Corporate Governance: A Comparative Analysis of Burberry and Hugo Boss

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.