German Corporate Governance in International and European Context

Transcription

1 Jean J. du Plessis Bernhard GroBfeld Claus Luttermann Ingo Saenger Otto Sandrock Matthias Casper German Corporate Governance in International and European Context Second Edition 4y Springer

2 1 An Overview of German Business or Enterprise Law and the One-Tier and Two-Tier Board Systems Contrasted Introduction General Characteristics Various Types of Business Organisations Contrasting the One-Tier and Two-Tier Board Systems Delineation 14 2 An Overview of the Corporate Governance Debate in Germany Introduction History and Significance of the German 'Corporate Governance' Debate Focus on the Supervisory Board Important Role of Supervisory Boards and Recommendations for Improvement Initial Reaction The German Corporate Governance Code Overview Section 161 of the AktG Basic changes to the Code since Parts and Layout Some Noteworthy Provisions of the Code The Legal Nature of the Code Need for a European Corporate Governance Code The Global Financial Crisis and Corporate Governance in Germany Concluding Remarks 53

3 xiv Contents 3 The General Meeting and the Management Board as Company Organs Introduction The General Meeting Function as a Corporate Organ Some Specific Functions Emergence of Shareholder Activism in Germany The Management Board Function as a Corporate Organ Qualifications, Appointment, Removal and Compensation of Members Rights, Powers and Responsibilities Duties and Forms of Liability Concluding Remarks 88 4 The Supervisory Board as Company Organ Introduction Appointment Prerequisites Conditions of Appointment and Qualifications to Serve as Supervisory Board Members General Some EU Recommendations Basic Knowledge of Economics, Law and Accounting Additional Requirement Pertaining to Knowledge and Qualification Women Conflicts of Interest Independence Former Members of Management Board Serving as Members of the Supervisory Board Number of Supervisory Boards an Individual Can Serve on Removal of Supervisory Board Members Ill 4.5 Compensation of Supervisory Board Members Rights and Responsibilities of Supervisory Board Members Appointment and Removal of Management Board Members Determination of the Compensation of Management Board Members Supervision Reporting to the General Meeting Instituting Action Against Members of the Management Board for a Breach of Their Duties General Duties and Forms of Liability The Supervisory Board as Integral Part of the German Two-Tier Board System Concluding Remarks 147

4 xv 5 The German System of Supervisory Codetermination by Employees Introduction Historical Development of Codetermination (Mitbestimmung) Overview Social Codetermination Supervisory Codetermination The Two-Tier Board System and Supervisory Codetermination Contrasted Perceptions Regarding Codetermination in Germany from a Historic Perspective Current Practical Perspectives on Codetermination General Concerns The Dependency of the Management Board on the Employee Delegates on the Supervisory Board Some Recent Scandals Associated with Employee Representatives Serving on Supervisory Boards The Mutual Take-Over Battle Between the VW SE and the Porsche SE: The VW SE Wins Compensation of the Employee Representatives Serving on Supervisory Boards Recent Proposals to Modify the System of Codetermination Issues Related to Supervisory Codetermination Codetermination in the Management Board: The Personnel Director Classification of Employees The Role of Trade Unions Concluding Remarks The Impact of European Developments on German Codetermination and German Corporate Law Introduction Decisions by the European Court of Justice and Their Impact on German Codetermination The Seat Theory as a Shield for the Maintenance of the German System of Codetermination Decisions of the ECJ Enabling EU Companies to Move Their Seats into Another EU Country Decisions of the ECJ Recognising National Barriers Against the Transfer of Companies' Seats Abroad Reconciling the Two Lines of ECJ Decisions Summary and Conclusions The Impact of the ECJ Rulings on German Courts, German Legislation and German Law Practice 219

5 ;vi Contents The Partial Conversion of German Courts to the Doctrine of Incorporation The Amendments of the German Statutes on Public and Private Limited Companies German Companies Transform Themselves into English Limited Companies The Proposal by a German Government Commission for New Statutory Regulations on International Company Law The Creation of the European Company (SE) and the System of EU Codetermination Stormy History The Regulation of the SE: Two-Tier Versus One-Tier Board System The Transfer of the Registered Seat of an SE The SE Employees' Directive The SE: A Success Story Advantages and Disadvantages of Incorporation as an SE The Relative Attractiveness of the Employees' Codetermination Under the SE Regulation and Directive A Re-Assessment of the SE Regulation A Re-Assessment of the SE Employees' Directive The Creation of a Societas Europaea Privata (SPE) Some Fundamental Features of the Legal Framework of the SPE Employees'Codetermination Under the SPE Proposal The Transfer of the Registered Seat of the SPE An Assessment of the Proposal for an SPE Including Its Rules on Employee Participation Cross-Border Mergers of Limited Companies The Sevic Decision by the European Court of Justice (2005) The Directive on Cross-Border Mergers of Limited Companies and Germany's Implementation of that Directive Recent Developments in a Nutshell Some Fundamental Changes Some Unwavering Institutions Concluding Remarks Codetermination Wins in Acceptance Driving Factors Accounting as the Documentary Proof of Good Corporate Governance Back to the Future Handling the 'Invisible' 277

6 7.3 Accounting Law Accountability A Complete Set of Financial Statements European Law and IFRS General Rule (Bilanzwahrheit) and Conflict of Laws IASB/IFRS: Lack of Legitimacy German and European Law (IFRS) Regulatory Interactions Corporate Governance Statement (Directive 2006/46/EC) Financial Statements: 'A True and Fair View' International Focus and Comparative Law European Court of Justice (ECJ) Guidance IFRS, Company Law and Tax Law Rules of Accounting Expectation Gaps and Procedural Law Completeness: No'Off-Balance Sheet' Valuation Financing and the'numbers Game' The Fall of Lehman Brothers Inc The Legal Focus of Accounting Practice The Procedural Law of Faithful Accounting Conclusion for Corporate Directors and Auditors Accounting and Company Groups Consolidated Financial Statements Liability: Separate Legal Entity and International Taxation Cash Pooling and Liability Accounting, International Allocation of Assets and Reform Legal Order and Competition Reform in Germany ('BilMoG') 'BilMoG': Some of the Rule Changes German and European Rule of Law Fair Competition? Comparative Law: Regional 'IFRS' Linguistic Diversity and European TFRS' European Accounting Law and Multijurisdictional Approach Auditing, Control and Sanctions About Watchdogs and Materiality Reform and Lessons from the Crisis Disclosure and Enforcement Liability in the European Context Sanctions: Some Rules 320

7 7.9 Judicial Relief (Rechtsschutz) European System International Court of Accounting Perspectives of a World Monopoly: IFRS and XBRL The Claim to Monopoly by the IASB 'XBRL': The Financial Reporting Revolution TFRS for SMEs' as a Trojan Horse Strategic Governance and Audit Committee Concluding Remarks 326 Banking on Trust: The German Financial Sector, Global Capital Markets and Corporate Finance and Governance Introduction: Casino Wall Street Reflections on Corporations, Capital and Banking Corporation Finance Common Law Concept of'ownership' The Banks'Dominant Role in Germany Germany: The Traditional Position Control Through the General Meeting Control Through the Supervisory Board Control Over the Management Board International Influences The Wind of Change Controlling German Banks Global Corporate Finance and Hyperspeculation Governance: Financing of Infinite Brassiness Exorbitance (Hyperspeculation) The Goldman Sachs Case Financial Engineering: Collateralized Debt Obligations and Credit Default Swaps Deutsche Bank AG (International) Macroeconomics of Corporate Governance Real Economy and Systemic Risk: 'Too-Big-to-Fail'? The Practice of a Paradigm Shift Legal Analysis of the Economy Instead of Exorbitance European, German and Global Perspectives Financial Institutions Boards of Directors Restriction of Mandates of the Supervisory Board Concluding Remarks 356 Corporate Governance and Corporate Compliance Corporate Compliance: Temporary Fashion and the Concept in Law 359

8 xix 9.2 Interrelation Between Corporate Governance and Corporate Compliance: The Programme Corporate Compliance as a Management Task The Duty of Legality as a Starting Point Organisational Duty as a Characteristic of the Duty of Legality for All AGs Possible Content of the Duty to Establish a Compliance Department Legal Consequences of a Violation of the Duty to Establish a Compliance Department: Applicability of the Business Judgment Rule The Role of the Supervisory Board The Underlying Principle Scope of the Monitoring Function Delegation to the Audit Committee Transmission Duties of the Compliance Department to the Supervisory Board in the Event of an Involvement of the Management Board Selected Specific Issues Independence of the Compliance Department Whistle-Blowing as a Necessary Part of a Compliance Department Particulars of Compliance Systems Within Company Groups Particularities for Investment Services Companies Summary: Corporate Governance and Corporate Compliance - A Conflicting Relationship? Corporate Governance in the EU, the OECD Principles of Corporate Governance and Corporate Governance in Selected Other Jurisdictions Introduction European Union Enhancing Corporate Governance Reflections Modernisation of the Regulatory Framework The European Commission's Projects Internal Market and Convergence with Foreign GAAP European Corporate Governance Forum (ECGF) The World Debt Crisis and Its Impact on the EU Future Priorities Regulatory Basics and Outlook OECD Principles of Corporate Governance 413

9 Background to the OECD Principles of Corporate Governance Broad Aims and Application Parts and Layout Ensuring the Basis for an Effective Corporate Governance Framework Disclosure and Transparency United States Background to the Corporate Governance Debate in the USA The American Law Institute's Involvement in the Corporate Governance Debate The Securities Exchange Commission The Sarbanes-Oxley Act of 2002: The USA Response to Collapses Like Enron and WorldCom Some Perspectives on SOX and Its Effect NYSE: Sections 303 and 303A - Corporate Governance Rules Summary of the Most Important NYSE Corporate Governance Rules The Dodd-Frank Wall Street Reform and Consumer Protection Act (The Dodd-Frank Act) United Kingdom Background to the Corporate Governance Debate in the United Kingdom The Cadbury Report and the Unfolding of the Concept of 'Corporate Governance' in the United Kingdom The Greenbury Report (1995), the Hampel Report (1998), the Smith Report (2003) the Higgs Report (2003) and the Walker Review (2010) The 2008 UK Combined Code and the 2010 UK Corporate Governance Code Australia Background to the Corporate Governance Debate in Australia The Bosch Reports The Hilmer Report The Virtues of Good Corporate Governance in Australia Between 1991 and The IFSA Blue Book The Australian Securities and Investments Commission The ASX Group Concluding Remarks 473

10 xxi European and German Provisions in English for Purposes of Chapter Index 493