In a panel discussion on 21 September at Hotel Palais Hansen Kempinski Vienna I discussed current issues of management liability with district attorney Sonja Herbst, public accountant and tax advisor Michael Schlenk (KPMG) and insurance expert Brigitta Schwarzer.
How much Compliance does an Organisation need?
The explicit inclusion of the Business Judgment Rule in Austrian corporate law at the beginning of 2016 has certainly contributed to the recognition of managers’ discretion in taking business decisions. At the same time however, a veritable compliance hype can bee seen in corporate organisations, which must be questioned critically. The decisive question is: How much compliance does an organisation need and has the bow not already been overdrawn?
One is always wiser in Hindsight
The experts’ discussion also touched upon the highly controversial judgment of the Regional Court of Munich in the matter Siemens vs. its former board member Heinz-Joachim Neubürger. The Regional Court of Munich handed down its judgment against Heinz-Joachim Neubürger with the knowledge of hindsight after extensive investigations. However, the court should have based its decision on an ex ante perspective from the point in time the management decision under scrutiny has been taken.
Reversal of Burden of Proof requires Documentation
Managers are well advised to produce documentation on business decisions to minimize risks. The creation of a paper trail documents the basis and considerations underlying a business decision. In a litigation on management liability the burden of proof is reversed, as a result of which a manager has to proove that by his conduct under scrutiny he has not breached his duty of care. Such proof can only be furnished on the basis of comprehensive documentation.