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Maria Arenz stands out even when she’s driving in the autobahn’s fast lane. Most other in-house lawyers might consider a standard-issue Porsche 911 Carrera coupe flashy enough. But the 57-year-old Arenz, the general counsel of the Stuttgart-based Dr. Ing. h.c. F. Porsche AG, found its all-gray interior too staid. She ordered custom-made red belts and trim. So it’s not surprising that Arenz has helped guide Porsche in its two maverick positions on corporate governance. First, the carmaker has refused to issue quarterly reports, arguing that they encourage short-term thinking and market volatility. As a result, in September 2001, the Deutsche Boerse removed Porsche from its midcap index. Now Porsche has gone on the offensive: suing the Deutsche Boerse for making quarterly reporting a prerequisite for its new “prime standard” classification, a status the exchange awards to companies that meet certain transparency standards. But Porsche made its loudest noise in October 2002, when it declined an invitation to list on the New York Stock Exchange. Porsche was the first of several foreign companies to refuse a listing in the wake of the Sarbanes-Oxley Act. Even before the corporate governance law passed, a New York listing held little allure for the sports car maker. With its cultlike status, Porsche doesn’t lack for name recognition. It doesn’t need currency because it doesn’t make any acquisitions. And it isn’t tempted to goose stock options, it says, because its managers own no company stock. All of its voting stock is held by the Porsche and Pi�ch families. So far, Porsche’s nonconformist positions have hurt neither its performance nor its image. Porsche reports results only on a semiannual basis, and yet its 2002 bond offering � pointedly made on Stuttgart’s tiny exchange � was oversubscribed. In January, Porsche was, for the third consecutive time, voted Germany’s most-admired company in a poll by the Hamburg-based Manager Magazin. Arenz has been Porsche’s general counsel since 1991. Prior to that she worked in-house at the auto parts giant Robert Bosch GmbH. In February, The American Lawyer‘s chief European correspondent Michael D. Goldhaber met Arenz in Stuttgart. Q. Why did Porsche decline to list on the New York Stock Exchange? Was Sarbanes-Oxley the deciding factor? A. Actually, our internal debate predated Sarbanes-Oxley. One of my main arguments was that a listing would expose us to class actions. A month after we listed, we’d have to hire at least one other expensive American in-house lawyer [to respond to SOX requirements]. There were other reasons. Sarbanes-Oxley only made the decision easier. Q. Why does Porsche refuse to file quarterly reports? A. I think quarterly reports give only a virtual picture and not a real picture of a company. This is only too evident when we look at the alarming decline of New Economy companies, which were once so highly valued. Stock markets put a premium on avoiding surprises. But we’re not a giant company that can operate in reality at one level and construct reports at another level. Q. Are you worried that the E.U.’s proposed transparency directive to improve financial reporting will impose quarterly reports? A. No, the E.U. is not talking about hard-core reporting anymore. What we are expecting from there we can live with. Of course, we see no need for an E.U. regulation at all. Your country has a good proverb: If it’s not broken, don’t fix it. Q. What do you think of the Sarbanes-Oxley requirement that a CEO certify the veracity of corporate results? A. In American culture there is a tendency to personalize. But such rules will not prevent another Enron. Human nature is too strong. And Sarbanes-Oxley still leaves too much room for interpretation by managers who feel under pressure � for example, to meet quarterly expectations. Q. But after Parmalat, Europe cannot say that America is uniquely prone to corporate scandal. A. No country is immune to corporate scandal. Nobody ever pretended that Europe is immune. Q. Your CEO Wendelin Wiedeking once said: “Everything doesn’t have to be done as the Americans do it.” Do you agree? A. He’s right. It would be horrible if the whole world were the same. What works in your country doesn’t necessarily work in other countries. Q. What do you think of the SOX provisions that provide legal protections for corporate whistle-blowers? A. This creates a bad climate. In general, trusting people makes people trustworthy. And it’s certainly not [true] that whistle-blowers are always beyond doubt. Q. How about the ban on outside auditors cross-selling legal and tax services? A. This is a good idea. It is the best part of the law. The conflict of roles was introduced by the Big Five accounting firms, and the way it was handled became a pest. Q. Academics would predict that, by resisting transparency, you will lower your stock price and raise the cost of capital. A. That’s indeed a very academic view. Our experience is that most investors care about the quality of management and long-term strategy. Our investors don’t complain about lack of transparency. Q. What do your peers think of the positions you have taken? A. Many tell me, “You’re right, we share your opinion.” Q. If you’re so happy with the choice of not listing in New York, why have we not seen German companies delist? A. Many German companies are unhappy about being listed and would like to delist. But now they realize, “Oops, even if we delist, it’s almost impossible to get out of most of the obligations of listed companies.” Q. Why don’t other companies stand with you on quarterly reporting? Is it because your market position is unique? A. I don’t know why others don’t join us. There are plenty of solid companies that are independent enough of the capital markets that they don’t need to go along with the herd. Q. Last year, your CEO gloated that Porsche’s stock has outperformed the German index and posed the question: “Who is the fool now?” Can you still make the same boast? A. I think the fool is who the fool is. We have not seen the fool change places yet. Q. Do you have any parting advice to other corporate counsel? A. Trust your own judgment. If you think after due consideration that a new “must” is nonsense, then it probably is nonsense. This article first appeared in The American Lawyer, a Corporate Counsel sibling publication.

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