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German Law Journal

[Vol. 11 No. 02

absolutely convincing, because the legislative goal of the recommendations can only be accomplished if both the management board and the supervisory board are really looking into the current state of a company’s corporate governance system and only choose not to comply with a recommendation if there is good cause. As a consequence, deviations without good reasons will be minimized, because it makes a difference whether a management board and a supervisory board can deviate from a recommendation with or without giving specific grounds. Now as they have to show good cause, the board members have to reflect on each single recommendation, with which they do not want to comply.136 Furthermore, investors, creditors and the overall public have an interest to know why the company decided not to comply with a particular recommendation. With that knowledge, they can make a well‐informed decision on whether to make an investment or to exit an investment. This information is relatively easy to access for the public, because under Section 161(2) the company has to permanently publish the report on its website.

II. Corporate Governance Statement

Furthermore, since the enactment of the Accounting Law Reform Act in 2009, the disclosure obligation of Section 161 is supplemented by a Corporate Governance Statement. According to Section 289a GCC, publicly listed companies have to report on their corporate governance system either in their annual report or on their website. The relevant information include the disclosure report under Section 161, particularities of a company’s corporate governance system that goes beyond legal obligations, and a description on the methods of operation of both the management board and the supervisory board as well as a description of both the composition and functioning of supervisory board committees. This information may further enhance the corporate governance system of the company and provide investors with investment‐relevant information on a company’s corporate governance system.

III. Report on Internal Control and Risk Management

Finally, the Accounting Law Reform Act requires capital markets oriented companies to report on particular features of their internal control and risk management system in the management board’s report on the business situation of the company (Sections 289(5) and 315(2) GCC). On the one hand, this provides the general public with information on the overall corporate governance system of the corporation. On the other hand, it facilitates


LIEDER (note 2), 593.

136 Michael Kort, Corporate Governance‐Grundsätze als haftungsrechtlich relevante Verhaltensstandards?, in FESTSCHRIFT FÜR KARSTEN SCHMIDT 945, 961 (Georg Bitter et al. eds., 2009).

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