The Stadtwerke der Ruhrgebiet city illuminated its tower, which can be seen from afar, in the colors of the Ukraine. The new D-PCGM should now also make public companies themselves crisis-proof.
(Photo: imago images/Reichwein)
Dusseldorf The war in Ukraine and the threat of a ban on imports of Russian oil and gas are fueling previously almost forgotten fears of cold, dark apartments in winter. The Federal Ministry of Economics assures that the energy supply is not endangered and is guaranteed even in the event of a gas shortage. Nevertheless, the question of crisis resilience and sustainable management of publicly owned companies – such as municipal utilities, public transport and cleaning companies – arises.
Even before Russia’s attack on Ukraine, the municipal utilities were suffering from sharply increased purchase prices for gas and electricity. When some energy discounters suddenly stopped supplying their customers, they fell into the replacement supply. Many of the responsible basic suppliers then increased their prices, some of them drastically, including some municipal utilities. Consumer advocates sharply criticized this.
In such cases, the recently updated German Corporate Governance Model Code (D-PCGM) is intended to provide assistance for public companies. Ulf Papenfuss is the scientific director of the expert commission that developed the model code. He calls for this to be placed on the agenda of all responsible political bodies.
“Crisis management in the context of the effects of the Ukraine war must be linked to sustainability goals,” Papenfuss told the Handelsblatt. This is essential with regard to critical infrastructure, security of supply, sustainability and trust in the state.
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“As a society, we have to give some fundamental thought in times of war, and that includes the question of what public companies should and can do,” said Papenfuss. “We need public companies that ensure security of supply and efficient critical infrastructure in the interests of our democracy and the social market economy.”
The Public Corporate Governance Commission of Experts has added the topic of sustainability to the model code. In the future, ecological and social factors should also play a greater role in the management of public companies. This follows the “great role model”, the German Corporate Governance Code (DCGK) applicable to large listed companies.
A model code for the management of public companies has only existed since 2020
The D-PCGM has existed since 2020. The German Association of Cities immediately recommended that its members implement the set of rules for public companies. Michael Ebling, Lord Mayor of Mainz, member of the Executive Committee of the German Association of Cities and President of the Association of Municipal Companies (VKU), told the Handelsblatt at the time that “clear and comprehensible standards and rules must apply, especially for public companies”.
The development of the Public Corporate Governance Code was primarily driven by affairs such as the now proverbial Cologne clique and the trend towards remunicipalisation of municipal utilities and educational institutions. Drivers for the development of the model code were also the serious deficits found in comparative studies in the 55 public corporate governance codes published at the time and the unnecessary duplication of work done in many local authorities.
In addition, the corona crisis led to some financial difficulties for municipalities due to the loss of tax revenue, which had to be managed professionally.
Distribution has been sluggish so far
However, adoption of the model code has been slow so far. Only individual cities like Dinslaken have publicly decided to introduce it in the city council or, like Flensburg, refer to the model code in the preamble of their specially developed code.
Recently, however, there has been some movement in development. A number of cities are in the process of aligning their public corporate governance codes with the D-PCGM, such as Frankfurt am Main and Mannheim. In addition, for example, the current municipal report of the Lower Saxony State Audit Office refers to the model code.
More: War in Ukraine: Fears of a gas supply stop are increasing in the energy sector