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The German System of Supervisory Codetermination by Employees

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German Corporate Governance in International and European Context

Abstract

Chapters 3 and 4 dealt with the primary organs of German public corporations, namely the general meeting, the management board and the supervisory board. Since the German two-tier board system refers to ‘the management board’ and ‘the supervisory board’ respectively, most attention was devoted to these two organs. In this chapter the primary focus is on the German system of supervisory codetermination by employees, and so, again primarily on the supervisory board as it is on the supervisory board that employee representatives serve. This is such an important aspect that it deserves separate chapters. The discussion in Chap. 5 includes the historical development of codetermination in Germany, its application in various industries and corporations, and the role of trade unions.

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Notes

  1. 1.

    See generally B Großfeld and U Lehmann, ‘Management Structures and Worker’s Codetermination in Germany with European Perspectives’ (1994) 1 Corporate Law Development Series 41–43.

  2. 2.

    E Córdova, ‘Workers’ Participation in Decisions within Enterprises: Recent Trends and Problems’ (1982) 121 Intl Labour Rev 125, 127. For a different classification of the different forms of employee participation – see Michael Salamon, Industrial Relations: Theory and Practice (Prentice Hall, New York 1987) 300 et seq.

  3. 3.

    B Großfeld and U Lehmann, ‘Management Structures and Worker’s Codetermination in Germany with European Perspectives’ (1994) 1 Corporate Law Development Series 41. See also Thomas Conlon, ‘Industrial Democracy and EEC Company Law: A Review of the Draft Fifth Directive’ [1975] ICLQ 352.

  4. 4.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 111, 117. See also Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 519; Ingo Saenger, Gesellschaftsrecht (Verlag Franz Vahlen, München 2010) 569–70 para 1059; Mark J Roe, ‘Some Differences in Corporate Structure in Germany, Japan, and the United States’ (1993) 102 Yale L J 1927, 1970. Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 1, 4 does, however, point out that it is extremely difficult to pinpoint the historical factors responsible for the development of codetermination, and in particular which general and corporate notions underlie the concept of codetermination.

  5. 5.

    Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 3.

  6. 6.

    Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 519.

  7. 7.

    Reichsgesetzblatt (RGBl.) 1920 I 147 (Official Jornal of the former Reich, 1920, Part I. pp. 147 et seq.).

  8. 8.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) American Journal of Comparative Law (AJCL) 117; Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 4.

  9. 9.

    Of 15 February 1922, Reichsgesetzblatt (RGBl.) 1922 Part I No. 17 pp. 209/10 (Official Jornal of the former Reich, 1922, Part I. pp. 209/10) – herafter referred to as the ‘1922-Amendment Act’.

  10. 10.

    By S 65 no. 1 of the – Nazi inspired – Act on the Regulation of National Labour (Gesetz zur Ordnung der Nationalen Arbeit) of 20 January 1934, RGBl. 1934 Part I 45-57 (Official Journal of the former Reich, 1934, Part I, at pp. 45–57). See also Peter Hanau, ‘Einführung’ in Mitbestimmungsgesetze in den Unternehmen mit allen Wahlordnungen (4th ed Deutscher Taschenbuch Verlag, München 1991) VII and Ingo Saenger, Gesellschaftsrecht (Verlag Franz Vahlen, München 2010) 569-70 para 1059.

  11. 11.

    Bundesgesetzblatt (BGBl. 1952 I 681) (Official Journal of the Federal Republic of Germany, 1952, Part I, at p. 681).

  12. 12.

    Insofar it is tied into the structure of the other regulations on codetermination at supervisory board level like, for example, S 6(1) Montan-MitbestG (1951). See further Brian Robinson, ‘Worker Participation: Trends in West Germany’ in Mark Anstey (ed), Worker Participation (Juta & Co Ltd, Cape Town 1990) 51.

  13. 13.

    See discussion in 5.2.3.4.

  14. 14.

    B Großfeld and U Lehmann, ‘Management Structures and Worker’s Codetermination in Germany with European Perspectives’ (1994) 1 Corporate Law Development Series 42.

  15. 15.

    BGBl. 1988 I 2312-2316 (Official Journal of the Federal Republic of Germany, 1988 Part I, at pp. 2312–2316).

  16. 16.

    Ulrich Eisenhardt, Gesellschaftsrecht (14th ed, CH Beck Verlag, München 2009) 335.

  17. 17.

    Brian Robinson, ‘Worker Participation: Trends in West Germany’ in Mark Anstey (ed), Worker Participation (Juta & Co Ltd, Cape Town 1990) 63.

  18. 18.

    See 5.2.2.

  19. 19.

    S 1 of the 1922-Amendment Act.

  20. 20.

    S 4 of the 1922-Amendment Act.

  21. 21.

    S 4 of the 1922-Amendment Act.

  22. 22.

    S 6 of the 1922-Amendment Act.

  23. 23.

    S 6 of the 1922-Amendment Act contained a reference to s 16 Works Council Act 1920.

  24. 24.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 18.

  25. 25.

    Brian Robinson, ‘Worker Participation: Trends in West Germany’ in Mark Anstey (ed), Worker Participation (Juta & Co Ltd, Cape Town 1990) 49.

  26. 26.

    ‘Invented’ is in inverted commas, as the system of supervisory codetermination by employees at supervisory board level already formed part of German law from 1922–1934 as was discussed above.

  27. 27.

    Hellmut Wißmann, ‘Das Montan-Mitbestimmungsänderungsgesetz: Neuer Schritt zur Sicherung der Montan-Mitbestimmung’ (1982) 35 NJW 423.

  28. 28.

    Ibid.

  29. 29.

    Otto Sandrock, ‘The Colossus of German Supervisory Codetermination: An Institution in Crisis’ (2005) 16 EBLR 86 et seq.

  30. 30.

    Gesetz über die Mitbestimmung der Arbeitnehmer in den Aufsichtsräten und Vorständen der Unternehmen des Bergbaus und der Eisen und Stahl erzeugenden Industrie - Bundesgesetzblatt (BGBl. 1951 I 347) (Official Journal of the Federal Republic of Germany, 1951, Part I at 347) – see Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 520 (fn 3). Normally, the Act requires the company to have more than 1,000 employees (see S 1(2)).

  31. 31.

    Ingo Saenger, Gesellschaftsrecht (Verlag Franz Vahlen, München 2010) 570 para 1060. S 1 (1 (a)) of the Montan-Mitbest (1951) provides that the major activities of the company must be directed to these fields. Since one of the affected companies tried to evade the Montan-MitbestG (1951) by transferring its management to a parent company which did not meet the criteria of the Act, the so-called Act Supplementing the Act of 1951 (Montan-Mitbestimmungs-Ergänzungs-Gesetz, commonly called ‘Holding-Novelle’) was passed in 1956 providing, inter alia, that a parent company which, in itself, would not fulfil the prerequisites of the Act, would nonetheless be subject to its regulations if its subsidiaries, looked at as a whole, would to a certain extent pursue the activities defined by the Montan-MitbestG (1951).

  32. 32.

    S 4 Montan-MitbestG (1951).

  33. 33.

    S 9(1) Montan-MitbestG (1951).

  34. 34.

    All ‘neutral persons’ under the Montan-MitbestG (1951) have to enjoy the confidence of all members of the supervisory board.

  35. 35.

    S 9(2) Montan-MitbestG (1951).

  36. 36.

    See the detailed provisions in S 8 Montan-MitbestG (1951).

  37. 37.

    See S 4(2) Montan-MitbestG (1951).

  38. 38.

    S 1(3) Montan-MitbestG (1951) provides that a company which no longer fulfils the criteria for the application of the Act is still bound by its provisions for the next six years.

  39. 39.

    These numbers date back to 2003. More up-to-date numbers could unfortunately not be obtained.

  40. 40.

    See Otto Sandrock, ‘The Colossus of German Supervisory Codetermination: An Institution in Crisis’ (2005) 16 EBLR 87 et seq.

  41. 41.

    Bundesgesetzblatt (BGBl. 1976 I at 1153) (Official Journal of the Federal Republic of Germany, 1976, Part I at 1153).

  42. 42.

    S 1(1)1 MitbestG (1976).

  43. 43.

    Exempt, however, from its application are companies in pursuit of the following purposes: political, trade union or employer oriented, religious, charitable, educational, scientific, scholarly or artistic. The same is true for press-related companies enjoying the freedom of information and freedom of opinion under Art 5 of the German Federal Constitution. See S 1(4) MitbestG (1976).

  44. 44.

    Similar to, but not because of the provisions of the Montan-MitbestG (1951), the supervisory board has to be composed of (i) six representatives of the employees and six representatives of the shareholders if the company has less than 2,000 employees, (ii) eight representatives of the employees and eight representatives of the shareholders if the company employs between 10,000 and 20,000 persons, and (iii) ten representatives of the employees and ten representatives of the shareholders if the company has more than 20,000 employees (S 7(1) MitbestG (1976)).

  45. 45.

    In principle, all members of the supervisory board are entitled to participate in the election of the chairperson. But in case of a 50:50 vote, only the representatives of the shareholders may appoint the chairperson while the vice-chairperson will be elected exclusively by the employee representatives on the supervisory board. See S 27 MitbestG (1976).

  46. 46.

    Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th edn, CF Müller Verlag, Heidelberg 2006) 522.

  47. 47.

    Ibid 526.

  48. 48.

    Collection of Decisions of the German Federal Constitutional Court (BVerfGE) vol 50, 290.

  49. 49.

    Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 522. Also Thomas Raiser, ‘Der neue Koalitionskompromiß zur Mitbestimmung’ (1976) 31 BB 145.

  50. 50.

    Klaus J Hopt, ‘The German Two-Tier Board: Experience, Theories, Reforms’ in K J Hopt, K Kanda, M J Roe, E Wymeersch and S Priggle (eds) Comparative Corporate Governance: The State of the Art and Emerging Research (OUP, Oxford 1998) 242, 246–47; Hans-Christoph Hirt, ‘Germany: The German Corporate Governance Code: Co-determination and Corporate Governance Reforms’ (2002) 23 Company Lawyer 349, 352.

  51. 51.

    These numbers were obtained from the following source: Böckler Boxen – Die Themenseiten der Hans-Böckler-Stiftung’ <http://www.boeckler-boxen.de/1857.htm>, in particular from <http://www.boeckler-boxen.de/images/inhalt_boeckler_de/bb_grafik_2009_Ausichtsraete_2.gif>. According to the table set up there, in 2008 a total of 463 companies had a 12-persons supervisory board, 96 with a 16-persons supervisory board and 135 companies with a 20-persons supervisory board.

  52. 52.

    See, however, discussion in 5.3.5, dealing with the ‘Compensation of the Employee representatives Serving on Supervisory Borads’.

  53. 53.

    Bundesgesetzblatt (BGBl. 1952 I 681) (Official Journal of the Federal Republic of Germany, 1952, Part I at 681).

  54. 54.

    Bundesgesetzblatt (BGBl. 1965 I 1089) (Official Journal of the Federal Republic of Germany, 1965, Part I at 1089).

  55. 55.

    Reichsgesetzblatt (RGBl. 1892, 477) (Official Journal of the former Reich, 1992 at 477).

  56. 56.

    B Großfeld and U Lehmann, ‘Management Structures and Worker’s Codetermination in Germany with European Perspectives’ (1994) 1 Corporate Law Development Series 50. For the specific statutes, see Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 4.

  57. 57.

    Otto Sandrock, ‘The Colossus of German Supervisory Codetermination: An Institution in Crisis’ (2005) 16 EBLR 89 et seq; Rainer Huke and Thomas Prinz, ‘Das Drittelbeteiligungsgesetz löst das Betriebsverfassungsgesetz 1952 ab’ (2004) 59 BB 2633 et seq.

  58. 58.

    Bundesgesetzblatt (BGBl. 2004 I 974) (Official Journal of the Federal Republic of Germany, 2004, Part I at 974).

  59. 59.

    The total number of these companies were 1,477. Included in this number are however cooperatives (Genossenschaften) (34), companies with one or more general partners but limited by shares (Kommanditgesellschaften auf Aktien) (9) and mutual insurance companies (Versicherungsverein auf Gegenseitigkeit) (24). Without the latter, there remains a total of 1,410 companies which were subject, in 2009, to the one-third employee participation regime.

  60. 60.

    This number has been calculated as follows: We do not know the total number of seats in the supervisory boards of these companies, but one can assume that the average size of the supervisory board for these companies would be nine. In short, collectively the 1,410 companies falling under this arrangement would have a total number of 12,690 supervisory board members. One third of these seats must be filled by employee representatives, bringing it to a total of 4,230 supervisory board positions held by employee representatives.

  61. 61.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 120–21.

  62. 62.

    ADHB 24 July 1861 with effect from 1 March 1862 – see Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 271. It is uncertain whether the requirement for having a supervisory board for AGs was influenced by developments concerning the Kommanditgesellschaft auf Aktien (KGaA) – see Wiethölter 281–85.

  63. 63.

    The statute is named ‘Act on Private Limited Companies’ (Gesetz betreffend die Gesellschaften mit beschränkter Haftung’).

  64. 64.

    As to the reasons why the Aufsichtsrat was first introduced into the German law, Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 271 refers to two completely contradictory conclusions reached by two commentators (Passow and Schumacher), relying on exactly the same research sources.

  65. 65.

    Montan-MitbestG (1951) – see Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 520 (fn 3).

  66. 66.

    The ADHGB of 1861, for instance, did not contain any provisions as to who was responsible for appointing the members of the supervisory board or the way in which the supervisory board was to be constituted. It was, apparently, left as a matter to be dealt with in the corporation’s constitution, but it seems as if the underlying idea was that they were supposed to be appointed by all the shareholders – Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 280.

  67. 67.

    Ibid 281.

  68. 68.

    S 84 AktG.

  69. 69.

    S 112 AktG.

  70. 70.

    Under the title ‘Duties and prerogatives of the Supervisory Board’ (Aufgaben und Rechte des Aufsichtsrats) S 111 AktG provides: ‘(1) The supervisory board has to control the management. (2) The supervisory board may inspect and examine the books and documents of the company, in particular its financial means, its inventory of securities and commodities … it commissions auditors to examine the annual accounts of the company and the group … (3) The supervisory board has to convene a shareholders’ meeting when the state of the company requires it. (4) The function of managing the business of the corporation cannot be conferred upon the supervisory board. The articles of the company or the supervisory board must, however, determine that certain transactions can only be carried out with its approval. If the supervisory board refuses its approval, the management board may demand that the shareholders’ meeting decides on the approval …’.

  71. 71.

    Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 280.

  72. 72.

    The German Corporate Governance Code (GCGC) of 26 May 2010 <http://www.corporate-governance-code.de/eng/kodex/index.html>.

  73. 73.

    Art 5.5.1 GCGC.

  74. 74.

    Karsten Schmidt, Gesellschaftsrecht (4th ed, Carl Heymanns Verlag, Köln 2002) 805 para 28(II)(1)(a), comments on S 76 AktG: ‘Under its own responsibility, the management board has to govern the company.’

  75. 75.

    See also Wolfgang Koch, Das Unternehmensinteresse als Verhaltensmaßstab der Aufsichtsratsmitglieder im mitbestimmten Aufsichtsrat einer Aktiengesellschaft (Peter Lang Verlag, Frankfurt 1983).

  76. 76.

    Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 300: ‘Bei Einschluß der Mitbestimmung ist der Aufsichtsrat gesellschaftsrechtlich ein Fremdkörper.’

  77. 77.

    For example, Wolfgang Spieker, ‘Möglichkeiten und Grenzen der Mitbestimmung im Aufsichtsrat’ (1962) 4 Das Mitbestimmungsgespräch 51 et seq; Karl-Heinz Sohn, ‘Die Mitbestimmung und ihre Kritiker’ (1965) 7 Das Mitbestimmungsgespräch 195 et seq. Also Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 115, 119–20. In general Bernhard Großfeld and Ulrich Irriger, ‘Intertemporales Unternehmensrecht’ (1988) 11 JZ 531, 537.

  78. 78.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 120.

  79. 79.

    See Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 295–97.

  80. 80.

    Wolfgang Schilling, ‘Die Mitbestimmung im Lichte des Gesellschaftsrechts’ (1954) RdA 441.

  81. 81.

    Ibid.

  82. 82.

    Detlev F Vagts, ‘Reforming the “modern” corporation: Perspectives from the German’ (1966) 80 Harvard L Rev 23, 66: ‘[The statutes which introduced the system of employee participation at board level were] enacted over the protests and dire predictions of industry …’.

  83. 83.

    Ibid 68. Also, reading through the German sources, one is struck by the similarity between arguments raised in the UK and some earlier arguments presented by German commentators in condemning the system of employee participation at board level – eg Wolfgang Schilling, ‘Die Mitbestimmung im Lichte des Gesellschaftsrechts’ (1954) RdA 442 et seq.

  84. 84.

    Paul Rose, ‘EU Company Convergence Possibilities after CENTROS’, (2001) 11 Transnat’l L & Contemp Probs, 133. See also Kurt Biedenkopf, ‘Vorwort’ in Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 5 et seq; Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 271–72; Helmut Kohl, ‘Corporate Governance: Path Dependence and German Corporate Law: Some Skeptical Remarks from the Sideline’ (1999) 5 Colum J Eur L 189, 195; B Großfeld and U Lehmann, ‘Management Structures and Worker’s Codetermination in Germany with European Perspectives’ (1994) 1 Corporate Law Development Series 50; Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 5–6; Mitbestimmung im Unternehmen, Bericht der Sachverständigenkommission zur Auswertung der bisherigen Erfahrungen bei der Mitbestimmung (Mitbestimmungskommission) (Biedenkopf Report) Drucksache des Deutschen Bundestages VI/334 (1970) 56 par I(1); Stellungnahme der Bundesregierung zum Bericht der Mitbestimmungskommission Drucksacke des Deutschen Bundestages VII/1551 (1970). See generally Jean J du Plessis, ‘Some Thoughts on the German System of Supervisory Codetermination by Employees’ in Ulrich Hübner and Werner F Ebke (eds), Festschrift für Bernhard Großfeld (Verlag Recht und Wirtschaft, Heidelberg 1999) 875, 883 et seq.

  85. 85.

    See Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 120.

  86. 86.

    See in general Rudolf Wiethölter, Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht (CF Müller Verlag, Karlsruhe 1961) 300.

  87. 87.

    Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 4.

  88. 88.

    Andrew Johnston, EC Regulation of Corporate Governance (CUP, Cambridge 2009) 99. See also the ‘Concluding Remarks’ in 6.8.

  89. 89.

    Max van Drunen, Funktionsdefizite in Regelungen zum Aufsichtsrat im deutschen und im niederländischen Recht (BWV, Berlin 2010) 64–66.

  90. 90.

    Cf Hans-Joachim Mertens, ‘Zuständigkeiten des mitbestimmenten Aufsichtsrats’ (1977) 6 ZGR 272–75, 289; Stephen Laske, ‘Unternehmensinteresse und Mitbestimmung’ (1979) 8 ZGR 172–73, 200; Ulrich Immenga, ‘Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR 249, 252–53. Thomas Raiser, ‘Das Unternehmensinteresse’ in Fritz Reichert-Facilides, Fritz Rittner and Jürgen Sasse (eds) Festschrift für Reimer Schmidt (Verlag Versicherungswirtschaft eV, Karlsruhe 1976) 103 et seq provides an interesting exposition of the historical development and the importance the concept of ‘corporate interests’ in German law.

  91. 91.

    The applicants were, inter alia, the Bayer AG, Daimler Benz AG, Hoechst AG, Robert Bosch GmbH.

  92. 92.

    Art 14 paras 1 and 2 of the German Federal Constitution provide: ‘The property and the right of succession into a decendent’s estate are guaranteed. Their substance and limits are defined by statute. / Property obliges. Its use shall also serve the welfare of the community.’

  93. 93.

    Collection of Decisions of the German Federal Constitutional Court (BVerfGE) vol. 50, 290 et seq; also published in (1979) 32 NJW 699 et seq.

  94. 94.

    Collection of Decisions of the German Federal Supreme Court in Civil Matters (BGHZ) vol. 83, 106 et seq. (at 110 et seq); also published in (1982) 35 NJW 1525 et seq.

  95. 95.

    The By-Laws of the Siemens AG provided that, within the supervisory board, a committee should be formed for the regulation of the relations of the company with the members of its board of directors; that, within that committee, the chairperson of the full supervisory board should also be the chairperson of that committee; and that such chairperson should have a casting vote in cases of an equal split of the votes (50:50). The Court found that particular provision in the By-Laws not to violate the German Federal Constitution.

  96. 96.

    The German version of that part of the judgment reads as follows: ‘Das Mitbestimmungsgesetz von 1976 hat als das Ergebnis grundlegender, nach langjährigen Auseinandersetzungen gefundener Entscheidungen ein besonderes gesellschaftspolitisches Gewicht. Es soll über das Interesse der unmittelbar Betroffenen hinaus dem Wohl der Allgemeinheit dienen (…) und nimmt mit seiner gesamtwirtschaftlichen Zielsetzung innerhalb der Rechtsordnung einen Rang ein, der es grundsätzlich ausschließt, einzelnen seiner materiell-rechtlichen Bestimmungen das öffentliche Interesse im Sinne von § 241 Nr. 3 AktG abzusprechen.’ We have translated this part freely to capture the spirit of the judgment.

  97. 97.

    That Section provides as follows: ‘A resolution taken in the shareholders meeting is … only null and void when it …/3. is incompatible with the nature of the public limited company or when its substance violates statutory provisions aiming either exclusively or mainly at the protection of the creditors or of public interests.’

  98. 98.

    Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 53–55.

  99. 99.

    See the ‘Concluding Remarks’ in 6.8.

  100. 100.

    See the rather early critique by Christine Windbichler and Gregor Bachmann, ‘Corporate Governance und Mitbestimmung als “wirtschaftsrechtlicher ordre public”’ in Harm Peter Westermann and Klaus Mock (eds) Festschrift für Gerold Bezzenberger (de Gruyter Verlag, Berlin 2000) 797 et seq.

  101. 101.

    Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 271–72. See also Peter Ulmer, ‘Der Deutsche Corporate Governance Kodex - ein neues Regulierungsinstrument für börsennotierte Aktiengesellschaften’ (2002) 166 ZHR 150, 180–81.

  102. 102.

    Martin Veit and Joachem Wichert, ‘Unternehmerische Mitbestimmung bei europäischen Kapitalgesellschaften mit Verwaltungssitz in Deutschland nach “Überseering” und “Inspire Art” ‘(2004) 49 AG 14, 17–18 with critical analyses of codetermination by leading commentators; and Otto Sandrock, ‘Gehören die deutschen Regelungen über die Mitbestimmung auf Unternehmensebene wirklich zum deutschen ordre public?’ (2004) 49 AG 57 et seq. See also Ingo Saenger, ‘Conflicts of Interest of Supervisory Board Members in a German Stock Corporation and the Demand for their Independence – An Investigation in the Context of the Current Corporate Governance Discussion’ [2005] Corporate Governance L Rev 147 at 161–168.

  103. 103.

    See Otto Sandrock, ‘Die Schrumpfung der Überlagerungstheorie’ (2003) 102 ZVgIRWiss 447, 490–93 who has tried to establish a comprehensive list of those shortcomings. See also the enumeration of such shortcomings by Maximilian Schiessl, ‘Leitungs- und Kontrollstrukturen im internationalen Wettbewerb – Dualistisches System und Mitbestimmung auf dem Prüfstand’ (2003) 167 ZHR 235, 240 et seq. See further the differentiating comments of a number of authors and participants in a discussion published in Arnold Picot (ed) Corporate Governance, Unternehmensüberwachung auf dem Prüfstand (Schaeffer-Poeschel Verlag, Stuttgart 1995).

  104. 104.

    See S 111(1) AktG.

  105. 105.

    This conclusion follows inevitably if the many critical comments over the activities of codetermined supervisory boards are taken together – see Friedrich Kübler, ‘Aufsichtsratsmitbestimmung im Gegenwind der Globalisierung’ in Friedrich Kübler et al (eds), The International Lawyer, Freundesgabe für Wulf Henrich Döser (Nomos Verlagsgesellschaft, Baden-Baden 1999) 237 et seq; Otto Sandrock, ‘Deutschland als gelobtes Land des Kapitalgesellschaftsrechts?’ (2002) 57 BB 1601, 1602 right col. Also Axel von Werder, ‘Überwachungseffizienz und Unternehmensmitbestimmung’ (2004) 49 AG 166, 171.

  106. 106.

    See the in-depth examination of that aspect by Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 147 et seq as well as Axel von Werder, ‘Überwachungseffizienz und Unternehmensmitbestimmung’ (2004) 49 AG 166, 170; Florian Schilling (vice chairman of the international personnel services firm, Heidrick & Struggles, that identifies and recruits top-level managers), ‘Mitbestimmung und Corporate Governance’, FAZ 26 Nov 2001, 25; Wolfgang Bernhardt, ‘Defizite für eine effiziente Aufsichtsratstätigkeit’ (1995) 159 ZHR 310, 316 et seq; Florian Schilling, ‘Mitbestimmung und Unternehensaufsicht, FAZ 16 Apr 2007, 24. Also see Elmar Gerum, Das deutsche Corporate Governance-System (Schäffer-Poeschel Verlag, Stuttgart 2007) 206.

  107. 107.

    Florian Schilling, ‘Mitbestimmung und Corporate Governance’, FAZ 26 Nov 2001, 25.

  108. 108.

    See also the critique by Peter Ruhwedel and Rolf Epstein, ‘Eine empirische Analyse der Strukturen und Prozesse in den Aufsichtsräten deutscher Aktiengesellschaften’ (2003) 58 BB 161 et seq.

  109. 109.

    See Klaus J Hopt, ‘Gemeinsame Grundsätze der Corporate Governance in Europa?’ (2000) 29 ZGR 779, 801.

  110. 110.

    See the critique by the rekwnowned Belgian entrepreneur André Leysen, ‘Rufe nach Abschaffung der Mitbestimmung mehren sich’ FAZ 15 Dec 2003; Martin T Roth, ‘Das Geld anderer Leute’ FAZ 28 March 2003, 13.

  111. 111.

    See the in-depth examination of that aspect by Axel von Werder, ‘Überwachungseffizienz und Unternehmensmitbestimmung’ (2004) 49 AG 166, 167 right col, 170.

  112. 112.

    As to an opposite example, where an employee representative criticised the amount of a termination payment, see Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 257.

  113. 113.

    Two attorneys (Mark K Binz and Martin Sorg) who had promoted the indictment, bitterly commented upon the payments in an Editorial ‘Der Fall Mannesmann – Landung‚ in der Nähe des Bettvorlegers’ – in English: ‘The Mannesmann case: Landing close to a bedside rag’ (2003) 58 BB 20 Oct 2003. The facts of that case are expounded in detail in a legal opinion submitted by Uwe Hüffer in Beilage 7 to Issue 43 of (2003) BB.

  114. 114.

    See 5.3.3.1.

  115. 115.

    Bundesgesetzblatt (BGBl. 2009 I at 2509) (Official Journal of the Federal Republic of Germany, 2009, Part I at 2509).

  116. 116.

    The VorstAG seeks to achieve that end mainly by prescribing, first, that the supervisory board must decide on all payments, without exeption, in plenary session; second, that, ion view of all circumstances (more specifically defined by the Statute) the compensation must be appropriate; and that, third, in case of a violation of these rules by the supervisory board, its members are liable for all damages thereby inflicted on the company. See also the discussion in 2.5, 3.2.2, 3.3.2.5 and 4.6.2.

  117. 117.

    It has even been contended that is incompatible with the TFEU (Treaty on the Functioning of the European Community) to exclude employees from EU Member States from German supervisory boards. See the Proposals by the German Task Force on Codetermination (‘Arbeitskreis Unternehmerische Mitbestimmung’, in (2009) 30 ZIP 885) and Christoph Teichmann, ‘Europäisierung der deutschen Mitbestimmung’, ibid. at 10). That contention has however been rejected by hans-Jürgen Hellwig and Casper Behne, ‚Gemeinschaftsrechtswidrigkeit und Anwendungsvorrang des Gemeinschaftsrechts in der deutschen Unternehmensmitbestimmung‘, (2009) 30 ZIP 871.

  118. 118.

    See Eberhard Schwark, ‘Globalisiertung, Europarecht und Unternehmensmitbestimmung im Konflikt’ (2004) 49 AG 173–74.

  119. 119.

    A spectacular example of such conflict came about when Frank Bsirske, chairman of the powerful Trade Union VERDI (Vereinigte Dienstleistungen) that volectively represents the employees working in all kinds of financial institutions; of health-services; educational institutions; public services; media; telecommunication; and traffic, in summer 2003 called up its members for a strike against the Lufthansa AG on whose supervisory board Bsirske himself was sitting as an employee representative! Cf Gregor Bender, ‘Auch Gewerkschafter im Aufsichtsrat müssen Kodex befolgen’ FAZ 9 July 2003, 17; Christian Geinitz, ‘Possenspiel im Osten’ FAZ 12 June 2003, 13.

  120. 120.

    See Volker Triebel, ‘Ein Bündel an Gesellschaftsformen steht zur Wahl’, FAZ 21 May 2003.

  121. 121.

    As an example see Oberlandesgericht (Court of Appeals) Stuttgart, 1995 IPRax 397 with annotation by Herbert Kronke, Mehrstufiger grenzüberschreitender Konzern und mitbestimmter Aufsichtsrat, 377 et seq.

  122. 122.

    This term leads back to Irving L. Janis, Victims of Groupthink (Houghton Mifflin Co. Boston 1972). See also Clark McCauley, ‘The Nature of Social Influence in Groupthink: Compliance and Internalization’ (1989) 57 Journal of Personality and Social Psychology 250–260.

  123. 123.

    As far as could be established, the idea of “groupthink” was first applied to the work of the German supervisory board by Klaus Wazka, ‘Aufsichtsräte beugen sich zu schnell dem Gruppendruck’, FAZ 6 Jun 2009 17.

  124. 124.

    In separate meetings of the two groups prior to the meeting of the supervisory board as a whole, such “groupthink” can effectively be prepared. See Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 191 et seq.

  125. 125.

    Cf Elke Bohl, ‘Die Mitbestimmung irritiert die ausländischen Investoren’ FAZ (nationwide German daily newspaper) 20 Sept 2003 14 as well as Bernhard Großfeld, ‘Rechnungslegung als Unternehmensverfassung’ (2003) 6 NZG 841, 843 et seq with references notably to US sources.

  126. 126.

    But see ‘Concluding remarks’ in 6.8.

  127. 127.

    That term was coined in 2004 by the then chairperson of the German Social Democratic Party, Franz Muentefering, It was quoted numerous times in the English and US media. See, for example, A. Sorkin ‘Germany’s Blackstone Deal Swats Down “Locust” Talk’, N. Y. Times (24 April 2006); C. Dougherty, ‘The Buzz on German Private Equity’, The Economist Int’l Herald Tribune (20 October 2006); B. Benoit, ‘German Deputy Still Targets “Locusts”’, (14 February 2007); ‘Dial for Locust’, The Economist (14 June 2007); D. Gow, ‘Germany fears the New ‘Locusts’, Guardian (4 June, 2008).

  128. 128.

    See, among many others, Michael Adams, ‘Was spricht gegen eine unbehinderte Übertragbarkeit der in Unternehmen gebundenen Ressourcen durch ihre Eigentümer?’ (1990) 35 AG 243, 250; Martina Röhrich, ‘Gleichbehandlungspflicht bei Kontrollaquisitionen’ (1993) RIW 93, 95 with further references; Lutz Michalski, ‘Abwehrmechanismen gegen unfreundliche Übernahmeangebote (unfriendly take-overs) nach deutschem Aktienrecht’ (1997) 42 AG 152, 156 (left col); Dietrich Becker, ‘Verhaltenspflichten des Vorstands der Zielgesellschaft bei feindlichen Übernahmen’ (2001) 165 ZHR 280.

  129. 129.

    A particularly ‘bitter’ poison pill is now contained in S 33(1) sentence 2 third alternative of the Wertpapier-Übernahme-Gesetz (Act on Take-overs) of 20 Dec 2001, which entered into effect on 1 Jan 2002 but was repealed in July 2006. It allowed the board of directors of a company that was the target of a hostile take-over to take measures with the approval of the supervisory board to frustrate the take-over. This could provoke the formation of a calamitous alliance between the board of directors and a codetermined supervisory board which acted to the detriment of the shareholders. The provision also gave rise to doubts to its compatibility with the fundamental rights catalogue of the German Federal Constitution (guarantee of the protection of property). For further details see Michael Kort in Klaus J Hopt and Herbert Wiedemann (eds), Großkommentar zum HGB (4th ed, Berlin 2003) section 76 para 95.

  130. 130.

    Parity codetermination is also a rather expensive exercise. Notably in large companies complicated elections have to be organised for the election of the employee representatives. These elections require considerable financial expenditure.

  131. 131.

    Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 257 et seq and 271 et seq) has compiled the results of several examinations of this procedure. Obviously, in practice, members of the management board are de facto almost exclusively appointed by an unanimous vote of the supervisory board.

  132. 132.

    See Otto Sandrock, ‘German Supervisory Codetermination and the Lesson to be Learned from it’ in Chinese Culture University, Taipeh (ed), 8th International Conference on Multinational Enterprises, 14–16 March 2006, vol I, 122.

  133. 133.

    Die Welt (German nationwide daily newspaper) 28 July 2005, 17.

  134. 134.

    Ferdinand Piëch.

  135. 135.

    ‘Germany’s ‘cowboy capitalism’ Wall Street Journal 9 Aug 2005, A8.

  136. 136.

    See 5.3.3.

  137. 137.

    ‘Together they stand’, The Economist, 16 July 2005, 14.

  138. 138.

    Expression used by Maximilian Schiessl, ‘Leitungs- und Kontrollstrukturen im internationalen Wettbewerb – Dualistisches System und Mitbestimmung auf dem Prüfstand’ (2003) 167 ZHR 237.

  139. 139.

    Expression used by Theodor Baums, a renowned German company law academic, according to a note in FAZ 27 June 2003.

  140. 140.

    See in particular Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 272; and Klaus J Hopt, ‘Unternehmensführung, Unternehmenskontrolle, Modernisierung des Aktienrechts – Zum Bericht der Regierungskommission Corporate Governance’ in Corporate Governance: Gemeinschaftssymposion der Zeitschriften (ZHR/ZGR) (Verlag Recht und Wirtschaft GmbH, Heidelberg 2002) 42–46, 66–67. The need for a basic reform has also been stressed by Abbo Junker, ‘Unternehmensmitbestimmung in Deutschland – Anpassungsbedarf durch internationale und europäische Entwicklungen’ (2005) 36 ZFA 1–44 (expert opinion prepared for the German Federal Association of Employers).

  141. 141.

    See 6.8.

  142. 142.

    This part is also based on the paper delivered by Otto Sandrock in Taipeh in March 2006 (Otto Sandrock, ‘German Supervisory Codetermination and the Lesson to be Learned from it’ in Chinese Culture University, Taipeh (ed), 8th International Conference on Multinational Enterprises, 14–16 March 2006, vol I, 122).

  143. 143.

    See 5.3.1.

  144. 144.

    The case has been described in greater detail in the 1st edition of this book – see Jean J. du Plessis Bernard Großfeld, Claus Luttermann, Ingo Saenger and Otto Sandrock, German Corporate Governace in International and European Context (Springer Verlag, Heidelberg 2007) 131–133.

  145. 145.

    It is customary that the By-Laws of German public limited companies provide for a committee to be set up within their supervisory boards which is in charge of the relations between the companies and the individual members of their management boards, in particular of the service contracts of the latter. The regulation of all financial matters also falls within the competence of these committees. Usually an employee delegate is a member of such committees.

  146. 146.

    See FAZ 20 Sept 2003, 11; 22 Sept 2003, 11; 25 Sept 2003, 18; 6 March 2004, 13. Cf also Jürgen Dunsch, ‘Das Millionenspiel bei Mannesmann’, FAZ 22 Sept 2003, 11; Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 276; also Jürgen Dunsch, ‘Das Millionenspiel auf den Chefetagen’ FAZ 5 May 2003, 13; ‘Der Telekom-Vorstand gibt Ron Sommer Rückendeckung’ FAZ 12 July 2002; ‘Showdown im Aufsichtsrat’ FAZ 16 July 2002.

  147. 147.

    See FAZ 20 Sept 2003, 11; 22 Sept 2003, 11; 25 Sept 2003, 18; 6 March 2004, 13). Cf also Jürgen Dunsch, ‘Das Millionenspiel bei Mannesmann’, FAZ 22 Sept 2003 and 5 May 2003; Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 276;

  148. 148.

    See Peter Ulmer, ‘Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen – noch zeitgemäß?’ (2002) 166 ZHR 276.

  149. 149.

    See FAZ 25 Nov 2006, 1, 13, 17.

  150. 150.

    See FAZ 30 Nov 2006, 13 and 20; 4 Dec 2006, 4. See also Holger Steltzner, ‘Lehren aus dem Mannesmann-Prozeß’ FAZ 30 Nov 2006, 1.

  151. 151.

    The case has been described in greater detail in the 1st edition of this book – see Jean J. du Plessis Bernard Großfeld, Claus Luttermann, Ingo Saenger and Otto Sandrock, German Corporate Governace in International and European Context (Springer Verlag, Heidelberg 2007) 133–137.

  152. 152.

    Further details about this relationship between the federal State of Lower Saxony, the supervisory board of VW and its board of manangement will be described in the next section (5.3.4).

  153. 153.

    As to the interrelationship between the State of Lower Saxony and Volkswagen see ‘Dark days for Volkswagen’ The Economist 16 July 2005, 55; Siegfried Thielbeer, ‘Schröder, Wulff und das System Volkswagen’ FAZ 6 July 2005, 3; Johannes Ritter, ‘Wolfsburger Filz’, FAZ 8 July 2005, 11; Carsten Germis, ‘Die politische Verantwortung’ FAZ 9 July 2005, 17; Johannes Ritter and Henning Peitsmeier, ‘Machtkampf in Wolfsburg’ FAZ 19 Oct 2005, 20.

  154. 154.

    See FAZ 16 July 2005, 16; and 17 July 2005, 17.

  155. 155.

    It was Peter Hartz, whose name is connected with important federal legislation, who reformed the German labour markets and who is well known in the German public. Peter Hartz was the so-called ‘Arbeitsdirektor’ of the Volkswagen AG.

  156. 156.

    For a comprehensive report of these different incidents see Henning Peitsmeier and Johannes Ritter, ‘Das System VW vor Gericht’ FAZ 15 Jan 2007, 12. German tabloids have taken up that subject publishing pertinent pictures, see for example ‘Stern’ no 40, 29 Sept 2005, 26–40. See also FAZ 30 Sept 2005, 11; and 8 Oct 2005, 11.

  157. 157.

    When these payments were covered up, the accountant (Joachim Gebauer) was immediately laid off by Volkswagen. Gebauer challenged his dismissal before a labour court of first instance. His claim, however, was dismissed. See FAZ 18 Nov 2006, 13.

  158. 158.

    The criminal court dealing with the indictment of Peter Hartz ascertained damages in the amount of a grand total of 2.6 million Euros to have been caused to the Volkswagen AG.

  159. 159.

    See Bernd Rüthers, ‘Betriebsräte bei VW – ein unentgeltliches Ehrenamt?’ FAZ 19 July 2005, 18. See further FAZ 6 July 2005, 13; 17 July 2005, 11; 25 July 2005, 17; 18 July 2005, 40; 8 Aug 2005, 12; 17 Oct 2005, 16.

  160. 160.

    See Stefan Seitz, Editorial ‘Auf eine vertrauensvolle Zusammenarbeit’ (2005) 32 BB 8 Aug 2005; Volker Rieble, ‘Betriebsräte geraten ins Visier der Strafrechtler’ FAZ 17 Aug 2005, 21. See further FAZ 26 July 2005, 11; 22 July 2005, 13; 10 Aug 2005, 10; 20 Aug 2005, 11.

  161. 161.

    See FAZ 17 Aug 2005, 21; 20 Aug 2005, 11; and 10 Oct 2005, 16.

  162. 162.

    That covenant was heavily criticised in public; see, for example, FAZ 27 Nov 2006, 11.

  163. 163.

    This judgement was handed down in February 2008. See ‘Anwälte prangern das “System VW” an’, FAZ 19 Feb 2008, 16; 23 Feb 2008, 11. An appeal against that judgement failed in 2009 (FAZ 18 Sep 2009, 17).

  164. 164.

    Christoph Hein, ‘VW und Indien tricksen sich gegenseitig aus’ FAZ 19 July 2005, 20. See further FAZ 5 July 2005, 11; 7 July 2005, 10; 12 July 2005, 11; 5 Aug 2005, 18; 10 Aug 2005, 9; and 10 Aug 2005, 14.

  165. 165.

    He is a grandson of the legendary designer of the Volkswagen ‘beatle’, Ferdinand Porsche, who was the founder of the famous car-making company. As to his personality see ‘Face value – Volkswagen’s Ferdinand Piëch is fanatical about cars and ruthless towards people’ The Economist 2 Dec 2006, 72.

  166. 166.

    See FAZ 9 Jan 2007, 9.

  167. 167.

    See FAZ 19 Apr 2006, 22; 3 May 2006, 13; 4 May 2006, 15; 11 Oct 2006, 22; 9 Nov 2006, 13; and 9 Jan 2007, 9.

  168. 168.

    See FAZ 16 Nov 2006, 1 and 11; 17 Nov 2006, 16.

  169. 169.

    See FAZ 9 Nov 2006, 16; 17 Nov 2006, 16. See also Johannes Ritter, ‘Der Schatten über Wolfsburg’ FAZ 13 Jan 2007, 11.

  170. 170.

    As was seen in Chap. 1 (1.3) ‘SE’ is the the European Company (Societas Europaea) formed under EU law (see 6.4 below). Originally Porsche was organized as a German public limited company (Aktiengesellschaft = AG). After the EU Regulation for the Establshment of the European Company (SE) and the SE employees’ Directive had been implemented by Germany and had entered into effect on 29 December 2004, the Porsche AG transformed into an SE.

  171. 171.

    See FAZ 29 Nov 2007, 17. For the fical year 2006/2007, the Porsche SE was able to pay to the six members of its management board 112.7 million (!) Euros in salaries and bonusses.

  172. 172.

    See FAZ 27 Febr 2008, 18; 4 Mar 2008, 1, 19, 22; 11 Apr 2008, 21; 22 Apr 2008, 14.

  173. 173.

    See FAZ 22 Apr 2008, 14; 25 Apr 2008, 16; 23 Jun 2008 11; 11 Jul 2008, 16; 1 Sep 2008, 17; 5 Sep 2008, 20; 5 Sept 2008, 22; 10 Sep 2008, 14; 12 Sep 2008, 16; 13 Sep 2008, 11; 17 Sep 2008, 19; 15 Sep 2008, 13; 15 Nov 2008, 16; 24 Sep 2008, 16; 24 Oct 2008, 16; 25 Oct 2008, 17; 27 Oct 2008, 14; 27 Nov 2008, 17.

  174. 174.

    See FAZ 7 Jan 2009, 13; 23 Apr 2009, 17; 8 May 2009, 14; 13 May 2009, 11; 3 Jun 2009, 13; 29 Jun 2009, 15; 16 Jun 2009, 13; 14 Jul 2009, 14; 20 Jul 2009, 9; 24 Jul 2009, 3; 24 Jul 2009, 1; 24 Jul 2009, 15; 25 Jul 2009, 12; 21 Nov 2009, 13; 4 Dec 2009, 17; 8 Jul 2010, 15. In the beginning of 2011, the VW SE also bought up the Austrian Porsche Holding GmbH, an Austrian company with limited liability (Gesellschaft mit beschränkter Haftung), the huge automobile dealer which until then had been jointly owned by the families Porsche and Ferdinand Piëch (see FAZ 28 Jan 2011, 16).

  175. 175.

    Already in the beginning of 1960, a compromise had been reached between the Federal Republic of Germany and the federal state of Lower Saxony according to which a share portion of 20% was alloted to each of the two state entities. Such ownership had been disputed between the two states since the end of the Second World War. That compromise (embodied in a ‚Vertrag über die Regelung der Rechtsverhältnisse bei der VW GmbH’, BGBl. 1959 III Gliederungsnummmer 641-1) was then approved by the VW Gesetz. The Federal Republic of Germany later sold its 20% share in the VW AG. In consequence, only Lower Saxony remained as a shareholder with its right to appoint two members of the supervisory board of the VW AG.

  176. 176.

    Gesetz über die Regelung der Rechtsverhältnisse bei der Volkswagenwerk Gesellschaft mit beschränkter Haftung, BGBl. 1960 I 301, amended on 21 July 1960 (BGBl. 1960 I 2479).

  177. 177.

    See the VW Gesetz 1960 in its amendment of 21 July 1960.

  178. 178.

    The power of appointment was fixed in S 4(1) of the VW Gesetz.

  179. 179.

    The Porsche SE as a holding company transformed into the European company form of an SE after the EU Council Regulation of 8 October 2001 for the Establishment of the European Company (SE) and the SE Employees’ Directive had been passed on the level of the EU and after the German statute implementing these two pieces of European legislation had entered into effect on 29 December 2004. See further 6.4.1.

  180. 180.

    See its judgement of 23 October 2007 (C-112/05) where the Court ruled that this provisions violated one of the basic economic freedoms enshrined in the EC-Treaty (now Treaty on the Functioning of the European Union = TFEU), i. e. the free movement of capital (Art. 63 et seq TFEU). See also FAZ 12 May 2008, 23.

  181. 181.

    Of 30 July 2009 (BGBl. 2009 I 2478).

  182. 182.

    Also the VW AG transformed into the European company form of an SE after the EU Council Regulation of 8 October 2001 for the Establishment of the European Company (SE) and the SE Employees’ Directive had been passed on the level of the EU and after the German statute implementating these two pieces of European legislation had been implemented by a German statute which entered into effect on 29 December 2004.

  183. 183.

    S 2(1) par. 1 of the VW Gesetz provided (translated into English): ‘The voting rights of a shareholder whose part value shares represent more than one fifth of the share capital shall be limited to he number of votes granted by the par value of shares equivalent to one fifth of the share capital.’ That cap had been extended also to cases where a shareholder acted as agent for another shareholder. Insofar S 3 para. 5 of the VW Gesetz provided (translated into English): ‘At the general meeting, no person may exercise a voting right which corresponds to more than one fifth of the share capital.’

  184. 184.

    See its judgement of 23 October 2007 (C-112/05) where the Court ruled that this provision violated one of the basic economic freedoms enshrined in the EC-Treaty (now Treaty on the Functioning of the European Union = TFEU), i. e. the free movement of capital (Art. 63 et seq TFEU). See also FAZ 12 May 2008, 23.

  185. 185.

    Gesetz über die Regelung der Rechtsverhältnisse bei der Volkswagenwerk Gesellschaft mit beschränkter Haftung, BGBl. 1960 I 301, amended on 21 July 1960 (BGBl. 1960 I 2479).

  186. 186.

    See Art 23, 1st sentence of the VW articles of incorporation.

  187. 187.

    S 4 para. 1 of the VW Gesetz of 1960 provided: “Resolutions of the general meeting which, under the Law on public limited companies, require the favourable vote of at least three quarters of the share capital represented at the time of their adoption, shall require the favourable vote of more than four fifths of the share capital represented at the time of that adoption.”

  188. 188.

    Such provisions are embodied not only in all German statutes regulating limited companies such as the Act on public limited companies (Aktiengesellschaften) and private limited companies (Gesellschaften mit beschränkter Haftung), but also in the Acts on cooperatives or on associations. Thus the three fourths majority prescribed for all major corporate acts, represents a general principle of German corporate law.

  189. 189.

    As to an in-depth commentary on that decision see Peer Zumbansen and Daniel Saam, ‘The ECJ, Volkswagen and European Corporate Law’, (2007) 8 German Law Journal 1027 et seq.

  190. 190.

    S 25 para 2 of the articles of incorporation in their official English version reads: ‘Resolutions of the General Meeting in respect of which the German Corporation Act stipulates a majority comprising at least three quarters of the capital stock represented at the time the resolution is voted on shall require a majority of more than four fifths of the capital stock of the company reperesented at such time.’

  191. 191.

    See FAZ 12 Mar 2008, 23; 11 Apr 2008, 14; 25 Apr 2008, 16; 23 May 2008, 11; 28 May 2008, 12 and 21; 6 June 2008, 13.

  192. 192.

    See Spiegel-online (Spiegel is a German weekly) of 15 April 2009.

  193. 193.

    See the diagram in the FAZ 20 Jul 2009, 9. The State of Qatar also held a major portion (15% up to 20%) of the VW voting stock.

  194. 194.

    See S 4 para 1 of that statute.

  195. 195.

    S 15 para 4 of the articles of incorporation in its present (March 2011) version provides: ‘Resolutions concerning the establishment and relocation of production facilities shall require a majority of two thirds of the Members of the Supervisory Board.’

  196. 196.

    See Art 9 para. 1 of the articles of incorporation in its present (March 2011) version.

  197. 197.

    This is the aggregate number when one adds the 200 odd seats in the mining, coal, iron and steel industry under the Mining, Iron and Steel Act of 1951 (see supra at 5.2.3.2 in fine), the 4896 seats assigned to them by the general MitbestG 1976 (see supra at 5.2.3.3) and the 4230 seats reserved for them by the former Works Council Constitution Act 1952, now replaced by the One Third Participation Act of 2004 (see 5.2.3.4 at b).

  198. 198.

    See Ss 4(3), 13(1) Montan-MitbestG (1951); Ss 26, 33(1) MitbestG 1976; S 9 One-Third Participation Act 2004.

  199. 199.

    A resolution of the Federal Committee (Bundesausschuß) of the Federation of the German Trade Unions (Deutscher Gewerkschaftsbund) passed on 10 Oct 2000 for the years 2001 and after regulates the ‘Transfer of Remunerations resulting from Activities in Codetermination or similar Activities’ (Abführung von Vergütungen aus der Wahrnehmung von Mitbestimmungsfunktionen oder ähnlichen Aufgaben). A copy of that resolution has been forwarded to the author of this article by Hans Böckler-Stiftung.

  200. 200.

    This represents, however, only a moral obligation which is legally not enforceable since a legally binding obligation would encroach upon the independence of the respective member of the supervisory board.

  201. 201.

    Hans Böckler-Stiftung, named after a famous chairman of the German Trade Unions, in office immediately after the second world war.

  202. 202.

    The so-called ‘Eigenbehalt’.

  203. 203.

    With respect to fees up to an amount of 3500 Euros, 10% may be retained. 95% of all fees exceeding of 3500 Euros shall be transferred, but always limited to a personal retention of 3500 Euros. A detailed scale of fees and personal retention is attached to the resolution.

  204. 204.

    Elmar Gerum, Das deutsche Corporate Governance-System (Schäffer-Poeschel Verlag, Stuttgart 2007) 48.

  205. 205.

    Ibid at 49.

  206. 206.

    See Rainer Hank, ‘Vater der Mitbestimmung’ FAZ 15 Nov 2006, 18.

  207. 207.

    See the article by Philipp Neumann in Die Welt (German nationwide daily neswpaper) 30 Aug 2006. Further details can be found on the Internet (keyword < Biedenkopf Kommission>). Also see Nico Raabe, Die Mitbestimmung im Aufsichtsrat (Erich Schmidt Verlag, Berlin 2010) 55–58.

  208. 208.

    See FAZ 15 Nov 2006, 14. See also Elmar Gerum, Das deutsche Corporate Governance-System (Schäffer-Poeschel Verlag, Stuttgart 2007) at 48.

  209. 209.

    See FAZ 21 Dec 2006, 11.

  210. 210.

    See also the Editorial by Wolfgang Bernhardt, ‘Mitbestimmung zwischen Juristentag und Biedenkopf-Kommission’ (2006) 51/52 BB first page (unnumbered) and his comments, BB-Forum: Unternehmensmitbestimmung nach Biedenkopf’, (2007) BB 381 et seq.

  211. 211.

    The reporter was Thomas Raiser, a law professor at the Humboldt University in Berlin.

  212. 212.

    The paper comprises 116 pages and is published in Deutscher Juristentag (ed) Verhandlungen des 66. Deutschen Juristentages Stuttgart 2006, vol I Gutachten, München 2006, at pp. B1–B116.

  213. 213.

    See further 6.4.1, 6.4.4, 6.4.6, 6.4.7 and 6.4.9.

  214. 214.

    See the brochure edited by the 66th German Lawyers Forum Stuttgart 19–22 Sept 2006, at 6 as well as FAZ 22 Sep 2006, 6.

  215. 215.

    See Arbeitskreis ‘Unternehmerische Mitbestimmung’ (author), ‘Entwurf einer Regelung zur Mitbestimmungsvereinbarung sowie zur Größe des mitbestimmten Aufsichtsrates, (2009) 30 ZIP 885-899; FAZ 11 May 2009, 11.

  216. 216.

    For details, see 6.4.1.

  217. 217.

    Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen Gesellschaft―SE-Beteiligungsgesetz (SEBG). See Chap. 6 note 122.

  218. 218.

    See 6.4.4 and 6.4.9.

  219. 219.

    See Mathias Habersack, Reformbedarf im deutschen Mitbestimmungsrecht’, (2009) 30 Beilage zu Heft 48 Zeitschrift für Wirtschaftsrecht (ZIP) 1–5.

  220. 220.

    See Christoph Teichmann, ‘Europäisierung der deutschen Mitbestimmung’, (2009) 30 Beilage zu Heft 48 Zeitschrift für Wirtschaftsrecht (ZIP) 10-17. See also Peter Hanau, ‚Abschluß und Inhalt von Mitbestimmunsgvereinbarungen, (2009) 30 Beilage zu Heft 48 Zeitschrift für Wirtschaftsrecht (ZIP) 6–9.

  221. 221.

    See Hans-Jürgen Hellwig and Caspar Behne, Gemeinschaftsrechtswidrigkeit und Anwendungsvorrang des Gemeinschaftsrechts in der deutschen Unternehmensmitbestimmung, (2010) 31 ZIP 871–874.

  222. 222.

    S 33 MitbestG (1976) and S 13 Montan-MitbesG (1951).

  223. 223.

    See Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 95.

  224. 224.

    S 33(1) and (2) MitbestG (1976) and S 13(1) Montan-MitbesG.

  225. 225.

    Ulrich Immenga, ‘Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR 258.

  226. 226.

    See Ss 76, 77, 78, 93 AktG.

  227. 227.

    Uwe Hüffer Aktiengesetz (9th ed, Verlag CH Beck, München 2010) 404.

  228. 228.

    See also Bundesverfassungsgericht (BVerfG) (1979) 32 NJW 699, 711.

  229. 229.

    See in particular Ulrich Immenga, ‘Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR 257–58.

  230. 230.

    Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 521.

  231. 231.

    Ibid.

  232. 232.

    Cf Ulrich Immenga, ‘Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR 257–58; Friedrich Kübler and Heinz-Dieter Assmann, Gesellschaftsrecht (6th ed, CF Müller Verlag, Heidelberg 2006) 521.

  233. 233.

    See S 33 MitbestG (1976).

  234. 234.

    See Hartmut Oetker in Rudi Müller-Glöge, Ulrich Preis und Ingrid Schmid (eds), Erfurter Kommentar zum Arbeitsrecht (11th ed, CH Beck Verlag, München 2011) S 33 MitbestG Arbeitsdirektor, note 1, 2.

  235. 235.

    BVerfG (1979) 32 NJW 699, 711. See also Peter Hanau, ‘Die arbeitsrechtliche Bedeutung des Mitbestimmungsurteils des Bundesverfassungsgerichts’ (1979) 8 ZGR 545–46.

  236. 236.

    Tom Hadden, Company Law and Capitalism (2nd ed, Weidenfield and Nicolson, London 1977) 450.

  237. 237.

    Other distinctions which are also relevant for purposes of codetermination are the distinction between male and female employees; between trade union members and non-trade union members; and between people with an interest in the corporation and those completely unrelated to the corporation.

  238. 238.

    See S 15(2) MitbestG (1976).

  239. 239.

    For academic purposes the Germans distinguish between collective bargaining (Tarifvertrag); codetermination in the enterprise (Mitbestimmung im Unternehmen); and codetermination at shop-floor level or in business (Mitbestimmung im Betrieb) – see Peter Hanau, ‘Die arbeitsrechtliche Bedeutung des Mitbestimmungsurteils des Bundesverfassungsgerichts’ (1979) 8 ZGR 540. Another distinction which is sometimes made is between workplace codetermination (betrieblichen Mitbestimmung) and enterprise or corporate codetermination (unternehmerische Mitbestimmung) – Karl-Georg Loritz, ‘Sinn und Aufgabe der Mitbestimmung heute’ (1991) ZFA 3; The different forms of codetermination are, however, also linked to each other – Peter Hanau, ‘Die arbeitsrechtliche Bedeutung des Mitbestimmungsurteils des Bundesverfassungsgerichts’ (1979) 8 ZGR 541. See also Peter Hanau, ‘Einführung’ in Mitbestimmungsgesetze in den Unternehmen mit allen Wahlordnungen (4th ed, Deutscher Taschenbuch Verlag, München 1991)VII.

  240. 240.

    See especially Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (II)’ (1966) Das Mitbestimmungsgespräch 115–16.

  241. 241.

    During the mutual take-over battle between VW and Porsche (see 5.3.4), for example, the employees of Porsche were strictly opposed to the support granted by trade unions to VW in its aim to gain control over the Porsche group.

  242. 242.

    Aktienrechtsreform und Mitbestimmung – Stellungnahmen und Vorschläge, published by Bundesvorstand des Deutschen Gewerkschaftsbundes (Düsseldorf 1962). See Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 95 (fn 3).

  243. 243.

    At first, corporations were classified as large public corporations if they complied with any two of three stated requirements, namely employing more than 2000 employees, with a balance sheet sum of more than DM 50 million, and with a turrnover of DM 100 million – see Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 95–96. After some further deliberation, these requirements were eventually fixed in 1966 at 2000 people employed, a balance sheet sum of more than DM 75 million, and a yearly turrnover of DM 150 million.

  244. 244.

    Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 96.

  245. 245.

    See especially Heinz Seidel ‘Um die Ausweitung der qualifizierten Mitbestimmung (II)’ [1966] Das Mitbestimmungsgespräch 116–17.

  246. 246.

    See 5.2.3.3.

  247. 247.

    Thomas Raiser, ‘The Theory of Enterprise Law in the Federal Republic of Germany’ (1988) AJCL 122 (fn 54).

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  1. Orrick Hoelters & Elsing Attorneys Düsseldorf, University of Muenster Institute for International Business Law, 1 Birkhahnweg, 48155, Muenster, Germany

    Otto Sandrock

  2. Deakin University, Geelong Waurn Ponds Campus 75 Pigdons Road, Waurn Ponds, VIC, 3216, Australia

    Jean J. du Plessis

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Sandrock, O., du Plessis, J.J. (2012). The German System of Supervisory Codetermination by Employees. In: German Corporate Governance in International and European Context. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-23005-9_5

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