Corporate Governance Reform in Germany: The Second Decade

Abstract

Notwithstanding one decade of corporate law reform during which the German legislature augmented the traditional explicit system of corporate control with market-based corporate governance devices, the German corporate governance reform law agenda is still packed. The paper provides an overview of the status of corporate law making on the verge of early Federal elections in Germany and examines the driving forces behind current reforms. It also considers governance-related securities and accounting law reforms. The authors provide brief comments on pending legislative steps and measure the impact of the reforms on the overall structure of the German corporate governance system.

The paper serves two purposes. On the one hand, it provides an insight into the dynamic development of German corporate law under the influence of European, national, and international reform agendas. On the other hand, it describes the transition from the traditional German explicit system of corporate control to a system in which the legislature assigns capital markets a greater share in controlling managers.

Keywords: corporate governance, securities regulation, accounting law, Aktiengesetz, Germany, European Union, explicit system, market system, reform, shareholder rights, current change reports, investor protection, market efficiency, Transparency Directive, director remuneration, independent directors

JEL Classification: N20, N24, M40, M10, K22, G32, G34, G30, G28