The German Supervisory Board

Revista da Faculdade de Direito da Universidade de Porto (RFDUP) 2020-2021, 539-562

20 Pages Posted: 20 Oct 2022

See all articles by Klaus J. Hopt

Klaus J. Hopt

Max Planck Institute for Comparative and International Private Law; European Corporate Governance Institute (ECGI)

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

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JEL Classification: G3, K22

Suggested Citation

Hopt, Klaus J., The German Supervisory Board (September 30, 2022). Revista da Faculdade de Direito da Universidade de Porto (RFDUP) 2020-2021, 539-562, Available at SSRN: https://ssrn.com/abstract=4234039

Klaus J. Hopt (Contact Author)

Max Planck Institute for Comparative and International Private Law ( email )

Mittelweg 187
D-20148 Hamburg
Germany
+49 40 41 90 02 05 (Phone)
+49 40 41 90 03 02 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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