Prof. Claus Luttermann

Balancing Corporate Governance: Back to the Future of Reasonableness in Law and Practice (Compliance)

Enron, WorldCom, Lehman, Tesco, Amazon, Google, Volkswagen… numerous scandals worldwide had demonstrated since the turn of the millennium: Acting in an ethically responsible way is part of entrepreneurship and the essence of a free order. Where this kind of action is lacking, deficits will accumulate. In the worldwide economic crisis the familiar coordinates of order and practice break down. Banks, insurances, industries are struggling, failing, nationalized and corporate groups are systematically cheating on taxpayer expenses.

How about good corporate governance? Is the voluntaristic approach of “comply or explain” outdated? Emergency legislation increases. Centralisation and regulation conquer more and more space. Politicians and central bankers socialise private losses and thereby the failure of managers. World markets, economies and societies play up. – Reasonableness is necessary: We must learn to regard the corporation in its legal nature as an instrument for ordering assets and liability (the Vermoegensordnung) with its natural possibilities and limitations. In order to curb conflicts, the issue is “markets, morals, and law” (Eisenberg).

Basically, we are dealing with the old question of codification: To what degree should the legislator step in with regulations where private entrepreneurship is organizing itself? This is the key question worldwide in the relationship between states and international private business (lex mercatoria). Answers may place the emphasis differently, depending on the respective legal culture. However, the world financial meltdown shows: We all depend on good corporate governance, which lives and grows out of common values.