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German Corporate Governance Code: Key Principles and Recommendations
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The German Corporate Governance Code (Code) outlines essential principles and recommendations for effective corporate governance practices in Germany. This article provides an overview of the key areas covered by the Code.
Supervisory Board
Responsibilities and Expectations
- The Supervisory Board should be informed about all findings and issues of importance by external auditors.
- The Supervisory Board should discuss audit risk assessment, strategy, and results with the auditor.
- Members of the Supervisory Board are expected to undertake training or professional development measures necessary to fulfill their duties.
Conflict of Interest Prevention
- Members of the Management Board and Supervisory Board must not pursue personal interests or exploit business opportunities for themselves.
- Conflicts of interest must be disclosed without undue delay, and material conflicts may result in termination of a member’s mandate.
Transparency and External Reporting
Disclosure Requirements
- Shareholders and third parties should be kept informed by consolidated financial statements, group management reports, and interim financial information.
- Material new facts must be disclosed to shareholders without undue delay.
Self-Assessment
Evaluating Effectiveness
- The Supervisory Board should assess its effectiveness at regular intervals and report on the self-assessment in the Corporate Governance Statement.
Other Recommendations
Additional recommendations include:
- Providing support for Supervisory Board members during training and professional development measures.
- Specifying which Code recommendations were not applied due to overriding provisions, as applicable.
Conclusion
The German Corporate Governance Code provides a framework for companies in Germany to ensure good corporate governance practices, transparency, and accountability. By following the principles and recommendations outlined in the Code, companies can maintain trust with their stakeholders and contribute to the overall well-being of the economy.