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2010]

The German Supervisory Board on Its Way to Professionalism

117

Act)9 and the Gesetz zur Angemessenheit der Vorstandsvergütung (Act on Adequacy of Executive Compensation)10. The latter legislation is an early reaction to issues of the latest financial crisis.

Overall, these legal changes made the supervisory board climb to a higher position of power. In particular, the supervisory board is now significantly involved in the decision‐ making process on a company’s overall strategic concept and on management decisions of fundamental importance. This development emphasizes the future‐oriented monitoring obligation of the supervisory board, which gained much more importance in the last decade. By the same token, these changes strengthened the supervisory board’s capability to monitor the management board more efficiently. Furthermore, the new provisions increased the flow of information from the management board to the supervisory board, and they facilitated the monitoring efficiency of every single supervisory board member.

However, today’s supervisory board system is, by no means at all, free from any deficiencies. To the contrary, there are still a number of shortcomings of the German supervisory board system. This paper addresses some major critical points of the current system including the standards of German codetermination11 and the excessive size of the supervisory board12. I will advocate a fundamental change of the current status quo of German codetermination13 and a limitation of board size to no more than 12 members14. In addition, this paper supports the idea of allowing enterprises to choose between a one‐tier and a two‐tier board system15.

B. Law on Control and Transparency of Enterprises

The overall starting point for the current reform endeavors was the enactment of the Law on Control and Transparency of Enterprises as of 27 April 1998.16 This law was not enacted

9

See, section F of this paper.

10

See, section E.IV of this paper.

11

See, section G.II of this paper.

12

See, section G.III of this paper.

13

See, section G.IV of this paper.

14

See, section G.III of this paper.

15

See, section H of this paper.

16 Bundesgesetzblatt 1998 I, 786. As to the political background of this Act, see, John W. Cioffi, Restructuring ’Germany, Inc.’: The Corporate Governance Debate and the Politics of Company Law Reform, 24 LAW & POLICY 355‐ 402 (2002); Coiffi (note 1), 551‐554.

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