The ICGN responded to the Regierungskommission’s (Commission’s) consultation on the German Corporate Governance Code (Kodex).
At the same time, all systems of corporate governance have their challenges, and from an institutional investor perspective ICGN is alert to potential areas of concern in the German system that can include:
• Effectiveness of co-determination: ensuring the fiduciary duty of care of employee-elected directors to support the long-term interests of the company as a whole, and not just the German labour unions;
• Quality of Communication between Supervisory Board and Management Board: the two-tier structure raises risks of ineffective coordination between the two governing bodies;
• Independence in Germany is less far reaching than other jurisdictions where majority independence is a norm;
• Concerns about influences of controlling shareholders and respect for the rights of minority shareholders;
• Limited historical willingness by Aufsichtsrat members to engage with institutional investors;
• Cultural concerns: scandals at key German bluechips in recent years.
It is clear that the Commission gave considerable, and fresh, thinking to the amended Kodex, and we applaud the spirit of starting with principles and building a more concise code that is relevant for German companies and reflects international corporate governance standards. This submission by ICGN will acknowledge some of the key improvements that we see in this latest version. But the nature of consultations is such that the greatest focus is on areas of potential concern.
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© ICGN - International Corporate Governance Network
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