Puma, the SE and the shape of the board

Another one bites the dust. The European Union's legal form Societas Europaea hasn't been quite the hit that its creators envisaged in the early days of the new century. Corporations around the Europe Union have had this legal form available as a way of operating across 27-member states without having to set up special subsidiaries and comply with national company law in all its variations. Yet few companies have taken advantage of it – except in Germany. Now Puma has joined the small crowd, another German convert to the cause. Puma's reason is perhaps a little different from the others – which include Allianz and Porsche. Those looked like attempts to break out of the straightjacket of Germany's Mitbestimmung regulations, the "co-determination" law under which members of the workforce get half the seats on the supervisory board. The change of status didn't diminish that requirement, but it did allow the companies to spread those seats to labour representatives across the European Union, thus diluting the power of German trade unions on the boards.

In Puma's case, the reasoning and the outcome is a little different. Now 71 per cent owned by PPR, the French luxury goods company, Puma is adopting a more forceful interpretation of the SE law. It's ending its German-style dual-board structure in favour of a single board, so that its CEO, Jochen Zeitz, can become executive chairman, still part of the management but also running the board. He'll also join the senior management of PPR as head of a new lifestyle division. Splitting his time between the two sets of responsibilities might have been messy for a CEO but it's just about manageable for a chairman. But there's scope for conflicts of interest. And there's the small question of the interests of the holders of the other 29 per cent of Puma to consider. That isn't to say it can't be done, of course. But Zeitz will have to perform a balancing act as he juggles his roles and responsibilities.

Source document: The news release gives a bit of the background to the decision, if not to the corporate governance nuances.