Corporate authorities scrutinizing the under-the-spotlight activities of Dax and M-Dax.
In a recent report by Union Investment and Vanda Rothacker, several key areas were identified where DAX and MDAX companies could enhance their corporate governance practices. The analysis, which evaluated 128 criteria, highlighted the need for strengthening supervisory board independence and diversity, enhancing transparency and disclosure practices, improving risk management frameworks, fostering shareholder engagement, better integrating sustainability into governance, and clarifying roles and responsibilities within the board.
One of the areas with particular room for improvement is the independence of supervisory boards, especially the chairmanship of the audit committee. Vanda Rothacker, ESG analyst specializing in corporate governance at Union Investment, emphasized the need for improvement in the areas of office concentration and independence in the supervisory board.
The corporate governance ranking revealed that out of the 60 companies in the German mid-cap index (M-Dax), seven companies did not reach the minimum points required for a passing grade. In contrast, the leaders in the Dax include Allianz, Deutsche Börse, BASF, and Eon, all receiving a grade of 1. In the M-Dax, Aurubis and Commerzbank lead with a grade of 1 as well.
However, the average grade in the Dax dropped from a clean 2 last year to 2.1 this year, while the average grade in the M-Dax increased slightly from 2.8 to 3.0. Jens Wilhelm, a board member of Union Investment, stated that the companies haven't shown significant improvement this year.
Looking at the large grade differences in the M-Dax, Rothacker criticized, "If you look further down the ranking, it gets bleak." Dax newcomer Delivery Hero is at the bottom of the ranking with a grade of 4. Rothacker further stated that companies in the lower ranks of the M-Dax have a lot of homework to do, especially in the area of transparency.
Union Investment, in collaboration with Ivox Glass Lewis, has developed a corporate governance ranking for the Dax and M-Dax for the fourth and second time respectively. The report underscores the evolving expectations for good corporate governance practices, with a particular focus on transparency, board effectiveness, risk oversight, and sustainability integration. Shop Apotheke, Porsche, and Rational have to settle for a 5+, while Ströer and Aroundtown received a 5. For Grand City Properties and Encavis, it's a 6.
In conclusion, the 2021 corporate governance ranking serves as a call to action for DAX and MDAX companies to address the identified areas for improvement and strive for better transparency, board effectiveness, risk management, shareholder engagement, and sustainability integration in their governance practices.
In light of the corporate governance ranking, it is evident that many DAX and MDAX companies need to focus on enhancing the independence of their supervisory boards, particularly in the audit committee, as highlighted by Vanda Rothacker. Furthermore, improving transparency, a key area of concern, is crucial for companies, particularly those in the lower ranks of the M-Dax, as they have a lot of work to do in this regard.
