Congratulations to Bayern Munich who have just won their 11th straight Bundesliga title. One can debate the strength of the league, which is so dominated by one team, but it is still an incredible performance. Immediately after the championship was secured, the club announced that it was parting ways with its CEO, Oliver Kahn, and Sports director, Hasan Salihamidžić, both former players. The decision itself wasn’t particularly surprising given the media reports over the last few weeks, but the timing of the announcement was so bizarre, I wondered whether winning the title was somewhat inconvenient. After all, Dortmund effectively blew it having been widely expected to win their final game and therefore the title. The purpose of this blog isn’t to judge the merits of the decision, but to use it as an illustration of how a board member can (or cannot) be dismissed. Our foreign clients not familiar with the workings of German law are often understandably bemused by the legal framework. Here are a few principles:
- Bayern Munich is an AG, which is a form of German company. It has a management board that effectively runs the company/club, and a supervisory board which monitors and “super-vises” what the management board is up to. Herr Kahn and Herr Salihamidžić are/were both management board members. Tellingly, the highly influential Uli Hoeness is a supervisory member. Players and the coach are, if you are wondering, on neither board, they are just arguably the most valuable and important members of staff.
- Management board members will typically be engaged on fixed-term service agreements, often 3-5 years in term. They are not employees. Sometimes their contracts contain “link clauses”, meaning their service agreements terminate if they leave the board.
- The supervisory board will usually have the authority to engage or dismiss a management board member. Dismiss means remove from the board and terminate the service agreement.
- Crucially, a management board member can only be removed from the board if there is an “important reason”. Examples include a gross breach of duty, an inability to manage the business properly or a withdrawal of confidence by the general meeting. Even if the board member is removed from the board, the service agreement needs to be dealt with i.e. terminated: terminating that will require either good cause, an enforceable “link clause” or a mutual agreement.
- Board members usually end up leaving via a mutually agreed separation agreement with part, if not all, of the remaining term of contract being paid up (or the board member staying on payroll until s/he has found a new job) and warm language about the board exit.
I can only speculate on what has happened at Bayern. My reading of the situation is as follows:
- In the week before the final game of the Bundesliga season, Bayern, through the supervisors’ board, took the decision to let Herren Kahn and Salihamidžić go.
- They informed them 1-2 days before the game and offered the exit packages.
- Herr Salihamidžić agreed, orally or even formally, to his exit package and leaves on good terms. He attended the final game in Cologne and celebrated with the team.
- Herr Kahn did not agree and was then removed from the board and effectively put on garden leave. He was asked not to attend the game or celebrations.
What happens next?
Herr Salihamidžić will likely be a good leaver and remains a legend. Herr Kahn may be mulling over his options with his legal team. He may, in tune with his character as an exceptional player, fight Bayern and contest the validity of the board removal and termination, possibly via litigation. The question for him and his advisors is what he can achieve – maybe a better exit package, emotional satisfaction at having his say, but also potential damage to his own reputation and status as a leg-end of Bayern.
With these exits and how they were communicated plus the firing of coach Nagelsmann in similar fashion a few weeks ago, FC Hollywood has returned, at least for a little while, but still won the league and will likely sort out its internal struggles and return for the new season as strong as ever. I would expect a 12th title, a good run in the Champions League and, at board level, a return to the days of stability and mia san mia.
For further information, please contact:
Matthew Devey, Linklaters
matthew.devey@linklaters.com
