Corporate Governance at Adidas-Salomon
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Case Code: CGOX010 Case Length: 11 Pages Period: 2002-2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.300 Organization: Adidas-Salomon Industry: Sporting Goods Countries: USA Themes: - |
Abstract Case Intro 1 Excerpts
Excerpts
Business Note
Adidas had grown out of a rift between German brothers Adi and Rudi Dassler, who created athletic shoe giants adidas and Puma. As WWI was winding down, Adi scavenged for tires, rucksacks, and other wastage to create slippers, gymnastics shoes, and soccer cleats at home. His sister cut patterns out of canvas. By 1926, the Dasslers had built a factory. At the 1928 Amsterdam Olympics, German athletes first showcased Dassler shoes to the world. In 1936, American Jesse Owens sprinted to Olympic gold in Dassler's double-striped shoes...
Corporate Governance Overview
In 2001, adidas developed the "adidas-Salomon Corporate Governance Principles"(ASCGPs). These principles documented the company's commitment to strengthening the rights of shareholders, to upholding true and fair transparency and reporting standards as well as making the composition, responsibilities and functioning of the Executive Board and Supervisory Board (EB&SB) more transparent...
Shareholders' Rights
adidas's shareholders exercised their rights at the Annual General Meeting (AGM) according to the "one share – one vote – one dividend" principle. They ratified the actions of the EB&SB as well as the appropriation of retained earnings...
Supervisory Board
The Supervisory Board (SB) consisted of 12 members who were diverse in their professional background and nationalities. Six members were elected by the shareholders at the AGM and six members were elected by the employees pursuant to the German Co-Determination Act (MitBestG)...
Supervisory Board Committees
In order to increase the efficiency of its work and handle complex issues better, the SB of adidas had established three committees:
• The General Committee, which dealt with EB personnel matters...
Executive Board
The EB consisted of seven members who reflected the diversity and the international nature of the Group. The EB developed and implemented corporate strategy and guaranteed appropriate risk management and risk control within the Group...
Cooperation between the Boards
An important component of good corporate governance was open dialog and constant cooperation between the EB&SB. By tradition, EB&SB had maintained a constructive and efficient working relationship in the best interests of the Group...
Avoiding conflict of Interest
The EB&SB members were required to act in the best interests of the Group and were not allowed to pursue personal interests in their decisions. Each member of the EB was required to disclose any potential conflicts of interest to the SB without delay and to inform the other members of the EB accordingly...
Confidentiality and insider trading rules
Members of the adidas Boards were bound to observe secrecy on confidential data of the Group. EB&SB members were required to follow German law on securities trading. This meant that they were not allowed to disclose insider information or utilize it to acquire or dispose off adidas's shares on their own account or on behalf of any other person...
D&O Policy in place for adidas Board Members
Members of the EB&SB were required to comply with principles of proper corporate management. If they culpably violated these principles, they were liable to adidas for damages...
Disclosures
adidas believed it was important to encourage an open dialog with the financial community and ensure fair and equal treatment of its shareholders. To offer more uniformity and hence more transparency and facilitate comparison with its major competitors, adidas prepared its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS)...
Compliance with the German Corporate Governance Code (GCGC)
The GCGC had been implemented in February 2002, to make Germany's corporate governance rules transparent to both domestic and international investors. adidas believed it complied with the GCGC recommendations and suggestions with the following exceptions:
• adidas D&O liability insurance did not include a deductible for EB&SB members under the Corporate Governance Code...
Exhibits
Exhibit I: Financial Highlights
Exhibit II: Segment Information (€ in millions)
Exhibit III: Supervisory Board
Exhibit IV: Executive Board
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