Corporate Governance: A Comparative Analysis of Burberry and Hugo Boss

This report analyzes the corporate governance structures of Burberry and Hugo Boss, two luxury fashion brands. It examines the differences and similarities between the UK and German corporate governance practices and evaluates the need for global convergence of corporate governance codes.

CORPORATE
GOVERNANCE

REPORT 1
Introduction
Every organization consists of a number of stakeholders that have varied business interests
with the organization. In order to govern the conduct of the organizations, a number of
statutes have been formulated across various nations. The rules, regulations, statutes together
fall in the ambit of the concept called the “corporate governance.” Corporate Governance
refers to the set of practices, laws, policies that guide the behavior of the organization to bring
about the overall positive value addition in the society (Tricker, 2015). The corporate
governance practices are aimed at enabling the management of the enterprises to be
transparent, fair, and accountable towards the range of the stakeholders. A corporate
governance structure of an entity has several components namely the people, policies, roles,
and structures (Carroll and Buccholtz, 2014).
The following report is aimed at analyzing the corporate governance structures of the two
organizations namely the Hugo Boss and the Burberry Group PLC. While the former is a
popular British luxury fashion brand, the latter is a German luxury fashion brand. Hence, the
report will shed light on the differences and the similarities of the UK and German corporate
governance practices. In addition, an evaluation would be done to answer the question that
whether the global convergence of the corporate governance code is necessitated.
Background of the entities Burberry Group Plc. and the Hugo Boss
The entity Burberry Group Plc. is a popular British luxury fashion brand, the headquarters of
which are situated in London. Thomas Burberry founded the entity in the year 1856
(Burberry, 2018a). It is listed on the London Stock Exchange and is the manufacturer of
fashion accessories, cosmetics, women's, men's and children fashion clothes. The company
falls in the ambit of the UK corporate governance code. As per the latest financial reports of
the year 2018, the entity has earned a revenue of GBP 2733 million. Therefore, the entity is a
major player in the fashion industry.
The entity Hugo Boss AG is a German luxury fashion brand which was established in the
year 1924 by Hugo Boss and hence the name. The headquarters of the entity is located at
Metzingen, Germany. The company also is the manufacturer of the Men's and Women’s
wear, shoes, accessories, fragrances, eyewear, and watches. The entity sells its products under
the two brand names HUGO and BOSS. The company had delivered the group sales of Euro

REPORT 2
2693 million in the year 2017 (Hugo Boss, 2018a). As the company is headquartered at
Germany, it is required to follow the German code of conduct.
Both the companies are biggest competitors to each other, but are governed by a separate
code of conducts and therefore differ in terms of the corporate structure.
Geographical location and corporate governance structures
The corporate governance structure of the entities is governed by the location of the entity.
As mentioned above, the company Burberry follows the UK Corporate Governance Code, as
updated and published by the Financial Reporting Council (FRC) in the month of April 2016
(Burberry, 2018b). In addition, it follows the UK Financial Conduct Authority (FCA) Listing
Rules. Further, the corporate governance provisions of the Companies Act 2006 are also
complied with.
The UK corporate governance code states five main principles for corporate governance
namely the leadership, effectiveness, accountability, remuneration and the relations with
shareholders (Financial Reporting Council, 2016). The main feature of the UK corporate
governance code is the "comply or explain" approach. Thus, the UK code prescribes
principles can be complied with, and if an alternative means can be justified, the same can be
followed by explaining the same. The explanation should be indicative of the fact that the
actual practices are consistent with the principles, and the rationale for the action.
In contrast to this, the German Corporate Governance Code describes the significant statutory
requirements for the management and supervision of the corporations on the German stock
exchange (German Corporate Governance Code, 2018). The code contains the combination
of the national and international standards for good corporate governance in the public listed
entities. This code is in addition to the accounting framework and the other legal
requirements. It is significant to note that the listed German corporations are required to issue
a statement of compliance that is known as the Corporate Governance Statement that states
that the code has been complied with along with the incidental recommendations.
Thus, it would be right to state that the geographical location of the entity plays a significant
role in the determination of the applicability of the corporate structure rules. While the Hugo
Boss is mandatorily required to follow the structure and principles of the German Corporate
Governance Code, the Burberry is either required to follow the UK code or explain the
rationale of not following it.

REPORT 3
Corporate Structure of Burberry and Hugo Boss
The German code for corporate governance requires the listed German corporations to follow
a dual board management system. Thus, the entities are required to have a management board
in addition to the supervisory board. While the management board is responsible for the
management of the affairs of the company under the leadership of the Chair, the supervisory
board is entrusted with the responsibility of appointing, supervising, and advising the
management board.
Mr. Mark Langer who is the Chief Executive Officer heads the current management board of
the company Hugo Boss. There are three other board members namely Mr. Bernd Hake, Mr.
Yves Muller and Mr. Ingo Wilts (Hugo Boss, 2018b). As a whole, the management board is
responsible for the management of the corporate functions like Corporate Strategy,
Communication, Human Resources, Legal Compliance, Wholesale, Finance and Taxation
matters, Risk and Insurance Management, Creative Management, and others.
The Chairman, Mr. Michel Perraudin and the Deputy Chairman, Mr. Antonio Simina head
the current supervisory board of the Hugo Boss (Hugo Boss, 2018c). There are ten other
members, which together constitute the supervisory board of the company. The supervisory
board of the entity has further established various committees to perform its functions
efficiently and effectively. These committees are the Audit Committee, the Working
Committee, the Personnel Committee, the Mediation Committee, and the Nomination
Committee, as required by the statutes.
According to the UK code of corporate governance, there have been prescribed five
principles. According to the first principle of leadership, an effective board should head an
entity, and there should be a clear division of the responsibilities among the board members.
Accordingly, its board of directors comprising of a Chairman, a CEO, a CFO, seven non-
executive directors, and a senior independent director manages the entity Burberry (Burberry,
2018c). The entity has special decisions and matters reserved for the approval of the board,
for instance, the decisions with respect to the corporate strategy, internal control system,
major capital expenditure, and transactions, annual budget, operational plans, and other such
key matters.
Similarly, to the structure of the Hugo Boss, the board of director of Burberry function
through a number of committees, such as the remuneration committee, audit committee, and
the nomination committee. In addition, the committee engages the third-party advisers and

REPORT 4
independent professional experts to guide them in discharging their responsibilities and
functions.
Board Diversity and accountability
Board diversity is one of the key issues in modern corporate governance. This is because the
diversity in the board enables more accountability and equality in the employment, and this is
a means to challenge the stereotyping against gender and race (Bear, Rahman, and Post,
2010). The companies of today are thus paying more attention towards strong female
presence as well as the individuals belonging from the ethnic minority groups in their
corporate board structure. While the entity Burberry has five women out of eleven members
on its board, the Hugo Boss has three women on its supervisory board. Thus, the board of
directors of both the entities has diversified board structures.
Another key element of a strong corporate governance framework is the accountability of the
board. The board accountability refers to the taking of responsibility for the activities of the
entity (Mallin, 2011). In addition, it includes the fair, transparent, and balanced assessment
and presentation of the position and the prospects of the organization to the shareholders
(Andrews, 2017). The large organizations must provide a strategic report of the key
developments, negative and positive attributes of the business operations to the stakeholders.
The report must comprise the key elements like the present position and the future prospects
of the entity.
In response to the accountability element of the sound corporate governance structure, the
company Burberry has presented various facets of business operations in the form of
chairman’s letter, key performance indicators, risk and viability report, corporate governance
report, report of the audit committee, director’s report, director’s remuneration report among
others. Similarly, the entity Hugo Boss has presented the report of the supervisory board,
business activities, and group structure, management reports on the matters like group
strategy, employees, research and development, risk and opportunities and others in its
annual report (Hugo Boss, 2018d).
Thus, both the companies have followed a different set of code of corporate governance rules
and framework, but have comprehensively presented the board diversity and board
accountability in their annual reports, for the evaluation by the stakeholders and as required
by the respective statutory regulations.

REPORT 5
Global convergence of corporate governance codes
As evident from the case studies of the Burberry and Hugo Boss, the corporate governance
structure vary from country to country. The mechanism is based on the political, social, and
economic situations of respective countries. However, the underlying principle is the same
that is to strike a balance between the interest of the public and other stakeholders, and the
entity. In recent times, the phenomena like that of globalization have opened new gateways
for the investors, to access the capital market and entities beyond the borders. This has called
for debate for whether a global convergence of the corporate governance code is necessitated
and possible.
In response to the above, it is significant to note that one major argument in against of the
global convergence of the corporate governance code is that these are based on the
accounting and legal requirements for the corporations (Aguilera and Crespi-Cladera, 2016).
These legal requirements vary from country to country. For instance, while the companies in
the UK follow the Companies Act 2006, the German companies are required to abide by the
German Company Law. Another few arguments that support the divergence in the codes of
corporate governance are the differences in the ownership and board structures across the
nations, securities regulation, the role of banks and large financial institutions in the entities,
the role and size of the stock markets, degree of involvement of the government and other
incidental aspects.
However, researchers who back the convergence of the codes globally, argue the points like
globalization, liberalization of the business practices in the global markets and role of the
international organizations in the promoting the corporate governance practices.
Hence, it would be right to state that convergence of corporate governance principles though
backed by theoretical principles, lack base in practical implementation.
Conclusion
As per the discussions conducted in the previous parts, it can be stated that corporate
governance is a collection of the procedures and processing that is a means to guide and
control the organizations. These serve as the principles to distribute the rights and
responsibilities of the various participants in an entity, namely the shareholders, investors,
regulators, customers, employees, the board of the directors and others. The report was an
attempt to analyze the similarities and differences in the codes of the corporate governance of

REPORT 6
the two entities, i.e. the Burberry Group Plc. and the Hugo Boss. Both these organizations are
set in different geographical backgrounds, and therefore possess a different set of corporate
structures. However, both the entities comply with the basic elements of board diversity and
board accountability in their respective manners. In addition to the above, the arguments were
presented in favor and against of the convergence of the corporate governance code at the
global level. It can be concluded that corporate governance is the key essentials of modern
business organizations, no matter to which geographical setting they belong.

REPORT 7
References
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