Summary
Corporate Governance is seen as an exhaustive set of enterprises’ constitutional rules that are allocated for a long-term period. These guidelines flow out of the specific fundamental sources like local statutory legislation and regulations, “collective agreements, regulations from private autonomy, and court decisions” (Dodo zu Knyphausen-Aufseß). The following two important issues directly influence the content and structure of Corporate Governance: the considered stakeholder groups and the necessary for the aligned enterprises’ activities institutional provisions. Due to the various weights of stakeholders’ groups the three types of Corporate Governance are identified: single interest, dual interest, and multiple public interest.
Despite USA, Germany expresses preference for two-tiered board of management model, where Shareholders have the power to select the members of the Board of Directors as well as to make decisions upon the company’s important issues. Meanwhile, the Board of Directors have no power to direct, but is responsible for selecting members of the Board of Managers and monitoring group’s performance. There are five types of different grades of codetermination, and Germany concentrates on three of them, which are: company-wide codetermination, codetermination at the plant level, and codetermination at the individual workstation (Dodo zu Knyphausen-Aufseß).
Moreover, the branches’ works committees are common for German Corporate Governance. These committees obtain certain rights for codetermination like analyzing the reports, being present of various hearings, and giving and receiving consultations, where the enforcement of measures is absent. On the other hand, these committees also have certain rights for participation, where the measures enforcement can be initialized. However, the concept of co-deciding has a list of specific problems that may occur: problem of organization, problem of qualification, problem of compromise, problem of clientele, problem of legislation, and problem of responsibility. At the same time, the conducted empirical studies prove the positive effect of works committee performance: not only it is followed with 25-30% increase in gross added value (Dodo zu Knyphausen-Aufseß), but it is also firmly accepted by the majority of employees.
After Codex’s revision in 2009 the improvements were noticed: frequent transfers within Management Boards occurred, the Boards became more diversified, and the level of general responsibilities increased (for example, it is planned that the Manager Board members will take care of the individual stakeholders in the nearest future). Due to the considered changes the certain recommendations for supervisors’ bodies content were issued: first of all, the “supervising bodies should be dominated by insiders”; secondly “the insiders should be chosen by employees that decide upon the company-specific investments in knowledge”; and thirdly, “the chairman of the supervising body should be a neutral person” (Dodo zu Knyphausen-Aufseß).
The actions were taken due to the relocated Corporate Governance’s focus. Unlike the year 2005, in 2015 the primary functions of Corporate Governance were named as setting strategy risk and scenario building, the conflicts were proffered to be avoided, corporate goals were decided to be kept private, and the main focus was on ethical issues.
References
Dodo zu Knyphausen-Aufseß. (March, 2016). Corporate Governance in Germany – An Overview. Technische Universität Berlin. Retrieved from: file:///C:/Users/epua038/Downloads/Corporate%20Governance%20in%20Germany%20-%20An%20Overview%20(1)%20(1).pdf
