The German Supervisory Board on Its Way to Professionalism
board encounters difficulties with regard to its monitoring function in practice. Where the supervisory board maintains in an influential position, codetermination slows down the decision‐making process, in particular as to internal controls. 153
2. Poor Supply of Information
As a further result of codetermination, the supervisory board is principally reluctant to discuss confidential matters and controversial issues in order to limit the influence of employee representatives in the supervisory board and to prevent confidential information to be released to the public. Things changed for the better, when the German stock corporation law was reformed in recent years by the Law on Control and Transparency of Enterprises in 1998154 as well as the Law on Transparency and Disclosure in 2002155. Nevertheless, the supervisory board to some extent still suffers from poor supply of information, because a number of employee representatives still believe that they are authorized to forward confidential information from the boardroom to the workforce, even if they infringe their legal obligation of secrecy. In practice, the management solves this problem by limiting the supply of information to the supervisory board in order to prevent indiscretion. Accordingly, the supervisory board lacks information and data that is needed for effectively monitoring the management board. A famous example for this practice was the way the merger of Daimler‐Benz and Chrysler was prepared.156 Daimler‐ Benz’ management board and Chrysler’s board of directors negotiated the largest trans‐ Atlantic merger deal ever. Daimler‐Benz’ supervisory board was called on to give approval of the merger not before the merger agreement was ready to be signed. Once more, this shows the weakness of the supervisory board concerning the participation in the decision‐ making process, even if it is a question of fundamental corporate change.
3. Conflict of Interests
Additionally, the participation of employees in the decision‐making process of the company leads to more conflicts of interests, as employee representatives view themselves as representatives of the personnel’s interests only. In particular, union‐ political objectives frequently collide with the interest of the monitored company. In this regard, the case of Frank Bsirske, chairman of the Trade Union for the Service Sector in
Hopt & Leyens (note 1), 165.
See, supra, note 16.
See, supra, note 49; see also Hopt & Leyens (note 1), 145.
See, Hopt (note 142), 801; LIEDER (note 2), 662.