to tackle this problem as evasion also includes the exploitation and capitalisation of the differences between legal systems (“legal systems shopping”).

 

Therefore: The Global Standard should condemn the evasion of rules and standards.

 

 

Fifth: Often the ultimate shareholder, the ultimate contracting party, the ultimate holding company, the ultimate debtor and the ultimate creditor is not known to the public. Groups of companies, various forms of intertwining, international cross holdings are not transparent. Therefore the public is not aware, who is bound by the standards. European and national laws foresee that important holdings have to be disclosed. In reality instead of the real shareholder nominees are registered and major shareholders try to remain anonymous by hiding in the bushes.

 

Therefore: The Global Standard should stress the idea of transparency of market participants.

 

 

Sixth: Companies, their boards, their directors and officers have to follow the rules, principles and standards. In groups of companies not only the individual company, their boards, etc. have to follow the rules, principles and standards. In addition the holding company carries a responsibility for all subsidiaries.

 

Therefore: The Global Standard should express the idea that the holding company carries a special responsibility for the group.

 

 

Seventh: Even on a national basis the “race to the law” takes too much time and has to cross many obstacles. In an international setting it is too often nearly impossible to execute the law.

 

Therefore: The Global Standard should remind that only law executed is good law.

 

 

Eighth: The Global Standard should not be a legally binding code. But it should be made public, whether the addressees feel, that they should follow the principles and the recommendations – and act in this way.