The German Supervisory Board
Revista da Faculdade de Direito da Universidade de Porto (RFDUP) 2020-2021, 539-562
20 Pages Posted: 20 Oct 2022
Date Written: September 30, 2022
Abstract
Germany has a two-tier board system. This system separates the board into a management board and a supervisory board. The function of the latter is primarily the supervision and control of the management board. Internationally, the one-tier board system prevails. The two-tier board system exists in Germany, Poland, France, Italy, the Netherlands and some other countries. The emergence of either one, the one-tier or the two-tier board system, had historical reasons. Contrary to the widespread opinion under each of the two systems, comparative law and experience does not show a clear superiority of one of the two models, but apart from certain path-dependencies there is a functional convergence of both systems. The international trend is clearly towards giving shareholders a choice between the one-tier and the two-tier systems. Germany has long experiences with the two-tier board system. They concern inter alia the internal structure of the board; its relation to the management board, in particular control also ex ante and co-decision in fundamental affairs; the tasks, rights and duties of the supervisory board; and the liability of the board members. A path-dependent particularity of the German supervisory board is the very far-reaching labor codetermination in major corporations. The consequences of labor codetermination on the corporation and on the economy are very much disputed. The experience made with the control of the supervisory board on the management board is satisfactory. Deficiencies as shown in the context of the Wirecard failure have led to an extensive corporate governance reform in 2021.
Keywords: Corporate covernance, company law, board structure, control by shareholders and auditors, corporate control, two-tier board, supervisory board
JEL Classification: G3, K22
Suggested Citation: Suggested Citation