Prof. Dr. Gunter M. Hoffmann Hintergrund Prof. Dr. Gunter M. Hoffmann Hintergrund Prof. Dr. Gunter M. Hoffmann Hintergrund Prof. Dr. Gunter M. Hoffmann Hintergrund

18. June 2013

New Regulation of Management Remuneration

The German government has decided on 08.05.2013 on a new wording of sec. 120 para. 4 Corporation Act. The wording of the bill is:

„(4) The General Assembly of the listed corporation decides once a year on the consent of the system of remuneration of the Management Board to be presented by the Supervisory Board. By this presentation the Supervisory Board has to give information on the maximum possible remuneration, broken down for the CEO, the CEO Substitute and regular Management Board members. The decision does not affect the validity of the managment contracts; it cannot be challanged according to sec. 243.”

It can be foreseen that the new regulation will enter into force even before the elections for Bundestag as the subject of (deemed) exagerated management remuneration is of high political interest. The new regulations means a heavy shift of power from the Supervisory Board to the General Assembly because the conclusion of management contracts is the key competence of the Supervisory Board of a corporation. By the new provision, meaning that the General Assembly will hold yearly on the Supervisory Board’s action in this field the remuneration system of the corporations will take another step towards the system of GmbHs as the shareholders’ meeting there decides solely on the management contracts and remuneration. Indeed, the growing wish for transparency among shareholders and public opinion as a whole is questioning the role of the Supervisory Board in general. Because if there is a strong wish for considerably more detailed Information (which will lead to considerably more work for the shareholders) the Supervisory Board (which is meant to disburden the General Assembly in this field) will lose its legitimacy more and more. In the long run this could end up with a further assimilation to Swiss company law which also privides for only two – and not three – organs of a corporation.