CORPORATE GOVERANCE

SUBMITTED BY-

PRANAY SINGH (2019097)

ADITI SINGHVI (2019130)
NEERAJ RAJANI (2019157)
VAISHNAVI DUGGAL (2019183)

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 COMPANY INFORMATION

A German Footwear brand which started by two brothers which later split up due to conflicts into
Puma and Adidas.

• “PUMA SE, also known as PUMA, is a Germany based multinational company that designs
as well as manufactures footwear, apparel and accessories.”

• “PUMA offers products for Football, Basketball, Training and Fitness, Running,
Motorsports, Golf and Sports style.”

• “As of 2019, PUMA employs more than 13,000 employees worldwide and has distribution
of its products in more than 120 countries.”

• “PUMA has more than 200 retail stores in India. PUMA reported revenue of Rs 1,413
crore in year 2019 in, latest regulatory filings show. Store sales grew by 17%. PUMA’s
women wear section accounted for 28% of the total sales in 2019 which was up from 24%
in 2018.”

• “PUMA had an all over the world sale of $5,502.2 million for the year 2019, which was an
increase of approx. $850 million sales in 2018. The net earnings stood at $262.4 million in
2019 as compared to $187.4 million earning in 2018.”

• “Although it is the third largest sportswear brand, it's growing at a rate faster than its
competitors.”

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 CORPORATE GOVERNANCE POLICIES AND PHILOSOPHY

Corporate Governance for Puma-2020

“The effective execution of corporate governance standards is a significant part of PUMA's

corporate arrangement. Straightforward and mindful corporate administration is an
essential for accomplishing corporate targets and for expanding the Company's value in a
supporting and sustainable way. The Supervisory Board and the Management Board work
intimately with one another in light of a legitimate concern for the whole Company so the
Company is overseen in a productive manner guaranteeing sustainable value addition
through great governance.”

“The Puma corporation follows the German model of corporate governance. This is likewise
called European Model. It is accepted that laborers are one of the key partners in the
organization and they ought to reserve the option to participate in the administration of the
organization. The corporate administration is helped out through two-tiers; hence it is
otherwise called two-level board model. German Corporate Governance Code presents
fundamental legal guidelines for the administration and management of German recorded
organizations and contains, as proposals and recommendations, universally and broadly
recognized principles for good and capable corporate administration. PUMA SE has a double
administration and governance structure. The Management Board is made out of three
individuals. The Supervisory Board is made out of six individuals, four of whom are chosen
by the Annual General Meeting, and two of whom are chosen by the workers. Another
significant corporate body is the gathering of the investors.”

Source: https://about.puma.com/en/investor-relations/corporate-governance

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“A. Supervisory Board

“The primary responsibility of the supervisory board is to advise and monitor the
management board with regards to the management and decision making for the company.
The Supervisory board also appoints the member of the Management Board.  The
Supervisory Board reports to all the stakeholders at the Annual General Meeting.”

Jean-Franqois Palus (Chairman of the Supervisory)

Heloise Temple-Boyer (Deputy General Manager of Artemis S.A.S, France)

Fiona May Oly (Independent Management Consultant)

Thore Ohlsson (Deputy chairman of supervisory)

Bernd Illig (Employees representative)

Martin Koeppel (Employees Representative)

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B. Management Board

The Management Board manages the Company along with representing the company both
in and out of court. Give key exhortation and direction to the seat and individuals from the
board, to keep them mindful of improvements inside the business and guarantee that the
fitting strategies are created to meet the organization's main goal and mission and to agree
to all pertinent legal and statutory guidelines. The Management Board works closely with
Supervisory Board and reports to them.

Bjorn Gulden (Chief executive order)

Michael Lammermann (Chief Financial Officer)

Anne-Laure Descours (Chief Sourcing Officer)

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 Analysis of Corporate Governance in 2020

Effective Implementation of the Corporate governance principles is an important aspect of

PUMA’s corporate policy. The whole idea of successful governance is centered around
Transparency and Responsibility. PUMA SE has the authoritative document of a European
organization (Societas Europaea, or SE). Being a SE settled in Germany, PUMA SE is
dependent upon European and German law for SEs while staying subject to German stock
organization law. As an organization recorded in Germany, PUMA SE holds fast to the
German Corporate Governance Code (DCGK).

So as to satisfy PUMA’s Environmental and social duty as a worldwide outdoor supplies

producer, PUMA has created groupwide rules on natural administration and on consistence
with working environment and social norms. Panther is persuaded that just on such an
establishment can an enduring and supportable corporate achievement be accomplished.
That is the reason PUMA is focused on the standards of the UN Global Compact. The PUMA
Code of Conduct recommends moral and ecological norms with which the two workers and
providers are needed to go along. The PUMA Code of Conduct was updated in 2016 and
expressly addresses PUMA's commitment and responsibility in regard of common liberties
and fighting debasement.

The PUMA Code of Ethics is a significant structure square of the CMS (Compliance
Management System) and is authoritative for representatives of all auxiliaries around the
world. It characterizes the rules and qualities that shape PUMA's personality. PUMA
anticipates that all workers should know about these qualities and to act appropriately. The
Code of Ethics contains rules, in addition to other things, on managing irreconcilable
situations and individual information and forbids insider exchanging, hostile to serious
conduct and defilement in any structure.

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 Corporate Governance for Puma-2005
“In 2005 Puma followed German corporate governance code with the following exceptions-

 The members of the Supervisory Board have not been paid any performance related
remuneration in addition to their fixed remuneration
 The information provided in the notes to the consolidated financial statements on
the remuneration paid to the members of the Board of Management is not broken
down for each individual person
 However, PUMA AG continued to report in the notes to its consolidated financial
statements the remuneration paid to the members of the Board of Management,
broken down into fixed remuneration, performance-related remuneration and long-
term incentives. This practice ensures that shareholders and the capital market
receive the necessary information
 The supervisory board constituted of following committees-
Personnel Committee
Audit Committee
Corporate Governance Committee
Compensation Committee.
 The company files an annual compliance statement every year which is made
available to its shareholders thereby maintaining transparency between the
company and its shareholders.

The Supervisory Board has in its four regular meetings discussed and resolved on the
Company’s business policies, all relevant aspects of corporate development and corporation
planning, the Company’s economic situation, including its net assets, financial position and
results of operations, and all key decisions for the Group.

The company has been recognised for its excellent corporate governance. The structure
provides a system of checks and balances thereby reducing the vulnerability of any
concentrated authority and any misuse thereby. The supervisory maintained a 100%
attendance throughout the year. This shows an active participation of the Board members in
the activities of the company. 

The company is a sports unit and is extensively trying to create an image of a more inclusive
company. The strategy is to evolve with the evolving societal changes and bridging cultural
differences. The company manages diversity in its board in terms of gender and ethnicity.
 

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 Shift in the Corporate Governance between 2005 and 2020

The sports and utility brand PUMA became the center of PPR’s Sport & Lifestyle wing. In the
structure of the following period of its corporate turn of events, PUMA AG planned to
embrace a new legal form by changing into a European Corporation, PUMA SE. As a feature
of the change, PUMA expected to change over its existing two-level board structure with an
administration board and an administrative board to the universally common structure.
Also, overseeing chiefs will be answerable for the overall administration of PUMA SE. This
legal structure of SE started in the year 2004, but PUMA adopted the system in year 2011,
commencing a complete paradigm shift in the corporate structure of PUMA.

To begin with, in the Germanic AG, an abbreviated type of Aktiengesellschaft, a German

word for a corporation limited by share ownership i.e the corporation whose ownership
rests with its shareholders. Generally, these companies have their shares traded on a stock
market. Generally, such corporation are found in Germany, Austria, Italy and Switzerland,
this threateningly named element just infers a traded on an open market organization with
restricted obligation situated in a solitary area, basically, an enterprise. Whether or not it's
an enormous enterprise or a business in a humble community, all AGs need to maintain
certain guidelines, for example, having at least 5 starting individuals, €50,000 in beginning
offer capital, standard comprehensive gatherings, articles of affiliation, and a 2-layered
administration framework. Furthermore, based upon the organization’s size, there are
requirements inside a two-tiered governance framework: for example, a specific side of
offer value requires a bigger overlooking board while more representatives mean more
noteworthy employee representation on the management board (500 laborers = ⅓ board
representation, while 2,000 specialists = ½ board representation).

The SE is a Latin word meaning “European Company”, read as Societas Europaea is,

essentially, a European multi-national. Keeping in mind, last 15 years of European
integration, the industrial world is seeing a new form of corporation, the SE. It will be
appropriate to simply understand that this is a like a German corporation in European
clothing, considering that national laws/regulations/rules still persist and governance
rules/regulations are mostly standardized. While, The AG structure has a load of
requirements in terms of worker/trade union representation on the supervisory board
(typically 50% employee, 50% shareholder). The SE & relevant laws look very similar to AG,
but allows/requires equivalent employee work council representation from across European
rather than just German employees. For shareholders, there's basically no real difference. In
theory there are advantages to not having to worry about ~30 different lots of European
company laws, in practice, AFAICT it has made no difference. The SE status has been sharply
criticized as relying excessively on national legislations, therefore undermining the
European character of the company and leading to a possible ‘race to the bottom’ in
legislations of the Member States. It is true that the SE Statute only covers classic areas of

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company law and still refers to the law of the state of registration for the non-regulated
subjects. Moreover, national law is made primarily applicable to areas of accounts,
dissolution, liquidation and insolvency.” Although from shareholders point of view this shift
did not bring any changes.”

Table 1: Major Difference between AG & SE model

Point of difference AG(Aktiengesellschaft) SE (Societas Europaea)

Governance scope Adhered to the national Adhered to the European
laws/regulations Union laws/regulations
National laws Only those are applied Along with national laws,
PUMA AG had to adhere to addition of few more
German laws. standardised laws for
countries across Europe
PUMA SE along with German
laws have to adhere to
European Union laws.
Model Adopts the two-tier model- Gives the choice of opting the
Management Board and model. So, a European Union
Supervisory Board. company can choose a one tier
Hence PUMA SE in 2005 had model-overall administrative
management board and model or the two-tier model.
supervisory board. PUMA SE has continued with
the two-tier model as in PUMA
AG.
Limited Can be applied to companies Limited to multinationals-
functioning only in the defined as companies with
domestic or home country. presence in at least 2 or more
countries through joint
venture, subsidiaries or
acquisitions.
Initial share capital Euros 50,000 is the initial share Euros 1,20,000-hence an
capital required. addition in the compliance
over the previous models
Management and employee For AG, a larger management An agreement is mandatory
agreements would be required depending without which the model
upon the size of share value. would be non-compliant. Does
Like 500+ members would not have specific terms and
require 33% representation on leaves to the specific nations.
board while 50% of the
representation would be
required for 2000+ members.
Therefore, PUMA AG had to
give 50% representation to
employees.
Recommendations

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In the way that PUMA AG shifted its compliance model to the SE structure. This shows their
inclination to embrace a more open-ended and open-minded model. Over the years be it
from 2005 to 2011 or from 2011 to today; the company has showed a great potential and
has been presenting itself as a modern company. So, we can recommend the company to
remodel its governance structure inclining towards the Anglo-American model. For that we
can first suggest the company to take a step forward towards it by narrowing down from the
two-tier structure to a one-tier structure model. Barriers to convergence towards the Anglo-
American governance regime are: the concentrated corporate control; the separation of
ownership and control through devices such as pyramids and proxy votes; the two-tier
board with co-determination between shareholders and employees on the supervisory
board that provides stability albeit possibly at the cost of entrenchment; the important role
played by banks, both directly as large shareholders and indirectly through proxy votes and
board representation; a host of institutional, legal and even cultural barriers to hostile
takeovers; and a regulatory framework based on EU directives but firmly rooted in the
German legal doctrine.

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