Recent Developments In German Corporate Governance

Corporate governance encompasses the free enterprise system, which is treated comprehensively in this book from a German perspective. This distinguishes the book from other books written in English in this subject area, not only because of the comprehensive way it covers German corporate law and corporate governance, but also because of the fact that it provides international and European perspectives on these important topics. This second edition is an extensively revised and updated version of the first edition, in particular with a view to the worldwide debt crisis. The authors provide readers with an overview of the unique features of German business and enterprise law and an in-depth analysis of the organs of governance of German public limited companies (general meeting, management board, supervisory board). In addition, approaches for reforms required at the international level are also suggested and discussed, including, among others, the unique interplay and dynamics of the German two-tier board model with the system of codetermination, referring to the arrangement of employees sitting on the supervisory boards of German public limited companies and private companies employing more than 500 employees; also covered are significant recent legal developments in Europe. The book highlights the core function of valuation and financial reporting at the international, European and German levels, with accounting as the documentary proof of good corporate governance. It also expands the scope of the first edition by a treatment of the German financial sector, global corporate finance and governance, and by including a new chapter on compliance of corporate governance laws, rules and standards in Germany. As far as comparative law is concerned, new developments in the area of corporate governance in the EU, the OECD Principles of Corporate Governance and corporate governance in the US, the UK and Australia are covered. The book is addressed to researchers, practitioners and basically anyone with an interest in the complex, but intriguing areas of corporate law and corporate governance.

This paper provides an overview of the German corporate governance system. We review the governance role of large shareholders, creditors, the product market and the supervisory board. We also discuss the importance of mergers and acquisitions, the market in block trades, and the lack of a hostile takeover market. Given that Germany is often referred to as a bank-based economy, we pay particular attention to the role of the universal banks (Hausbanken). We show that the German system is characterised by a market for partial corporate control, large shareholders and bank/creditor monitoring, a two-tier (management and supervisory) board with co-determination between shareholders and employees on the supervisory board, a disciplinary product-market, and corporate governance regulation largely based on EU directives but with deep roots in the German codes and legal doctrine. Another important feature of the German system is its corporate governance efficiency criterion which is focused on the maximisation of stakeholder value rather than shareholder value. However, the German corporate governance system has experienced many important changes over the last decade. First, the relationship between ownership or control concentration and profitability has changed over time. Second, the pay-for-performance relation is influenced by large shareholder control: in firms with controlling blockholders and when a universal bank is simultaneously an equity- and debtholder, the pay-for-performance relation is lower than in widely-held firms or blockholder-controlled firms. Third, since 1995 several major regulatory initiatives (including voluntary codes) have increased transparency and accountability.

Essay from the year 2013 in the subject Politics - General and Theories of International Politics, grade: 1,3 (German Grading System), University of Washington, language: English, abstract: After scandals like Enron in the past years, companies have been pressured to establish Corporate Governance systems to control their management. The design of these systems is often determined on a national level, but varies substantially from country to country. This paper deals with the different systems of Corporate Governance in the United States and Germany and establishes a comparison. The focus is put on how the German system is different from that of the US. At the end, recent developments in the Corporate Governance landscape are discussed. To begin with, it is important to understand what Corporate Governance means. It is defined as “The system of rules, practices and processes by which a company is directed and controlled”. These rules, practices and processes are supposed to achieve values like integrity, transparency and fairness. Thereby, Corporate Governance can support a corporation to “fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term”. Furthermore, it strengthens a company’s reputation and has shown to increase share prices by establishing trust. Potential investors, who might not be familiar with a corporation’s processes and controlling practices in detail, can rely on statutory monitoring systems.

The traditional German corporate governance system has developed against the background of a pay-as-you-go pension system and the consensus-oriented German culture. The system that emerged was characterized by influential banks and bank loans being the main source of outside financing for the corporate sector. However, as the economic and regulatory environment changed over the last 25 years, the corporate sector shifted towards more equity financing, and more generally towards more market-oriented sources of finance. Simultaneously, the banking sector saw major transformations and Germany enacted a series of regulatory initiatives to modernize its corporate governance. As a result, the German corporate governance system developed notably with international and minority shareholder gaining influence at the expense of banks and other insiders. While this development - which is strongly influenced by the Anglo-American governance ideal, but does not simply adopt a market-oriented blueprint - is still ongoing, several open issues with room for improvement remain.

The article shows major corporate governance developments that took place in Germany in recent years. These developments do not constitute a fundamental change of the German corporate governance system. Rather, regulatory changes are primarily aimed at further improving the modalities of managing and supervising corporations within the German system of corporate governance in order to attenuate its downsides and to strengthen its vigorousnesses. In this regard, an accelerating pace as well as an increasing intensity of reforms are to be observed. The German Corporate Governance Code marks a milestone in this advancement because the establishment of this instrument adds a new regulatory level to the regulatory framework of corporate governance which has not been employed in Germany before.

For many Americans, capitalism is a dynamic engine of prosperity that rewards the bold, the daring, and the hardworking. But to many outside the United States, capitalism seems like an initiative that serves only to concentrate power and wealth in the hands of a few hereditary oligarchies. As A History of Corporate Governance around the World shows, neither conception is wrong. In this volume, some of the brightest minds in the field of economics present new empirical research that suggests that each side of the debate has something to offer the other. Free enterprise and well-developed financial systems are proven to produce growth in those countries that have them. But research also suggests that in some other capitalist countries, arrangements truly do concentrate corporate ownership in the hands of a few wealthy families. A History of Corporate Governance around the World provides historical studies of the patterns of corporate governance in several countries-including the large industrial economies of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States; larger developing economies like China and India; and alternative models like those of the Netherlands and Sweden.

This book gives a concise introduction to the German law of business organizations and is meant to help business practitioners and international students to familiarize themselves with its key concepts and legal issues. After outlining some characteristic features of the German legal system the book describes the various types of German business organizations with a special focus on the German Limited Liability Company (GmbH) and the German Stock Corporation (AG). The book discusses some typical problems faced by companies engaged in cross-border activities and also provides a brief outline of some recent developments in European company law with a special focus on the new multinational corporate form of the European Company (SE).

Corporate governance is an important issue on the research agenda of financial economists. Using a new and unique data set of German corporations this book examines three topics that are crucial to a better understanding of corporate governance: (a) the frequency, causes, and consequences of control transfers, (b) the determinants of acquisition and failure, and (c) the role of corporate governance and market discipline for productivity growth. This book points out methodological drawbacks of previous empirical studies and provides suggestions on how to avoid these problems in research practice.