Code of Conduct

New rules for companies of the City of Vienna

The Court of Audit reports on the Wien Energie case revealed many weaknesses, which are now to be closed with the new code.

(Bild: APA/Helmut Fohringer)

At the latest after the commission of inquiry into the Wien Energie case, there were calls for a new investment management system for the City of Vienna. The issue was also criticized in two Court of Audit reports, in some cases with harsh words. The city has taken this to heart and is now presenting a new code.

Even during and after the investigation commission, the City of Vienna's ownership role in municipal and city-affiliated companies was criticized in particular. The City Court of Audit and the Federal Audit Office were also called into action as a result. And they were sometimes harsh in their criticism of the investment and risk management.

Courts of auditors criticize supervisory boards
The report by the City Court of Audit spoke of "systemic weaknesses in risk assessment, limitation, management and reporting". The behavior of the Supervisory Board in the case of Wien Energie and Wiener Stadtwerke is not given a good rap in the report. The Court of Audit attests: The nomination was not made on the basis of comprehensible criteria. The decisive criterion was de facto proximity to the City of Vienna.

The Austrian Court of Audit also found that the Supervisory Board "did not fully perform its supervisory function". This was due to the expertise of the people involved, as the Court of Audit diagnosed. To quote: "The City of Vienna and Wiener Stadtwerke should ensure that the composition of the Supervisory Board of Wien Energie is professionally balanced." According to the report, it was not so much the expertise of the Supervisory Board members that was important, but rather "institutional proximity to the City of Vienna".

Criticism that the City of Vienna obviously also took to heart. Deputy Mayor Christoph Wiederkehr (Neos) and Vienna's City Councillor for Finance and Economy Peter Hanke (SPÖ) have now presented the "Vienna Public Corporate Governance Code" (WPCGK). Behind the unwieldy name lies nothing other than the set of rules that municipal companies will have to play by in future. The "Krone" has the first details:

Central elements
Among other things, the code regulates the composition of the supervisory board and management and defines transparent decision-making processes. The WPCGK also aims to clearly delineate the tasks and responsibilities between the owner, the City of Vienna, on the one hand, and the individual company holdings on the other. 

With regard to the competencies of the Supervisory Board members , it specifically states: "Members of the Supervisory Board must have the knowledge, skills and professional experience required to properly perform their duties. Corresponding competence profiles and specific requirement criteria for the professional qualifications and competencies of members must be defined and periodically updated." Processes for the selection of persons for Supervisory Board functions must be defined and the reasons for decisions documented.

For the first time, this Code provides uniform rules for all municipal holdings: For Wien Holding and Wien Energie, as well as for Wiener Festwochen GmbH. This also reforms the appointment process for Supervisory Board members: The cooling-off phases and the strict handling of conflicts of interest in particular are an important step.

Christoph Wiederkehr, Vizebürgermeister und Transparenzstadtrat

Bild: Jöchl Martin

With regard to transparency and documentation: "Binding regulations make up the main part of this Code and must be observed without restriction. Any deviation from the recommendations of the Code must be justified by the company in an annual corporate governance report." And: "The decisions of the City of Vienna in its role as owner of companies must be documented in writing in the form of minutes of the shareholders' meetings or in circular resolutions in a comprehensible manner."

The Code is a milestone of our Progress Coalition; more than 140 companies are subject to these new regulations. Binding quotas for women and maximum age limits on supervisory boards are an expression of a participation policy that recognizes the signs of the times.

Peter Hanke, Finanz- und Wirtschaftsstadtrat

Bild: Zwefo

Risk management has also been clearly criticized in recent reports. The new Code also addresses this. "The management body shall ensure risk management and controlling appropriate to the size and economic activity of the company as well as appropriate corruption prevention." The management must also report at least quarterly on the course of business and on compliance-relevant events and violations. 

Reinforcement for the control bodies
But who do these new rules actually apply to? The Code applies to all companies in which the City of Vienna has a stake. This includes

• Companies in which the City of Vienna owns more than 50 percent of the shares. These companies must comply with the Code.
• Companies in which the City of Vienna holds less than 50 percent of the shares (i.e. minority shareholdings). In these cases, the City of Vienna is committed to ensuring that the Code is implemented voluntarily.
• Companies whose shares are traded on the stock exchange and certain other special cases are exempt.

In order to be able to take on these mammoth tasks, controlling is also being expanded. The financial administration has set up two new departments for "shareholding administration" and "shareholding controlling". The new positions have already been filled. In future, members of the city's Supervisory Board will receive legal advice and regular further training. Risk and sustainability management will also receive more intensive support and controlling will be expanded in a more targeted manner.