Six German business figures, including Deutsche Bank chairman Josef Ackermann, go on trial in Duesseldorf this week in a case examining the bonuses paid out in the spectacular US$230 billion Mannesmann takeover battle four years ago.
While the legal aspects are intricate, the view in the mind of the general public is that the trial, starting Jan. 21, is about a moral issue -- the perceived greed of executives approving huge bonuses for themselves and others.
German prosecutors will be trying to prove that the 111 million marks (US$71 million) in bonuses paid out after the hostile takeover of Mannesmann by British firm Vodafone in early 2000 were exorbitant and a breach of duty toward Mannesmann shareholders.
The defense will argue that, far from being hurt, shareholders actually benefited by the fact that the biggest corporate takeover in history drove the price of Mannesmann shares strongly upwards.
Besides Ackermann, who at the time was on Mannesmann's supervisory board, the most prominent defendants are Klaus Esser, the former chief executive, along with Joachim Funk, who was chairman of the company's supervisory board and Klaus Zwickel, former chief of the metalworkers union IG Metall who also sat on the supervisory board.
Neither Zwickel nor Ackermann received any money themselves, but their votes on the supervisory board helped to approve the bonuses for some of the others.
Two lesser-known figures, Juergen Ladberg who was head of Mannesmann's employees council, and the former personnel director, Dietmar Droste, are also charged.
At the core of the charges is a German word -- untreue -- which in the business sense roughly means "breach of fiduciary duty," the obligation to defend company and shareholder interests.
But defining this term could prove to be difficult in a German court, legal analysts ahead of the proceedings said, noting the differing practices and views about bonuses in the Anglo-American corporate world and those in Germany.
Under the German criminal code's paragraph 266, the breach of fiduciary duty concept could be applied on grounds that the bonuses were money which should have gone to Mannesmann's shareholders and not to individual executives.
Chief among the recipients was Esser, who had bitterly tried to fight off his company's takeover by Vodafone, but who then got a "golden parachute" of more than 60 million marks (US$31 million).
While in popular sentiment this might look like greed, prosecutors will have to prove that the bonuses did actual damage to Mannesmann shareholders in the untreue sense of breach of fiduciary duty.
Further, while bonuses are known to be business-as-usual in the Anglo-American corporate world, laws covering German corporations do not provide for such large-scale payments.
Under German stock corporation law paragraph 87, rewards to executive directors have to be "kept in appropriate relation" to the duties assigned them. This means the Duesseldorf court will have to grapple with what defines "appropriate."
Prosecutors are expected to argue that the bonuses were to the detriment of shareholders and to the Mannesmann company, and that being so much in excess of the usual rewards paid to German executives, the payments were far from being appropriate.
But the defense is expected to point out how Mannesmann shareholders benefited, thanks to Esser's spirited battle trying to ward off the takeover.
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