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2010]

The German Supervisory Board on Its Way to Professionalism

139

I. Background

Until recently, the number of established committees of the supervisory boards in Germany was underdeveloped compared to other countries, in particular the US and the UK.110 Even before the reform in 1998, commentators called for mandatory supervisory board committees.111 Furthermore, the 61st German Legal Association’s Biannual Meeting (Deutscher Juristentag) advocated this proposal. However, the reform of 1998 refused to make specific committees of the supervisory board mandatory. Although the legislature recognized that the supervisory board could improve its efficiency by establishing an increased number of committees, it emphasized that the supervisory board, under its self‐ organization duty,112 should have the ultimate authority to decide on its own, which committees are necessary depending on the particularities of the given company.113 In order to still incentivize the supervisory board to increase the number of committees, the above‐mentioned provision of Section 171(2) requires that the supervisory board informs the shareholders’ meeting of publicly held companies with regard to the issue which committees it has established and how often the supervisory board and its committees have actually met.114

II. Audit Committee

Since its creation in 2002, Section 5.3.2 GCGC recommends, “The Supervisory Board shall set up an Audit Committee which, in particular, handles issues of accounting, risk management and compliance, the necessary independence required of the auditor, the issuing of the audit mandate to the auditor, the determination of auditing focal points and the fee agreement.” Nowadays, this recommendation is very well accepted among large publicly held companies, in fact, all of the thirty largest companies listed at the German stock exchange comply with Section 5.3.2 GCGC.115 All of these companies also comply

110 See, KNUT BLEICHER ET AL., UNTERNEHMUNGSVERFASSUNG UND SPITZENORGANISATION 84‐86 (1989); C. WOLFGANG VOGEL, AKTIENRECHT UND AUFSICHTSRATSWIRKLICHKEIT 183‐197 (1980).

111 See, e.g., Marcus Lutter, Der Aufsichtsrat: Konstruktionsfehler, Inkompetenz seiner Mitglieder oder normales Risiko?, 39 AG 176, 177 (1994); Lutter (note 29), 1134; Hans Peter Schreib, Reform des Aufsichtsrats aus der Sicht der Aktionäre, 48 BETRIEBSWIRTSCHAFTLICHE FORSCHUNG UND PRAXIS (BFUP) 285, 287 (1996).

112

See, again, note 93.

113

See, Official Explanatory Statement (note 17), 16, 23.

114

See, section B. III of this paper.

115 See, v. Werder & Talaulicar (note 74), 828 table 5; v. Werder & Talaulicar (note 74), 693 table 5; see, further, Fabian Ehlers & Nicolas Nohlen, Unabhängiger Finanzexperte und Prüfungsausschuss nach dem Bilanzrechtsmodernisierungsgesetz, in GEDÄCHTNISSCHRIFT FÜR MICHAEL GRUSON, 107, 113‐114 (Stephan Hutter & Theodor Baums eds., 2009).

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