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German Corporate Governance Law and Regulations

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Management Board Responsibilities

The management board plays a crucial role in ensuring compliance with laws and internal policies. Their responsibilities include:

  • Acting in the best interests of the company while considering the interests of shareholders, employees, and other stakeholders.
  • Ensuring compliance with all applicable laws and regulations.
  • Being liable for failures related to compliance management.

Indemnities and Insurance

Directors’ and officers’ (D&O) liability insurance is a common practice in German corporate governance. Key aspects include:

  • Members of the management board must bear a deductible in case of damage.
  • Indemnifications by stock corporations are generally not permitted, except with shareholder approval.
  • D&O liability insurance provides protection for management board members against potential lawsuits and financial losses.

Strategy Development

In an AG (Aktiengesellschaft), the management board is responsible for developing and implementing the company’s strategy. Key considerations include:

  • Reporting to the supervisory board on business policy and corporate planning.
  • Coordinating with the supervisory board for certain types of business transactions, as required by the DCGK (Deutsche Corporate Governance Kodex).

Stakeholder Interests

Management boards must consider the interests of various stakeholders, including:

  • Shareholders: Their interests are a primary concern, but other stakeholders should also be considered.
  • Employees: Employee representation in the supervisory board plays a significant role in co-determination.
  • Other groups related to the company: Management boards should consider their interests and engage with them appropriately.

Employee Representation

Employees play a crucial role in German corporate governance through their representation in the supervisory board. This ensures that employee interests are represented and considered in decision-making processes.