Corporate governance: German boards beware

Author: | Published: 1 Dec 2006
Debate over German steel producer Mannesmann's management remuneration heats up

For many decades, the general public showed no interest in the level of management remuneration in German stock corporations. This has changed. In the light of the Mannesmann trial, which resumed in October 2006, management remuneration has become a hot topic of legal debate. The German legislator, national courts and even the public prosecutor have recently felt called upon to comment on some of the legal issues involved.

The law

In Germany, the Stock Corporation Act (Aktiengesetz, or AktG) prescribes a dual board system for stock corporations. The management board (Vorstand) is responsible for the operation of the company's business. The supervisory board (Aufsichtsrat) supervises and advises the management board. It is also explicitly assigned to appoint the members of the management board and negotiate their remuneration and other aspects of their service contracts.

Provisions in German law regarding the...