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142

German Law Journal

[Vol. 11 No. 02

recommendation may lead to a stronger autonomy of the supervisory board,125 and makes it more independent from any possible detrimental exercise of influence by the management board.

IV. Compensation Committee

For the first time ever, compensation committees are legally addressed by the Act on Adequacy of Executive Compensation as of 31 July 2009.126 According to Section 107(3), issues regarding the compensation of management board members cannot longer be delegated altogether to a (compensation) committee, rather the supervisory board as a whole is now responsible for deciding on matters of executive compensation.

Although this change does not seem to fit into the current development towards professionalism through creation of supervisory board committees, the new provision still improves the corporate governance system of the German stock corporation. Division of labor is the main purpose when the supervisory board delegates specific subjects, such as issues of auditing or nomination, to be handled by one or several committees. This idea, however, must step back with regard to executive compensation in order to improve the transparency of contracts with members of the management board including executive compensation.127 In this regard, it is absolutely convincing that the new provision goes even beyond Section 4.2.2 GCGC adopted in June 2008128, under which “the full Supervisory Board shall resolve and regularly review the Management Board compensation system including the main contract elements”, and that with regard to “the proposal of the committee dealing with Management Board contracts” (compensation committee). Due to the Code’s 2009 amendment, Section 4.2.2 GCGC is now aligned with the new provisions of the Act on Adequacy of Executive Compensation, i.e., “the full Supervisory Board determines the total compensation of the individual Management Board members (…).”

Under Section107(3), the compensation committee’s scope of responsibility is now significantly diminished. This is convincing, however, with regard to the increase of transparency as to executive compensation. In addition, the new law may improve the awareness and responsibility of every single supervisory board member as to today’s socio‐

125

Eberhard Vetter, Die Änderungen des Deutschen Corporate Governance Kodex, 60 DB 1963, 1967 (2007).

126

See, note 100.

127

See, Gesetzentwurf (note 101), 7.

128 For details, see, Stefan Wehlte, DCGK 2008: Anmerkungen zur jüngsten Revision der Standards für gute Unternehmensführung, 3 ZCG 216‐217 (2008).

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