Shedding Light

Corporate Governance Watchdog Can't Do Enough Explaining and Educating

frankfurt skyline
There's no clear view of Germany's complex corporate governance system.
  • Why it matters

    Why it matters

    The German Corporate Governance Commission, besides explaining the country’s complex system, will continue to work on improving governance practices to avoid unnecessary and counterproductive regulation.

  • Facts

    Facts

    • The German government in 2001 created the German Corporate Governance Commission to improve understanding of the system.
    • A year later, the commission issued the Corporate Governance Code, a voluntary set of best practice guidelines for all publicly quoted German companies.
    • A majority of countries in the European Union uses a single-tier system and national legislatures often adapt the rules to their own domestic legal environments.
  • Audio

    Audio

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For international observers and investors, German corporate governance for a long time has been opaque, if not downright mysterious.

To a large extent, this is due to two peculiarities of the German system. The first one is the country’s two-tier system of corporate management, where a supervisory board of external directors oversees  a management board, including the chief executive.

The second uniquely German feature is the country’s mandatory system of co-determination, where up to half of supervisory board members are elected by employees rather than shareholders. Add an enormous volume of codified corporate law, which is constantly modified by court judgment, and the result is a German governance system that lacks the pragmatism and dynamism of English-style case law.

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