Wirecard Pre- And Post-Scandal: A Board Effectiveness Analysis

• Published date: 06 July 2020
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Financial Services, Compliance, Corporate and Company Law, Directors and Officers, Insolvency/Bankruptcy
• Law Firm: CGLytics
• Author: CGLytics &nbsp

Wirecard's now former CEO, Markus Braun, resigned with immediate effect from his position on June 19 and was arrested by German authorities on June 22, after the company's auditor, EY reported EUR 1.9 billion missing from the balance sheets, and refused to sign off Wirecard's financial results¹.

Wirecard claimed that the missing amount does not exist and announced that the company has filed an application for insolvency on June 25². The company's shares were suspended from trading before it announced insolvency proceedings Wirecard's shares fell almost 90% after it admitted to the missing EUR 1.9 billion.

Right after the CEO's resignation, Jan Marsalek Wirecard's former COO and a member of the Management Board, was dismissed (on June 22). James Freis, a former Director of Financial Crimes Enforcement Network for the United States Department of the Treasury and Managing Director, Group Chief Compliance Officer, and Group Anti-Money Laundering Officer at Deutsche B'rse AG, was appointed interim CEO of Wirecard on June 19.

To evaluate if the Board of Wirecard was well equipped to prevent the fraud scandal, CGLytics looked at the expertise of Board Members and other factors that define the effectiveness of the Board prior to changes to its composition.

Gaps in board expertise

Prior to changes on the Management Board in June 2020, the Board of Directors of Wirecard consisted of five members of Supervisory Board and four members of Executive Board. According to the Board Expertise analysis, using CGLytics Governance Data and Analytics tools in the software platform, the Board at that time scored low on the Financial and Governance expertise, the two essential skills for successful oversight of financial compliance.

Wirecard's Board Expertise and Skills Matrix

Source: CGLytics Expertise Diagram and Skills Matrix

Criticism of Wirecard has been raised already in 2019, when the Financial Times started an investigation into the company's accounting conduct based on numerous whistleblowing cases. Wirecard was denying reports of misconduct and claimed such information was fake⁴. Both Markus Braun and Jan Marsalek, now former members of the Management Board, lacked Financial and Governance expertise, which was also the case with other members of the Management Board (except the Chief Financial Officer Alexander von Koop).

Thomas Eichelmann, independent member of the Supervisory Board and Chairman since January 2020, brings both Financial and Governance expertise...