From corporate governance to foundation governance

Corporate governance

The term “corporate governance” mainly refers to the structural and organisational aspects of listed companies. For lack of an adequate translation, the same term is used in the German language.

Discussion first centred around the different interests of company owners (principals) and management (agents), i.e. in Switzerland the shareholders on the one hand and the company management bodies on the other (board of directors and senior management: CEO, CFO, etc.). With diversified shareholding in particular, principals always run the risk of the management bodies following up their personal interests to the detriment of the legitimate interests of shareholders. This risk has to be countered by appropriately structuring the management and control bodies.

Also in Swiss business circles, corporate governance has been at the focus of discussion for years. As a result of the OECD principles of corporate governance issued in 1999, efforts were made to set up a code of best practice. In 2002 the Swiss Code of Best Practice for Corporate Governance came into force. It applies only to listed companies and is mainly intended to take more account of public shareholder interests. Meanwhile, the corporate governance standards have quickly started to have a broader and deeper effect.

Corresponding activities also started at the lawmaking level. At the beginning of 2005 the Federal Justice and Police Department presented draft legislation on the transparent remuneration of board and management members in listed companies.