NY Times Article on Porsche Re: NYSE Listing (long)
08-21-2002, 12:10 PM
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NY Times Article on Porsche Re: NYSE Listing (long)
August 21, 2002
Porsche Is Balking at U.S. Auditing Rule
By MARK LANDLER
RANKFURT, Aug. 20 Driving a Porsche may be a totem of success for high-level corporate executives from Beverly Hills to Bronxville. But Porsche is not about to be held to the same standards of accountability as its A-list American customers.
It said today that it had put its plans to issue shares on the New York Stock Exchange "on ice" because of a new law in the United States requiring senior executives to swear that their financial reports are accurate.
"I take oaths seriously," Porsche's chief executive, Wendelin Wiedeking, told reporters before opening a new assembly plant in Leipzig. "You can never be sure that results which thousands of people have had a hand in preparing are completely accurate."
Mr. Wiedeking did not elaborate on his objections but added that "the decision about a U.S. listing is on ice."
As part of an effort by Congress to curb abuses, the Securities and Exchange Commission is requiring that the chief executives and chief financial officers of companies whose stock is publicly traded in the United States sign off on financial reports. Those who violate the law may be fined up to $5 million and sentenced to 20 years in prison.
Mr. Wiedeking is uncommonly outspoken, but his dim view of the new law is widely shared among German chief executives.
Twenty-four companies, including DaimlerChrysler, Bayer and Deutsche Telekom, sent a letter to the S.E.C. last Friday asking that German companies be exempted from the requirement.
"We are quite far away from the U.S. system," said Peter Wiesner, a spokesman for the Confederation of German Industry, which is coordinating the campaign. "They are interfering in the company statutes of European firms. We believe this should be left to local regulators."
Mr. Wiesner said companies in Britain, France, Switzerland and other countries shared Germany's objections. He said his group hoped to send a follow-up letter signed by companies all over Europe.
"This is not making the capital markets in the United States very attractive," Mr. Wiesner said.
The German companies couched their protest in legal language. But experts here say there is an underlying grievance: German executives have not been accused of the serious level of corruption of their American counterparts. So why should they be required to swear an oath of honesty?
Many also believe that German law is strong enough to curb malfeasance without the threat of added liability in the United States.
Singling out chief executives and chief financial officers has touched a nerve in Germany because companies here tend to be less dominated by individuals than American corporations are.
The structure of German companies, which outsiders often find baffling, diffuses responsibility in two bodies. One is the supervisory board, composed of outsiders and a few senior executives, which functions like an American board. The other is a management board, composed of the top operating executives. Although the chief executive leads that board, its decisions are made collectively.
Complicating matters, German companies typically put an employee or union representative on the board's audit committee, a practice that runs afoul of the provision in the new American law requiring that all members of audit committees be wholly independent.
"The differences are cultural and historical," said Dieter Lange, a senior partner at Wilmer Cutler & Pickering in London who counsels German companies on dealing with United States regulators.
Mr. Lange said that he had advised against sending a letter to the commission because it was too confrontational. He said there were genuine differences for the United States and Germany, notably over accounting standards, but that the sides could probably reach a compromise.
"In actual substance, this certification of financial statements is not so different in the U.S. as in Europe," he said. "We're going to see a similar development in Germany that we saw in the United States."
A spokesman for the S.E.C. declined to comment on the letter, which was submitted as part of a public comment process before the law takes effect later this month.
Several big German companies, including Deutsche Bank and Siemens, declined to sign the letter. Detlev Rahmsdorf, a spokesman for Deutsche Bank, said it shared some of the concerns but preferred to work out the issues privately with the S.E.C.
"We live basically in both jurisdictions," he said. "We are a strong player on Wall Street, and we rely on our American employees."
Porsche, which is based in Stuttgart, relies more on its American customers. In 2001, analysts said, the company sold 44 percent of its cars and derived 42 percent of its sales from the United States.
But Porsche has been uncompromising about its financial practices. Last year, the Deutsche Börse, which runs Frankfurt's stock exchange, expelled the company from an index of midsize companies after it refused to publish quarterly financial reports. Porsche, which publishes results twice a year, said quarterly reports were costly and did not accurately reflect its business.
That led Porsche to consider listing on the New York Stock Exchange. But some analysts said they always doubted that Porsche would accede to the requirements of a listing. Having just issued almost $300 million in bonds, Porsche does not need the capital.
"It would have made it easier for Porsche customers to buy the shares," said Thomas C. Aney, an automotive analyst at Dresdner Kleinwort Wasserstein in Frankfurt. "But there was no financial need."
Indeed, he said, the executives at the stock exchange seemed more entranced with a Porsche listing than Porsche itself was.
Porsche Is Balking at U.S. Auditing Rule
By MARK LANDLER
RANKFURT, Aug. 20 Driving a Porsche may be a totem of success for high-level corporate executives from Beverly Hills to Bronxville. But Porsche is not about to be held to the same standards of accountability as its A-list American customers.
It said today that it had put its plans to issue shares on the New York Stock Exchange "on ice" because of a new law in the United States requiring senior executives to swear that their financial reports are accurate.
"I take oaths seriously," Porsche's chief executive, Wendelin Wiedeking, told reporters before opening a new assembly plant in Leipzig. "You can never be sure that results which thousands of people have had a hand in preparing are completely accurate."
Mr. Wiedeking did not elaborate on his objections but added that "the decision about a U.S. listing is on ice."
As part of an effort by Congress to curb abuses, the Securities and Exchange Commission is requiring that the chief executives and chief financial officers of companies whose stock is publicly traded in the United States sign off on financial reports. Those who violate the law may be fined up to $5 million and sentenced to 20 years in prison.
Mr. Wiedeking is uncommonly outspoken, but his dim view of the new law is widely shared among German chief executives.
Twenty-four companies, including DaimlerChrysler, Bayer and Deutsche Telekom, sent a letter to the S.E.C. last Friday asking that German companies be exempted from the requirement.
"We are quite far away from the U.S. system," said Peter Wiesner, a spokesman for the Confederation of German Industry, which is coordinating the campaign. "They are interfering in the company statutes of European firms. We believe this should be left to local regulators."
Mr. Wiesner said companies in Britain, France, Switzerland and other countries shared Germany's objections. He said his group hoped to send a follow-up letter signed by companies all over Europe.
"This is not making the capital markets in the United States very attractive," Mr. Wiesner said.
The German companies couched their protest in legal language. But experts here say there is an underlying grievance: German executives have not been accused of the serious level of corruption of their American counterparts. So why should they be required to swear an oath of honesty?
Many also believe that German law is strong enough to curb malfeasance without the threat of added liability in the United States.
Singling out chief executives and chief financial officers has touched a nerve in Germany because companies here tend to be less dominated by individuals than American corporations are.
The structure of German companies, which outsiders often find baffling, diffuses responsibility in two bodies. One is the supervisory board, composed of outsiders and a few senior executives, which functions like an American board. The other is a management board, composed of the top operating executives. Although the chief executive leads that board, its decisions are made collectively.
Complicating matters, German companies typically put an employee or union representative on the board's audit committee, a practice that runs afoul of the provision in the new American law requiring that all members of audit committees be wholly independent.
"The differences are cultural and historical," said Dieter Lange, a senior partner at Wilmer Cutler & Pickering in London who counsels German companies on dealing with United States regulators.
Mr. Lange said that he had advised against sending a letter to the commission because it was too confrontational. He said there were genuine differences for the United States and Germany, notably over accounting standards, but that the sides could probably reach a compromise.
"In actual substance, this certification of financial statements is not so different in the U.S. as in Europe," he said. "We're going to see a similar development in Germany that we saw in the United States."
A spokesman for the S.E.C. declined to comment on the letter, which was submitted as part of a public comment process before the law takes effect later this month.
Several big German companies, including Deutsche Bank and Siemens, declined to sign the letter. Detlev Rahmsdorf, a spokesman for Deutsche Bank, said it shared some of the concerns but preferred to work out the issues privately with the S.E.C.
"We live basically in both jurisdictions," he said. "We are a strong player on Wall Street, and we rely on our American employees."
Porsche, which is based in Stuttgart, relies more on its American customers. In 2001, analysts said, the company sold 44 percent of its cars and derived 42 percent of its sales from the United States.
But Porsche has been uncompromising about its financial practices. Last year, the Deutsche Börse, which runs Frankfurt's stock exchange, expelled the company from an index of midsize companies after it refused to publish quarterly financial reports. Porsche, which publishes results twice a year, said quarterly reports were costly and did not accurately reflect its business.
That led Porsche to consider listing on the New York Stock Exchange. But some analysts said they always doubted that Porsche would accede to the requirements of a listing. Having just issued almost $300 million in bonds, Porsche does not need the capital.
"It would have made it easier for Porsche customers to buy the shares," said Thomas C. Aney, an automotive analyst at Dresdner Kleinwort Wasserstein in Frankfurt. "But there was no financial need."
Indeed, he said, the executives at the stock exchange seemed more entranced with a Porsche listing than Porsche itself was.
