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Setting the benchmark in corporate integrity

Commission propose fundamental changes to German Corporate Governance

The Government Commission for the German Corporate Code has, in February of this year, proposed a series of changes it believes will greatly improve the current upholding of corporate governance

The proposed initial changes have since been made public on the commission’s website and further subjected to written public consultation for purposes in better influencing final recommendations.

The overriding intention of the proposal is to create a more streamlined code, despite the content being relatively compact as compared to similar European codes. Amendments to sections pertaining to “corporate management and supervision for both national and international investors” and one section entitled “Management Board – Composition and Compensation” are to be made for purposes in achieving greater transparency. The intended changes are to be made “without impacting on the methods and systems of management board remuneration defined by each specific company,” but are purely meant for purposes in improving both readability and transparency.

Relating more so to practical changes are proposals recommending that “a cap be placed on remuneration, in both terms of its total amount as well as in terms of its individual components. The system-inherent and individual caps should continue to be defined individually for each company by the supervisory board”.

Outlining its intentions in improving “comparability over time and with other companies, both for the supervisory board and for the general public,” the Commission recommends for important figures in management board remuneration to be “prepared in a standardised fashion”. These implementations will effectively allow for collected data to be a far more reliable aspect of the consultation process in matters relating to management board remuneration. The data to be included would be that already published by related companies and would provide for a greater sense of overview and of comparability across the board.

Further to the Commission’s recommendations for Corporate Governance Code revisions are details of personnel changes. The report states that Prof. Dr. Henning Kagermann, appointed to the commission in 2009, is to step down from his post following “years of experience on management and supervisory boards to advance the work done by the Corporate Governance Commission.”

The overall effect of the report is to establish a more conformant system of governance in upholding the Corporate Governance Code. The commission hopes for the German code to be more reliable and more transparent.

 

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