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The German Supervisory Board on Its Way to Professionalism


management board and the supervisory board to provide sufficient information to the supervisory board. Moreover, the management board is required to inform the supervisory board “regularly, without delay and comprehensively, of all issues important to the enterprise with regard to planning, business development, risk situation, risk management and compliance.” In addition, the Code recommends to the supervisory board to specify the management board’s information and reporting duties in more detail. Today, almost all companies listed on the German stock exchange comply with this recommendation.78

D. Independence of Supervisory Board Members

A milestone on the supervisory board’s way to professionalism was the 2005 amendment of the GCGC requiring the supervisory board to consist of “an adequate number of independent members.”79 The independence requirement aims at avoiding conflicts of interest that may interfere with the supervisory board members’ monitoring duty vis‐à‐vis the management board. Those conflicts of interests may not only arise out of a lack of distance towards the management board, but also out of a particular proximity towards rival businesses, financial institutions, and other business partners. Independent supervisory board members can be expected to monitor the business decision of the management board without those conflicts of interest, but rather consistent with the interests of the company’s shareholders. In particular, independent members are capable of challenging business decisions of the management board, and, thus, they protect the interest of shareholders.80 Today, almost all companies listed on the German stock exchange comply with this recommendation.81

I. Background

The independence requirement for German supervisory board members have its seeds in the recommendation of the European Commission on the role of non‐executive or supervisory directors of listed companies and on the committees of the (supervisory)


See, v. Werder & Talaulicar (note 74), 691 table 3: 97%.

79 See, section 5.4.2 GCGC as of 2 June 2005, available at: http://www.corporate‐governance‐ code.de/eng/download/E_CorGov_Endfassung2005.pdf, last accessed 27 January 2010.

80 See, Synthesis of the Responses to the Communication of the Commission to the Council and the European Parliament "Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to

Move Forward" – COM (2003) 284 final, 21 May 2003, 12, available http://ec.europa.eu/internal_market/company/docs/modern/governance‐consult‐responses_en.pdf,

at: last

accessed 27 January 2010.


See, v. Werder & Talaulicar (note 74), 693 table 5: 96, 1%.

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