Wirecard Assignment Corporate Governance [PDF]

Zitiervorschau

Stakeholder/Governance mechanism Audit Committee

What went wrong?

How to re-design?

Wirecard did not establish an Audit Committee until 2019. Without this independent committee the management board is not held accountable for their action financially. There is no one to check the financials, transactions of the company.

Auditor

EY was negligent when performing the audit of Wirecard. EY allegedly failed to request critical account information from a bank in Singapore for at least three years, where, according to Wirecard, up to $1 billion in the company's cash was managed. EY trusted on documents and screenshots of a third party and from Wirecard itself. This type of negligence brings about the suspicion that auditors at EY were in on the fraud. Bafin is held accountable for inadequate oversight and negligence. Many hedge funds have criticized Germany’s financial regulator, BaFin, for temporarily banning short-selling in Wirecard stock and for filing a criminal complaint against two FT journalists who reported the whistleblower allegations about the company. In 2016 Bafin already got a dossier of allegations related to money laundering related to Wirecard. Furthermore the FT already investigated Wirecard and the

When going public immediately create a independent Audit Committee with suitably qualified individuals to check and monitor the financial actions of the management board and company. The name of the financial expert should be disclosed. The Audit Committee should communicate regularly with the auditor, without the presence of the Management Board, whereby this exclusion should be set forth in the Audit Committee’s procedural rules. This could have been prevented if the auditor was not so negligent. Even if you 100% trust a company always double check leads, suspicious transactions. Perform a thorough and good audit.

BaFin

This is due to negligence of the regulator. It should have worked more diligently and should have followed up lead and red flags pointed out many times. More stringent controls and putting up more restrictions aren’t necessarily good since trying to control and monitor too much is bringing about negative effects, but doing you job more thoroughly.

Supervisory board

Multi-stakeholder approach

Markus Braun/management

situation was not right. Until 2016 the Supervisory Board consisted of only three persons, five until 2018 and only six from 2019. This is very small for a company that big and neglected to scrutinize the conduct. The name of the socalled financial expert member the Supervisory Board was not disclosed. From the looks of it Wirecard, from the start, was focused on growth and creating shareholder value. This too does not necessarily has to be a bad thing but when you are overdoing it, it can become a bad thing. You loose sight of other important aspects of the business. Furthermore, like what happened can become fraudulent. Markus Braun, took over the reign of Wirecard in 2002. And already started shady by taking over the listing of a defunct call center group, a route that avoids the scrutiny of an initial public offering. This shady behavior continued. If the management team was monitored better and was accountable for their action this would have a lower probability to happen. They had too much freedom and focus on growth and misconduct.

This should have been 12 at the minimum for such a large company. The supervisory board is in place to prevent such action made by the management board. The oversight should have been better. Transparency is important. Implement a multistakeholder approach to weigh in all factors making business decisions. Growth will probably be slower but you build a more steady company and factoring in all stakeholders fraudulent behavior will be less. Stronger monitor by e.g. supervisory board would mitigate this. An independent Audit Committee would mitigate this as well. Furthermore, a transparent culture in the company.