The German Supervisory Board on Its Way to Professionalism
Not convincing is the argument that the corporate governance system could be damaged by the new provision due to an alleged upgrading of codetermination, since all fundamental business decisions now require approval by employee representatives.68 This argument ignores that Section 111(4) does not only upgrade the legal position of labor representatives, but also the position of shareholder representatives. Besides that, the level of codetermination remains unchanged, i.e., under the Codetermination Act of 1976, the representatives of the shareholders are still able to approve fundamental business measures against the employee representatives’ wishes.69 The legitimate core of this critique focuses rather on the detrimental impact that codetermination has on the German corporate governance system as a whole. The inconvenient truth is that German codetermination is not sustainable, because it interferes with the supervisory board’s capability to monitor the management board more efficiently. Therefore, the current codetermination system has to be changed70 in lieu of criticizing the persuasive concept of the supervisory board’s mandatory approval rights.
III. Importance of the German Corporate Governance Code
Due to the newly established Section 161, the supervisory board has become more responsible for a company’s corporate governance system, as both the management board and the supervisory board have to disclose whether they comply with the recommendations of the GCGC or not on an annual basis. The GCGC catapulted the German corporate governance system into a new era, and it brought the responsibility of the supervisory board for good corporate governance to a whole new level.71 However, it goes beyond the scope of this paper to go into the very details of the Code’s legal nature,72
68 See, the critique of Hopt & Roth (note 65), Section 111, margin number 17; Schiessl (note 58), 597; Klaus J. Hopt, Unternehmensführung, Unternehmenskontrolle, Modernisierung des Aktienrechts – Zum Bericht der Regierungskommission Corporate Governance, in CORPORATE GOVERNANCE, 27, 60‐61 (Peter Hommelhoff et al. eds., 2002).
LIEDER (note 2), 586‐587.
See, in detail section G.IV of this paper.
71 See, Peter Ulmer, Der Deutsche Corporate Governance Kodex – ein neues Regulierungsinstrument für börsennotierte Aktiengesellschaften, 166 ZHR 150, 152 (2002); Wolfgang Seidel, Der Deutsche Corporate Governance Kodex – eine private oder doch eine staatliche Regelung?, 25 ZIP 285, 289 (2004); Lutter (note 3), 775.
72 See, e.g., OLG München, 6 August 2008 – 7 U 5628/07 (MAN), 54 AG 294 (2009); HÜFFER (note 66), Section 161, margin number 3; Michael Kort, Corporate Governance‐Fragen der Größe und Zusammensetzung des Aufsichtsrats bei AG, GmbH und SE, 53 AG 137, 137‐138 (2008); Ulmer (note 71), 158‐161; Christoph H. Seibt, Deutscher Corporate Governance Kodex und Entsprechens‐Erklärung (§161 AktG‐E), 47 AG 249, 250‐251 (2002).