Wirecard; Carillion; Theranos Chairs frequently comment that they want their Board to include Directors with “scars on their backs”. A grim phrase and a stark truth – there is extraordinary value in first-hand experience. There is also undoubted value in getting under the skin of what happened in a crisis; how did the Board and leadership respond; was their contribution value accretive or the opposite? Most Boards are very open to learning and have a keen sense of what can go wrong. Fidelio frequently folds topical and relevant case studies into Board development programmes both to highlight key governance issues, and importantly as a catalyst for discussion. While Boards typically look in the first instance to their own sector, there is much to be learned from other companies that have been in the eye of the storm and this holds true cross-border, cross sector. A case in point is Wirecard - the largest corporate collapse in postwar German history, a one-time Fintech poster child, and an alleged fraud on a breathtaking scale over a long period of time. Some may be tempted to believe that its particularities and two tier governance structure make it of limited interest to Boards internationally. We would argue to the contrary and suggest that this extraordinary corporate failure holds a number of important lessons for all those sitting on Boards or focused on corporate governance. Case Study Learnings A Fidelio case study – based entirely on public domain information including analysis of company and press reports as well as the subsequent German parliamentary enquiry, and taking full account of the unfolding legal situation – draws attention to the following key learnings:
The importance of proactively managing regulatory relationships: closer is not always better
The critical importance of Audit both internal and external: the vital oversight role of the Audit Committee
Appropriate Board structures to support growth: managing composition, skills and succession
The role of analysts, investors and the press: why the Board needs to listen to all voices, including the critical ones
All four aspects of this case study are of essential importance to Boards of listed companies across all markets, and especially those involved in financial services. The Wirecard story is not over yet, and recent developments highlight further important issues concerning the disclosure of reports into the actions of auditors and the rights of investors who were (allegedly) sold shares under false pretences.
Sadly, Wirecard is not unique. Other Fidelio case studies focus on Carillion, as well as corporate crises which have not led to collapse but a severe loss in valuation and trust. The intent is not to deter good Board Members but to raise awareness, prompt good questions and encourage effective challenge.
To find out more about Fidelio Board learning and recent case studies, including Wirecard, please get in touch: awright@fideliopartners.com.
