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German Law Journal

[Vol. 11 No. 02

relation between board size and the performance measure Tobin’s Q169. Establishing supervisory board committees may help to diminish the most detrimental effects of an excessive board size, but compared to a smaller board, committees are only the second best solution, because they often lead to an inappropriate information asymmetry between committee members and the other members of the supervisory board.

In the past, several legislative attempts170 and reform proposals171 to limit the board size failed, because employees’ interest groups, such as workers unions, fought successfully for maintaining the status quo of German codetermination.172 Nevertheless, a recently conducted opinion survey shows that 72.1% of the interrogated supervisory board members advocate to limit the size of the supervisory board to only 12 seats.173 Therefore, the board size should be limited by the law, so that it does not consist of more than twelve members, regardless of the fact, whether the supervisory board is codetermined or not.

IV. Reform Proposals

These disadvantages of German codetermination can be avoided or at least mitigated by using an alternative approach that at the same time shares the above‐mentioned benefits of the current codetermination regime. In recent literature, there are two major alternative approaches to German codetermination that are worth mentioning, in particular, the model of a consultation board (Konsultationsrat) and codetermination by consensus (Konsensmodell). Besides these proposals, there are other suggestions, such as the recommendation to limit codetermination in the way that employee representatives in

169 David Yermak, Higher Market Valuation of Companies with a Smaller Board of Directors, 40 JOURNAL OF FINANCIAL ECONOMICS (J. FIN. ECON.) 185‐212 (1996); Theodore Eisenberg et al., Larger Board Size and Decreasing Firm Value in Small Firms, 48 J. FIN. ECON. 35‐54 (1998).

170 See, e.g., referent bill of the Law on Control and Transparency of Enterprises as of 1996, 17 ZIP 2193, 2196 (1996).

171 See, e.g., Berrar (note 164), 1114; Marcus Lutter, Vergleichende Corporate Governance – Die deutsche Sicht, 30 ZGR 224, 236 (2001); Möllers (note 157), 701; v. Werder (note 142), 170; Henssler (note 147), 157; LIEDER (note 2), 674‐679; Peltzer (note 106), 1047; see also Berlin Network of Corporate Governance, 12 Thesen zur Modernisierung der Mitbestimmung, 49 AG 200, 201 (2004); Arbeitskreis Externe und Interne Überwachung der Unternehmen der Schmalenbach‐Gesellschaft für Betriebswirtschaft e.V. (AKEIÜ), Best Practice der Mitbestimmung im Aufsichtsrat der Aktiengesellschaft, 60 DB 177, 178 (2007); Arbeitskreis “Unternehmerische Mitbestimmung”, Entwurf einer Regelung zur Mitbestimmungsvereinbarung sowie zur Größe des mitbestimmten Aufsichtsrats, 30 ZIP 885, 886‐887, 891 (2009).

172 Dieter Schulte, Reform des Aufsichtsrats aus Arbeitnehmersicht, 48 BFUP 292, 304 (1996); see further, MARCO ALBERS, CORPORATE GOVERNANCE IN AKTIENGESELLSCHAFTEN 191 (2002); Hopt (note 163), 29; Hopt (note 142), 785.

173 Arno Probst & Manuel René Theisen, Businessverständnis der AR sowie erste Befragung zum BilMoG, 6 AR 66, 68 (2009).

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