The German System of Supervisory Codetermination by Employees

Sandrock, Otto; du Plessis, Jean J.

doi:10.1007/978-3-662-54198-2_5

Otto Sandrock &
Jean J. du Plessis⁷

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1 Citations

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 this chapter includes a description of the statutory rules on codetermination in Germany including their historical development, their advantages and disadvantages, some further negative aspects of codetermination and, finally, the account of some proposals of reform.

Otto Sandrock sadly passed away shortly after the completion of this chapter.

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Notes

1.
See generally Großfeld and Lehmann (1994), pp. 41–43.
2.
Córdova (1982), pp. 125 and 127. For a different classification of the different forms of employee participation—see Salamon (1987), pp. 300 et seq.
3.
Großfeld and Lehmann (1994), p. 41. See also Conlon (1975), p. 352.
4.
Raiser (1988), pp. 111 and 117. See also Kübler and Assmann (2006), p. 519; Saenger (2013), p. 572, para 1059; Roe (1993), pp. 1927 and 1970. Loritz (1991), p. 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.
Loritz (1991), p. 3.
6.
Kübler and Assmann (2006), p. 519.
7.
Reichsgesetzblatt (RGBl.) 1920 I 147 (Official Journal of the former Reich, 1920, Part I. pp. 147 et seq.).
8.
Raiser (1988), p. 117; Loritz (1991), p. 4.
9.
Of 15 February 1922, Reichsgesetzblatt (RGBl.) 1922 Part I No. 17 pp. 209/10 (Official Journal of the former Reich, 1922, Part I. pp. 209/10)—hereafter referred to as the ‘1922-Amendment Act’.
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, pp. 45–57). See also Hanau (1991), p. VII; and Saenger (2013), p. 572, para 1059.
11.
Bundesgesetzblatt (BGBl. 1952 I 681) (Official Journal of the Federal Republic of Germany, 1952, Part I, p. 681).
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 Robinson (1990), p. 51.
13.
See discussion in Sect. 5.2.3.4.
14.
Großfeld and Lehmann (1994), p. 42.
15.
BGBl. 1988 I 2312-2316 (Official Journal of the Federal Republic of Germany, 1988 Part I, pp. 2312–2316).
16.
Eisenhardt (2009), p. 335.
17.
Robinson (1990), p. 63.
18.
See Sect. 5.2.2.
19.
S 1 of the 1922 Amendment Act.
20.
S 4 of the 1922 Amendment Act.
21.
S 4 of the 1922 Amendment Act.
22.
S 6 of the 1922 Amendment Act.
23.
S 6 of the 1922 Amendment Act contained a reference to s 16 Works Council Act 1920.
24.
Raiser (1988), p. 18.
25.
Robinson (1990), p. 49.
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.
Wißmann (1982), p. 423.
28.
Ibid.
29.
Sandrock (2005), pp. 86 et seq.
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, p. 347)—see Kübler and Assmann (2006), p. 520 (fn 3). Normally, the Act requires the company to have more than 1000 employees (see S 1(2)).
31.
Saenger (2013), p. 572, 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.
S 4 Montan-MitbestG (1951).
33.
S 9(1) Montan-MitbestG (1951).
34.
All ‘neutral persons’ under the Montan-MitbestG (1951) have to enjoy the confidence of all members of the supervisory board.
35.
S 9(2) Montan-MitbestG (1951).
36.
See the detailed provisions in S 8 Montan-MitbestG (1951).
37.
See S 4(2) Montan-MitbestG (1951).
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 6 years.
39.
These numbers date back to 2011 (see Industriegewerkschaft Bergbau Chemie Energie, Stahlbüro der Industriegewerkschaft Metall, http://www.boeckler.de/pdf/magmb_2011_05_molitor1.pdf. More up-to-date numbers could unfortunately not be obtained.
40.
See Sandrock (2005), pp. 87 et seq.
41.
Bundesgesetzblatt (BGBl. 1976 I at 1153) (Official Journal of the Federal Republic of Germany, 1976, Part I, p. 1153).
42.
S 1(1)1 MitbestG (1976).
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.
Similar to, but not because of the provisions of the Montan-MitbestG (1951), the supervisory board has to be composed of (1) six representatives of the employees and six representatives of the shareholders if the company has less than 2000 employees, (2) eight representatives of the employees and eight representatives of the shareholders if the company employs between 10,000 and 20,000 persons, and (3) 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.
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.
Kübler and Assmann (2006), p. 522.
47.
Ibid., p. 526.
48.
Collection of Decisions of the German Federal Constitutional Court (BVerfGE) vol 50, 290.
49.
Kübler and Assmann (2006), p. 522. Also Raiser (1976a), p. 145.
50.
Hopt (1998), pp. 242 and 246–247; Hirt (2002), pp. 349 and 352.
51.
See below Sect. 6.4.
52.
These numbers were obtained from the following source: Hans Böckler Stiftung, Daten und Fakten, Mitbestimmung in Deutschland (http.boeckler.de/pdf/mbf_mitbestimmung_in_d.pdf). According to the table set up there, in 2013 a total of 423 companies had a 12-persons supervisory board, 108 with a 16-persons supervisory board and 120 companies with a 20-persons supervisory board.
53.
See, however, the discussion infra Sect. 5.3.2, dealing with the ‘Remuneration of the Employee Representatives’.
54.
Bundesgesetzblatt (BGBl. 1952 I 681) (Official Journal of the Federal Republic of Germany, 1952, Part I, p. 681).
55.
Bundesgesetzblatt (BGBl. 1965 I 1089) (Official Journal of the Federal Republic of Germany, 1965, Part I, p. 1089).
56.
Reichsgesetzblatt (RGBl. 1892, 477) (Official Journal of the former Reich, 1992, p. 477).
57.
Großfeld and Lehmann (1994), p. 50. For the specific statutes, see Loritz (1991), p. 4.
58.
Sandrock (2005), pp. 89 et seq.; Huke and Prinz (2004), pp. 2633 et seq.
59.
Bundesgesetzblatt (BGBl. 2004 I 974) (Official Journal of the Federal Republic of Germany, 2004, Part I, p. 974).
60.
The second edition of this book surmised that, in 2009, 1410 companies were supposed to be subject to this regime of one-third codetermination meaning that several thousand seats on the supervisory boards of these companies were to be filled. This number had been calculated as follows: We did not know the exact number of seats in the supervisory boards of each of these companies, but one could assume that the average size of the supervisory board for these companies would be nine. Thus, collectively, the 1410 companies falling under this arrangement would have had a total number of 12,690 supervisory board members. One third of these seats had to be filled by employee representatives, bringing it to a total of 4230 supervisory board positions held by employee representative. On the basis of that calculation, it seemed a good guess in the second edition of this book, that approximately 4230 seats on the supervisory boards of these companies were filled by employee representatives, while shareholder representatives would hold approximately 8460 seats on the supervisory boards of these companies.
61.
As far as can be seen, statistics on these numbers are not available.
62.
See Bayer and Hoffmann (2015), pp. 909–918. Companies with well known trade-names like Media Saturn, Alltours Flugreisen and Herbert Kannegiesser GmbH were reported to have reneged on that statutory duty (see Frankfurter Allgemeine Zeitung of 25 August 2015, p. 22).
63.
See 4.3.5 and 11.2.8 regarding board diversity and women on boards.
64.
In its version of 22 December 2015, Bundesgesetzblatt (BGBl. 2015 I 2565) (Official Journal of the Federal Republic of Germany 2015 Part I at 2565).
65.
Again in its version of 22 December 2015, Bundesgesetzblatt (BGBl. 2015 I 2565) (Official Journal of the Federal Republic of Germany 2015 Part I at 2565).
66.
Except where that task has been delegated, by the shareholders assembly, to the supervisory board.
67.
As to the minimum women quota of 30% to be reached on the level of the boards of public limited companies (Aktiengesellschaften), see S 95 paragraphs (2) and (3) of the statute on public limited companies (Aktiengesetz) in its version of 22 December 2015, Bundesgesetzblatt (BGBl. 2015 I 2565) (Official Journal of the Federal Republic of Germany 2015 Part I at 2565).
68.
S 33 MitbestG (1976) and S 13 Montan-MitbesG (1951).
69.
See Seidel (1966a), p. 95.
70.
S 33(1) and (2) MitbestG (1976) and S 13(1) Montan-MitbesG.
71.
Immenga (1977), p. 258.
72.
See Ss 76, 77, 78, 93 AktG.
73.
Hüffer (2014), pp. 476–477, para 23.
74.
See also Bundesverfassungsgericht (BVerfG) (1979) 32 NJW 699, 711.
75.
See in particular Immenga (1977), pp. 257–258.
76.
Kübler and Assmann (2006), p. 521.
77.
Ibid.
78.
Cf Immenga (1977), pp. 257–258; Kübler and Assmann (2006), p. 521.
79.
See S 33 MitbestG (1976).
80.
See Oetker (2014) S 33 MitbestG Arbeitsdirektor, note 1, 2.
81.
BVerfG (1979) 32 NJW 699, 711. See also Hanau (1979), pp. 545–546.
82.
Hadden (1977), p. 450.
83.
Other distinctions 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.
84.
See S 15(2) MitbestG (1976).
85.
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 Hanau (1979), p. 540. Another distinction which is sometimes made is between workplace codetermination (betrieblichen Mitbestimmung) and enterprise or corporate codetermination (unternehmerische Mitbestimmung)—Loritz (1991), p. 3; The different forms of codetermination are, however, also linked to each other—Hanau (1979), p. 541. See also Hanau (1991), p. VII.
86.
See especially Seidel (1966b), pp. 115–116.
87.
During the mutual take-over battle between VW and Porsche (see Sect. 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.
88.
Aktienrechtsreform und Mitbestimmung—Stellungnahmen und Vorschläge, published by Bundesvorstand des Deutschen Gewerkschaftsbundes (Düsseldorf 1962). See Seidel (1966a), p. 95 (fn 3).
89.
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 turnover of DM 100 million—see Seidel (1966a), pp. 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 turnover of DM 150 million.
90.
Seidel (1966a), p. 96.
91.
See especially Seidel (1966b), pp. 116–117.
92.
See Sect. 5.2.3.3.
93.
Raiser (1988), p. 122 (fn 54).
94.
Ibid., pp. 120–121.
95.
ADHB 24 July 1861 with effect from 1 March 1862—see Wiethölter (1961), p. 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 (1961), pp. 281–285.
96.
The statute is named ‘Act on Private Limited Companies’ (Gesetz betreffend die Gesellschaften mit beschränkter Haftung’).
97.
As to the reasons why the Aufsichtsrat was first introduced into the German law, Wiethölter (1961), p. 271 refers to two completely contradictory conclusions reached by two commentators (Passow and Schumacher), relying on exactly the same research sources.
98.
Montan-MitbestG (1951)—see Kübler and Assmann (2006), p. 520 (fn 3).
99.
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—Wiethölter (1961), p. 280.
100.
Ibid., p. 281.
101.
S 84 AktG.
102.
S 112 AktG.
103.
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 ...’.
104.
Wiethölter (1961), p. 280.
105.
The German Corporate Governance Code (GCGC) of 26 May 2010 http://www.corporate-governance-code.de/eng/kodex/index.html.
106.
Art 5.5.1 GCGC.
107.
Schmidt (2002), p. 805, para 28(II) (1)(a), comments on S 76 AktG: ‘Under its own responsibility, the management board has to govern the company.’
108.
See also Koch (1983).
109.
Wiethölter (1961), p. 300: ‘Bei Einschluß der Mitbestimmung ist der Aufsichtsrat gesellschaftsrechtlich ein Fremdkörper.’
110.
For example, Spieker (1962), pp. 51 et seq.; Sohn (1965), pp. 195 et seq. Also Raiser (1988), pp. 115 and 119–120. In general Großfeld and Irriger (1988), pp. 531 and 537.
111.
Raiser (1988), p. 120.
112.
See Wiethölter (1961), pp. 295–297.
113.
Schilling (1954), p. 441.
114.
Ibid.
115.
Vagts (1966), pp. 23 and 66: ‘[The statutes which introduced the system of employee participation at board level were] enacted over the protests and dire predictions of industry ...’.
116.
Ibid., p. 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—e.g. Schilling (1954), pp. 442 et seq.
117.
Rose (2001), p. 133. See also Biedenkopf (2010), pp. 5 et seq.; Ulmer (2002a), pp. 271–272; Kohl (1999), pp. 189 and 195; Großfeld and Lehmann (1994), p. 50; Loritz (1991), pp. 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 du Plessis (1999), pp. 875, 883 et seq.
118.
See Raiser (1988), p. 120.
119.
See in general Wiethölter (1961), p. 300.
120.
Loritz (1991), p. 4.
121.
Johnston (2009), p. 99. See also the ‘Concluding Remarks’ in Sect. 6.8.
122.
van Drunen (2010), pp. 64–66.
123.
Cf Mertens (1977), pp. 272–275 and 289; Laske (1979), pp. 172–173 and 200; Immenga (1977), pp. 249 and 252–253. Raiser (1976b), pp. 103 et seq. provides an interesting exposition of the historical development and the importance the concept of ‘corporate interests’ in German law.
124.
The applicants were, inter alia, the Bayer AG, Daimler Benz AG, Hoechst AG, Robert Bosch GmbH.
125.
Art 14 paras 1 and 2 of the German Federal Constitution provide: ‘The property and the right of succession into a decedent’s estate are guaranteed. Their substance and limits are defined by statute. / Property obliges. Its use shall also serve the welfare of the community.’
126.
Collection of Decisions of the German Federal Constitutional Court (BVerfGE) vol. 50, 290 et seq.; also published in (1979) 32 NJW 699 et seq.
127.
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.
128.
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.
129.
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.
130.
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.’
131.
Raabe (2010), pp. 53–55.
132.
See the ‘Concluding Remarks’ in Sect. 6.8.
133.
See Sandrock (2015), pp. 129 and 131–132.
134.
See Sandrock (2015), pp. 129 and 132–133.
135.
See Astheimer (2013), p. 15.
136.
In order to preserve their independence, German company statutes prohibit members of supervisory boards to legally bind themselves to assign their claims for compensation.
137.
There are complaints, however, that not all employees follow that moral obligation. See Astheimer (2013), p. 15.
138.
See Sandrock (2015), pp. 129 and 133–134.
139.
See Sandrock (2015), pp. 133–134.
140.
See Frankfurter Allgemeine Zeitung (nation-wide daily newspaper) of 17 March 2016, p. 28.
141.
These extra payments enjoy however the members only of the highest paid rank, members of other ranks will receive less.
142.
See Wirtschafts-Woche online of 16 March 2016 http://www.wiwo.de/unternehmen/auto/praemien-fuer-die-belegschaft-wie-viel-autobauer-ihren-mitarbeitern-zahlen/7927804.html?p=28a=false&slp=false#image.
143.
See Wirtschafts-Woche (fn. 144).
144.
See Wirtschafts-Woche (fn. 144).
145.
The Audi AG is an integral part of the Volkswagen Group. The bonuses of its employees are therefore affected by the emission scandal (see below Sect. 5.5.5.3).
146.
A bonus in that amount will be disbursed only to a specific (higher-ranking) category of employees. Employees ranking in other categories, will receive bonuses according to their ranks. Further, the amount of the bonus depends upon how well the individual employee has performed. Finally, the BASF SE had paid a bonus in 2015 on Christmas in the amount of ca. 95% of the monthly salaries. See http://oppau.info/2016/02/276-millionen-fuer-erfolgsbeteiligung-fuer-das-jahr-2015-bei-basf-se/.
147.
Internet-edition of ‘Der Spiegel’, a German weekly; see http://www.spiegel.de/wirtschaft/unternehmen/volkswagen-tarifbeschaeftigte-bekommen-3950-euro-anerkennungspraemie-a-1092360.html.
148.
http://www.schwaebische.de.region_artikel,-ZF-Mitarbeiter-erhalten-1315-Euro-Erfolgsbeteiligung-_arid,5626931_toid,310.htm.
149.
See http://www.finanzen.net/nachricht/aktien/.Continental-Beschaeftigte-bekommen-hoehere-erfolgsbeteiligung-4775452.
150.
See infra Sect. 6.8.2.
151.
See Sandrock (2015), pp. 129 and 134–135.
152.
See infra Sect. 6.8.2.
153.
The large German steel producer Thyssen-Krupp Steel Europe may serve as an example. In view of the fall in demand of steel since 2012, its management and its employees of that company agreed in September 2013 to shorten working hours coupled with corresponding decreases in wages and reductions in staff (see Frankfurter Allgemeine Zeitung, a nation-wide daily newspaper, of 20 Sept 2013, p. 18).
154.
See Sandrock (2015), pp. 129 and 133–134.
155.
See the following reports in the British weekly The Economist, ‘Saving Detroit / Iron Orr’, issue of June 22nd, 2013, p. 38; ‘Should Detroit sell its art? / Mototown steps on Degas’, The Economist issue of July 6th, 2013, p. 39; and ‘Detroit’s bankruptcy / Can Mototown be mended?’, The Economist issue of July 27, 2013, pp. 32/33.
156.
See ‘Retirements benefits / Who pays the bill?’, The Economist, issue of 27th July 2013, pp. 33–35; ‘Those pension blues’, The Economist of 7th December 2013, pp. 43–44,
157.
See Sandrock (2015), pp. 129 and 135–136.
158.
By President Hollande, for example, but also by the leading circles of the EU.
159.
See, e. g., ‘Germany’s economy / Modell Deutschland über alles / The lessons the rest of the world should – and should not – take from Germany’, The Economist, issue of April 14th, 2013, pp. 15/16 and ‘What Germany offers the world’, same issue, pp. 26–28.
160.
See Sandrock (2015), pp. 129 and 136–137.
161.
A statistic was established by the German Institut der Deutschen Wirtschaft which relies on the numbers ascertained by the ILO and the OECD during the years 2000–2008. In each of those years, the following numbers of days were lost by strikes or lock-outs (per one thousand of employees): Spain 164, France 102, Italy 88, Finland 73, USA 30, Great Britain 30, Sweden 22, New Zealand 14, Portugal 14, Poland 6, Germany 5, Switzerland 4, Japan 0 (see de.statistika.com/statistic/…/anzahl-der-von-streiks-betroffenen-Betriebe-in-Deutschland).
162.
With respect to the strikes affecting the German railways (Deutsche Bahn A.G., organized as a public limited company whose shares are held by the German Federal Republic) see the series of articles in http://www.spiegel.de/thema/bahn_streik/. With respect to the strikes affecting the German air carrier Lufthansa (also organized as a public limited company; a part of its shares are held by the German Federal Republic), see http://www.spiegel.de/thema/lufthansa_streik/.
163.
The German Trade Union Alliance (Deutscher Gewerkschaftsbund) counted about 11 million members in 1990; about 8 million members in 1999; about 7.7 million members in 2002; about 6.1 million members in 2012. See the statistic mentioned in fn. 23 de.statistika.com/statistic/…/anzahl-der-von-streiks-betroffenen-Betriebe-in-Deutschland and the statistic established by the German Trade Union Alliance http:www.dgb.de/uber-uns/dgb-heute/mitgliederzahlen/1950-1993. In 2015, the number of members of the German Trade Union Alliance (Deutscher Gewerkschaftsbund) stabilized on the level of 2012 (6,095,513 members) (see the 2015 numbers in the chart http://www.dgd.uber-uns/dgb-heute/mitgliederzahlen/2010).
164.
For the following, see the list of them set up by Sandrock (2015), pp. 129 and 135–147.
165.
See Sandrock (2003), pp. 447 and 490–493 who has tried to establish a comprehensive list of those shortcomings. See also the enumeration of such shortcomings by Schiessl (2003), pp. 235 and 240 et seq. See further the differentiating comments of a number of authors and participants in a discussion published in Picot (1995).
166.
See S 111(1) AktG.
167.
This conclusion follows inevitably if the many critical comments over the activities of codetermined supervisory boards are taken together—see Kübler (1999), pp. 237 et seq.; Sandrock (2002), 1601, 1602 right col. Also von Werder (2004), pp. 166 and 171.
168.
See the in-depth examination of that aspect by Raabe (2010), pp. 147 et seq. as well as von Werder (2004), pp. 166 and 170; Schilling (2001), p. 25; Bernhardt (1995), pp. 310 and 316 et seq.; Schilling (2007), p. 24. Also see Gerum (2007), p. 206.
169.
Schilling (2001), p. 25.
170.
See also the critique by Ruhwedel and Epstein (2003), pp. 161 et seq.
171.
See Hopt (2000), pp. 779 and 801.
172.
See the critique by the reknowned Belgian entrepreneur Leysen (2003); Roth (2003), p. 13.
173.
See the in-depth examination of that aspect by von Werder (2004), pp. 166, 167 right col, 170.
174.
As to an opposite example, where an employee representative criticised the amount of a termination payment, see Raabe (2010), p. 257.
175.
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.
176.
See Sect. 5.5.4.
177.
Bundesgesetzblatt (BGBl. 2009 I at 2509) (Official Journal of the Federal Republic of Germany, 2009, Part I at 2509).
178.
The VorstAG seeks to achieve that end mainly by prescribing, first, that the supervisory board must decide on all payments, without exemption, in plenary session; second, that, in 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 Sects. 2.5, 3.2.2, 3.3.2.5 and 4.6.2.
179.
It has been contended, for example, that it 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 Teichmann C (2009) at 10). That contention has however been rejected by Hellwig and Behne (2009), p. 871.
180.
See Schwark (2004), pp. 173–174.
181.
A spectacular example of such conflict came about when Frank Bsirske, chairman of the powerful Trade Union VERDI (Vereinigte Dienstleistungen) that collectively 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 Bender (2003), p. 17; Geinitz (2003), p. 13.
182.
See Triebel (2003).
183.
As an example see Oberlandesgericht (Court of Appeals) Stuttgart, 1995 IPRax 397 with annotation by Kronke (2007), pp. 377 et seq.
184.
This term leads back to Janis (1972). See also McCauley (1989), pp. 250–260.
185.
As far as could be established, the idea of “groupthink” was first applied to the work of the German supervisory board by Wazka (2009), p. 17.
186.
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 Raabe (2010), pp. 191 et seq.
187.
Cf Bohl (2003), p. 14 as well as Großfeld (2003), pp. 841 and 843 et seq. with references notably to US sources.
188.
But see ‘Concluding remarks’ in Sect. 6.9.
189.
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, Sorkin (2006), Dougherty (2006), Benoit (2007a, b), and Gow (2008).
190.
See, among many others, Adams (1990), pp. 243 and 250; Röhrich (1993), pp. 93 and 95 with further references; Michalski (1997), pp. 152, 156 (left col); Becker (2001), p. 280.
191.
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 Kort (2003), section 76, para 95.
192.
See infra Sect. 5.5.
193.
See supra Sect. 5.4.1, no. 6.
194.
Decision of 16th February 2015, docket no. 3/16 O 1/14, published in ZIP 2015, 634–636 and AG 2015, 371–372.
195.
There are now attempts of the German Stock Exchange seated in Frankfurt am Main and the London stock Exchange to merge under the roof of a common holding to be seated in London.
196.
It is true that the decision also refers to Art. 18 TFEU (see that decision under no. 15 in fine) but without basing its ruling upon that Article.
197.
That decision has indeed been criticized in annotations by Hans-Jürgen Hellwig / Caspar Behne in: AG 2015, 33-342, by Rüdiger Krause, in ZIP 2015, 636–637 and by André Zimmermann in BB 2015, 1792.
198.
Departing from the denomination customary for German Courts of Appeal (Oberlandesgerichte, OLGs), the Court of Appeals of Berlin is called Kammergericht (KG). This has historical reasons.
199.
Published in RIW 2015, 845–847, and ZIP 2015, 2172–2174.
200.
TUI is said to be the largest German travel operator with “First Choice Holidays” as its English subsidiary.
201.
There is no indication of the date at which these numbers were given.
202.
Claimant’s name is Konrad Erzberger. He is a young entrepreneur from Berlin reputed for his endeavours to involve traditional German companies into trouble.
203.
Claimant had argued rather unpersuasively (see no. 3 of the decision) that an employee might be motivated to refuse a change of his/her job in Germany for a job in other countries of the EU since such change would result in the loss of his/her right to elect a delegate to the supervisory board or to be himself/herself elected into such position.
204.
Pursuant to that Article, the ECJ has jurisdiction to give preliminary rulings concerning the interpretation of the European Treaties. Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may request the Court to give a ruling thereon, if it considers a decision on that question to be necessary for rendering a judgment.
205.
See ECJ C-566/15.
206.
See the different opinions brought forward in a workshop about which the Frankfurter Allgemeine Zeitung (FAZ) (a German national daily) reports in its issue of 9th March 2016, p. 16.
207.
The authors rejecting the extraterritorial application of the German codetermination Acts, refer not only to the legislative history of the Codetermination Act of 1976 (MitbestG) which expressly reveals that, in 1976, the legislature had agreed on a purely territorial application of that Act. They also point out that the Act does not provide a substructure for its extraterritorial application (by setting up, for example, voting procedures for the election of foreign employees etc.). Finally, the supporters of that opinion argue that companies desiring to confer voting rights on their foreign employees, might easily incorporate as a SE (Societas Europaea)—a juristic person which would easily permit the introduction of such kind of extraterritorial codetermination. See also the authors cited in fn. 180. For further details see FAZ in fn. 207.
208.
See the rather early critique by Windbichler and Bachmann (2000), pp. 797 et seq.
209.
Ulmer (2002a), pp. 271–272. See also Ulmer (2002b), pp. 150 and 180–181.
210.
Veit and Wichert (2004), pp. 14 and 17–18 with critical analyses of codetermination by leading commentators; and Sandrock (2004), pp. 57 et seq. See also Saenger (2005), pp. 161–168.
211.
Thus, they will only be referred to briefly below under Sect. 5.5.4.
212.
See below under Sect. 5.5.5.
213.
See supra Sect. 5.2.3.
214.
The election regulation for example, issued under sect. 39 of the Mitbestimmungsgesetz, consists of three sets of regulations contained in more than 200 pages. See du Plessis and Sandrock (2005), p. 67 (at p. 79 with further references).
215.
See supra Sect. 5.2.3.7.
216.
See Ss 4(3), 13(1) Montan-MitbestG (1951); Ss 26, 33(1) MitbestG 1976; S 9 One-Third Participation Act 2004.
217.
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.
218.
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.
219.
Hans Böckler-Stiftung, named after a famous chairman of the German Trade Unions, in office immediately after the second world war.
220.
The so-called ‘Eigenbehalt’.
221.
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.
222.
See O. Sandrock / J. du Plessis in German Corporate Governance, Chapter 5 (fn. 1) pp. 173–175.
223.
See supra Sect. 4.6.1.
224.
See supra Sect. 5.2.3.3.
225.
As a rule, one member of such committee was an employee representatives.
226.
The new rule was introduced by the Gesetz zur Angemessenheit der Vostandsvergütung (VorstAG) of 31 July 2009 (BGBl. 2009 I 2509).
227.
These legislatory initiatives were a response to the so-called Abzocker-Iitiative by which the Swiss Parliament sought to curb the extraordinary growth of the salaries and bonuses of the members of administration of large Swiss companies. See the keyword Abzocker-Initiative in Wikipedia.
228.
Gesetz zur Verbesserung der Kontrolle der Vorstandsvergütung und zur Änderung weiterer aktienrechtlichen Vorschriften (VorstKoG), Bundestags-Drucksache (Official Materials of the German Bundestag) 17/8989 of 26 June 2013). See Verse (2013), pp. 921 et seq.; Hommelhoff (2013), p. 19.
229.
At present already, the supervisory board of companies listed at a stock exchange may submit its resolution on the salaries and bonuses to a vote by the shareholders’ meeting, though on a purely voluntary basis, or if a minority of shareholders motions for it. Under the new bill (which now failed), however, the submission to a vote of the shareholders would be mandatory. Further, the information on the salaries and bonuses would have to be specific (with respect to each director; eventual maximum amount of bonuses; etc.).
230.
Comprising the representatives of the 16 Federal States of the Republic of Germany.
231.
On 20 Sept 2013, 2 days before the general elections to the Lower House. See Verse (2013), p. 921; Frankfurter Allgemeine Zeitung, a nation-wide daily newspaper, of 21 Sept 2013, p. 12.
232.
That is a rather unspecific agreement which emphasizes that solutions should be sought with the representatives of the economy leaving unclear, however, whether “sustainable action(s)” (“nachhaltiges Handeln”) should be sought for companies or for the economy as a whole.
233.
See O. Sandrock and J. du Plessis, ‘The German system of Supervisory Codetermination by Employees’, in J. du Plessis et al. (fn. 1) at pp. 173 et seq.
234.
It was, above all, Ferdinand Piech the then chairman of the Volkswagen’s management board, who attained such mastership; see O. Sandrock / J. du Plessis, ‘The German system of Supervisory Codetermination by Employees’, in du Plessis et al. (fn. 1) at p. 179.
235.
Raabe (2010), pp. 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.
236.
See Sandrock (2006), p. 122.
237.
Die Welt (German nationwide daily newspaper) 28 July 2005, 17.
238.
Ferdinand Piëch. From 1993 to 2002, he served as its CEO, and from 2002 to April 2015 as chairman on its supervisory board. Since then, Ferdinand Piëch has resigned from all offices within the Volkswagen AG. In 2007, the Volkswagen AG became a subsidiary of the Porsche Automobil Holding SE seated in Stuttgart. Also within the Porsche SE, Ferdinand Piëch no longer holds an office on any of its boards, including the boards of its subsidiaries.
239.
‘Germany’s ‘cowboy capitalism’ Wall Street Journal 9 Aug 2005, A8.
240.
See infra Sects. 5.5.3 and 5.5.4.
241.
‘Together they stand’, The Economist, 16 July 2005, 14.
242.
Expression used by Schiessl (2003), p. 237.
243.
Expression used by Baums (2003).
244.
See, in particular, Ulmer (2002a), p. 272; and Hopt (2002), pp. 42–46 and 66–67. The need for a basic reform has also been stressed by Junker (2005), pp. 1–44 (expert opinion prepared for the German Federal Association of Employers).
245.
That silence seems to be due also to the fact that, during its 18th legislative period (running from October 2013 to October 2017), the German federal parliament has brought about a “big” coalition between Christian Democrats and Social Democrats. These parties hold an aggregate number of about 80% of the parliamentary votes. In their coalition agreement (https://cdu.de/sites/defaultU//files/media/dokumente/koalitionsvertrag.pdf see ibid. sub no. 2) the coalition partners did not expressly mention the issue of codetermination. Should, however, any change of that “hot topic” have been intended, it would have been included into the coalition agreement. From the silence of the coalition agreement, it follows that the German federal legislature will not address the issue of codetermination as long as that coalition will continue to exist.
246.
In 2013, however, the delegates of the shareholders and those of the employees sitting on the supervisory board of the Commerzbank A.G. (the second largest German bank) quarreled about whether to dismiss two members of the board of directors. The delegates of the shareholders wanted to terminate their contracts for cause with instant effect. The delegates of the employees refused to agree; obviously, for the reason that such dismissal would trigger a lay-off of further employees whose numbers had already been considerably reduced during the financial crisis of the years following 2008. At that time, the crisis had affected the Commerzbank to such a degree that it had to be saved by the German Federal Republic which then acquired about 25% of its share capital. The said disagreement, on the board of supervisors, between the delegates of the shareholders and those of the employees, was overcome by the casting vote of the chairman. But the dismissal of one of the two members of the board of directors who was responsible for the labour affairs, lead to some spectacular legal proceedings before German courts as a result of which the Commerzbank had to fully compensate the two directors. See the general report in Frankfurter Allgemeine Zeitung, a German national daily, of 15 October 2013, p. 15. (As to the dismissal of the director responsible for labour affairs see judgment of District Court of Frankfurt of 22nd April 2014, docket no. 3-05 O 8/14, https://openjur.de/u/687035.html and judgment of the Court of Appeals of Frankfurt of 17th February 2015, docket no. 5 U 111/14, https://openjur.de/u/761852.html). The Commerzbank finally agreed to compensate its former “labour” director in full, see FOCUS Online, http://www.focus.de/finanzen/news/wirtschaftsticker/unternehmen-commerzbank-lenkt-im-streit-im-ex-personalvorstand-sieber-ein_id_4878986.html. The other dismissed director left the Commerzbank voluntarily already in 2013 by accepting a job as director on the board of another company without however waving his rights of compensation (see online edition of Handelsblatt of 4th November 2013). It can be assumed that he also was compensated in full.
247.
See Sect. 6.9.
248.
This part is also based on the paper delivered by Otto Sandrock in Taipeh in March 2006 (Sandrock 2006, p. 122).
249.
The case has been described in greater detail in the 1st edition of this book—see du Plessis et al. (2007), pp. 131–133.
250.
At that time, it was 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 fell within the competence of these committees. Usually an employee representative is a member of such committees. In 2013, that state of law has been changed by the Gesetz zur Verbesserung der Kontrolle der Vorstandsvergütung und zur Änderung weiterer aktienrechtlicher Vorschriften (VorstKoG), see supra Sect. 5.5.2, fn. 230.
251.
See FAZ 20 Sept 2003, 11; 22 Sept 2003, 11; 25 Sept 2003, 18; 6 March 2004, 13. Cf also Dunsch (2003a), p. 11; Ulmer (2002a), p. 276; also Dunsch (2003b), p. 13; ‘Der Telekom-Vorstand gibt Ron Sommer Rückendeckung’ FAZ 12 July 2002; ‘Showdown im Aufsichtsrat’ FAZ 16 July 2002.
252.
See FAZ 20 Sept 2003, 11; 22 Sept 2003, 11; 25 Sept 2003, 18; 6 March 2004, 13). Cf also Dunsch (2003a), 5 May 2003; Ulmer (2002a), p. 276;
253.
See Ulmer (2002a), p. 276.
254.
See FAZ 25 Nov 2006, 1, 13, 17.
255.
See FAZ 30 Nov 2006, 13 and 20; 4 Dec 2006, 4. See also Steltzner (2006), p. 1.
256.
The case has been described in greater detail in the 1st edition of this book—see du Plessis et al. (2007), pp. 133–137.
257.
Further details about this relationship between the federal State of Lower Saxony, the supervisory board of VW and its board of management will be described below in this Section under 5.5.5.3.
258.
As to the interrelationship between the State of Lower Saxony and Volkswagen see ‘Dark days for Volkswagen’ The Economist 16 July 2005, 55; Thielbeer (2005), p. 3; Ritter (2005), p. 11; Germis (2005), p. 17; Ritter and Peitsmeier (2005), p. 20.
259.
See FAZ 16 July 2005, 16; and 17 July 2005, 17.
260.
See supra Sect. 5.2.3.5.
261.
It was Peter Hartz, whose name is connected with important federal legislation, who reformed the German labour markets and who, at that time, was well known in the German public. Peter Hartz was the socalled ‘Arbeitsdirektor’ of the Volkswagen AG.
262.
For a comprehensive report of these different incidents see Peitsmeier and Ritter (2007), p. 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.
263.
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.
264.
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.
265.
See Rüthers (2005), p. 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.
266.
See Seitz (2005); Rieble (2005), p. 21. See further FAZ 26 July 2005, 11; 22 July 2005, 13; 10 Aug 2005, 10; 20 Aug 2005, 11.
267.
See FAZ 17 Aug 2005, 21; 20 Aug 2005, 11; and 10 Oct 2005, 16.
268.
That covenant was heavily criticized in public; see, for example, FAZ 27 Nov 2006, 11.
269.
This judgment 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 judgment failed in 2009 (FAZ 18 Sep 2009, 17).
270.
Hein (2005), p. 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.
271.
He is a grandson of the legendary designer of the Volkswagen ‘beetle’, 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.
272.
See FAZ 9 Jan 2007, 9.
273.
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.
274.
See FAZ 16 Nov 2006, 1 and 11; 17 Nov 2006, 16.
275.
See FAZ 9 Nov 2006, 16; 17 Nov 2006, 16. See also Ritter (2007), p. 11.
276.
As was seen in Chap. 1 (Sect. 1.3) ‘SE’ is the European Company (Societas Europaea) formed under EU law (see Sect. 6.6.1 below). Initially Porsche was organized as a German public limited company (Aktiengesellschaft (AG)). After the EU Regulation for the Establishment 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, in 2007, transformed into an SE.
277.
The German statutory rules for codetermination have no effect on SEs seated in Germany. Instead, other rules for codetermination in these European companies have been set up (see Chap. 6 below, Sect. 6.6.1.4). As to the battle waged in 2008, on the employees’ representative participation on the Porsche SE’s supervisory board see Fritz (2008), p. 2.
278.
See FAZ 29 Nov 2007, 17. For the fiscal 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 bonuses.
279.
See FAZ 27 Feb 2008, 18; 4 Mar 2008, 1, 19, 22; 11 Apr 2008, 21; 22 Apr 2008, 14.
280.
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.
281.
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. The VW AG paid a purchase price of € 3.9 billion (see FAZ of March 15th, 2012, p. 18). In the beginning of 2011, the VW AG also bought up the Austrian Porsche Holding GmbH, an Austrian company with limited liability (Gesellschaft mit beschränkter Haftung) which is the huge automobile dealer that until then had been jointly owned by the families Porsche and Ferdinand Piëch (see FAZ 28 Jan 2011, 16).
282.
Through other holding companies, the shares of the Porsche Holding SE are in the possession of the families Porsche and Piëch, of the Golf Emirate Qatar and further shareholders.
283.
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 allotted 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.
284.
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).
285.
See the VW Gesetz 1960 in its amendment of 21 July 1960.
286.
The power of appointment was fixed in S 4(1) of the VW Gesetz.
287.
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 Sect. 6.6.1.
288.
See its judgment 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.
289.
Of 30 July 2009 (BGBl. 2009 I 2478).
290.
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 the 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.’
291.
See its judgment 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.
292.
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).
293.
See Art 23, 1st sentence of the VW articles of incorporation.
294.
S 4 para. 1 of the VW Gesetz of 1960 provided (as translated into English): “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.”
295.
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.
296.
As to an in-depth commentary on that decision see Zumbansen and Saam (2007), pp. 1027 et seq.
297.
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 represented at such time.’
298.
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.
299.
See Spiegel-online (Spiegel is a German weekly) of 15 April 2009.
300.
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.
301.
See S 4 para 1 of that statute.
302.
S 15 para 4 of the articles of incorporation in its present (March 2011) version provides (as translated into English): ‘Resolutions concerning the establishment and relocation of production facilities shall require a majority of two thirds of the Members of the Supervisory Board.’
303.
See Art 9 para. 1 of the articles of incorporation in its present (March 2011) version.
304.
See FAZ of 24th November 2011, p. 15 (‘EU-Kommission greift VW-Gesetz abermals an’).
305.
See Judgment of the ECJ of 22nd October 2013, Rs. C-95/12. See also FAZ of 23rd October 2013, p. 9 and Teichmann (2013c).
306.
In May 2012, for example, the chairman of the Volkswagen’s Works Council, Bernd Osterloh, demanded to reduce the bonuses of the chairman of the Volkswagen’s board of directors, Martin Winterkorn. According to Bernd Osterloh, those bonuses would increase to about € 20 million in 2012. But, obviously, his demand was not successful; see Frankfurter Allgemeine Zeitung (a nation-wide daily) of 25th May 2012, p. 18.
307.
See FAZ of 11th March 2013, p. 21 (‘Betriebsrat und Politik verteidigen das VW-Gesetz’).
308.
See FAZ of 27th August 2014, p. 22,
309.
See supra Sect. 5.5.5.1 nos. 3, 4.
310.
See Financial Report (Geschäftsbericht) of the Porsche SE for 2007/2008, p. 35.
311.
Already during 2007, the Porsche SE had acquired a portion of 30% of the voting shares of the VW AG. That acquisition triggered its duty to present to the outstanding shareholders an offer (Pflichtangebot) to buy up the remainder of their voting shares. In April 2007, the Porsche SE complied with that duty while adding the comment that its portion of 30% of voting stock would be sufficient to fend off third parties’ (in particular hedgefunds’ eventual) attempts to take over the Volkswagen AG (see ManagerMagazin Online of 26th March 2007; Porsche legt Pflichtangebot vor; in: FAZ.net of 28th March 2007).
312.
See http://www.porsche-se.com/pho/de/press/newsarchiv2008/?pool=pho&id=2008-10-268&lang=de.
313.
The German criminal court in Stuttgart had appointed a stock exchange expert to explain these capers transpiring at the stock exchanges. But in a cross-examination, that expert had to admit that the traditional theories of stock exchange processes were not able to explain these surprising events. See FAZ of 7 November 2015, p. 26.
314.
See the exhaustive chart in FAZ of 23rd October 2015, p. 23.
315.
See http://www.porsche-se.com/pho/de/press/newsarchiv2008/?pool=pho&id=2008-10-268&lang=de.
316.
For details see the exhaustive chart in FAZ of 23rd October 2015, p. 23.
317.
According to the FAZ of 11th February 2014, p. 13, two dozen hedge-funds had introduced claims against the Porsche SE.
318.
As to the proceedings before the ECJ, see above Sect. 5.5.5.1.
319.
See the detailed, elaborate report on all these events in FAZ of 6th July 2012, p. 14 (‘Verschmolzen und vor Gericht’), ibid., Carsten Knop, pp. 15 and 18 (Porsche-Kauf beschert VW Rekordgewinn; Carsten Knop, FAZ of 10th February 2016, p. 15 (‘Kein Vertrauen in die Porsches und Piëchs’).
320.
See FAZ of 12th May 2012, p. 15; of 15th October 2014, p. 22; of 7th May 2015, p. 26 (‘Einem Richter platzt der Kragen’). The court of first instance, however, dismissed some of these claims (see FAZ of 18th March 2014, p. 18; but see also FAZ of 2nd May 2014, p. 18). The Court of Appeals also dismissed such a claim (see FAZ of 27th March 2015, p. 23).
321.
The District Court in Hannover before which several of these actions had been introduced, has bunched them together in a kind of mass action (see FAZ of 14th April 2016, p. 18).
322.
Criminal proceedings were initiated on some accounts in March 2012 (see FAZ of 7th March, 2012, p. 9). Later, they were extended to the manipulation of stock exchange prices; see FAZ of 20th December 2012, pp. 11 and 16 (‘Der mit der Börse tanzte’). Further, these proceedings were extended to Ferdinand Piëch (see FAZ of 13th February 2013, pp. 9 and 14; of 14th December 2013, p. 22, and of 3rd December 2014, p. 22 (‘Staatsanwälte treiben Verfahren gegen Piëch voran’)), before they were finally stayed in August 2015 (see FAZ of 24th August 2015, p. 20). See also FAZ of 27th August 2014, p. 22 (‘Wiedeking muß wegen Kurskapriolen doch vor Gericht’).
323.
See Preuß (2016a), p. 19; FAZ of 10th March 2016, p. 23; FAZ of 15th March 2016, p. 21.
324.
See Preuß (2016b), p. 26.
325.
For a concise report in English language on these issues (as of the beginning of March 2016) see The Economist of March 5th, 2016, pp. 53 and 54 (‘Volkswagen (Emission impossible’).
326.
The discovery was made in California by an assistant professor (see von Petersdorff 2015, p. 28). California has set particularly high emission standards.
327.
For a comprehensive survey over the events, see the German national daily specified on economics and business Handelsblatt of 22nd September 2015, pp. 1–7 (under the general title of ‘Schmutzige Geschäfte’) with a series of individual articles on the events in the US and in Germany; Appel (2015), p. 17; Germis (2015), p. 26; Germis (2016a), p. 22.
328.
See Bubrowski (2016), p. 8. According to FAZ of 16th March 2016, p. 22, German investors had introduced 70 claims for compensation before the District Court of Braunschweig, which is the “home court” at the seat of the Volkswagen AG in Wolfsburg.
329.
Instantly the American Environmental Protection Agency started investigations on a violation of the US Clean Air Act (see Carsten Germis in: FAZ of 4th January 2016, p. 22; and Helene Bubrowski in FAZ of 6th January 2016, p. 8; Gerhard Wagner, in: FAZ of 13th January 2016, p. 16 (‘Don’t mess with Uncle Sam!’); FAZ of 10th March 2016, p. 21.
330.
See FAZ of 24th September 2015, p. 1 (‘VW-Chef Winterkorn tritt zurück’); FAZ of 25th September 2015, p. 19; Holger Appel in: FAZ of 26th September 2015 (‘Volkswagen, das Chaos’) and FAZ of 11th December 2015, p. 17.
331.
See FAZ of 21st November 2015, p. 21.
332.
The former chairman of Volkswagen’s supervisory board was Ferdinand Piëch) had resigned from that office on 25th April 2015; see Hanke and Meck (2015) (http://www.faz.net/aktuell/wirtschaft/unternehmen/im-portrait-ferdinend-piech-das-abrupte-ende-einer-patriarchenkarriere-13559619.html and The Economist of 2nd May 2015, p. 58)
333.
See Creutzburg and Germis (2015), p. 28.
334.
See FAZ of 26th January 2016, p. 24 and FAZ of 9th March 2016, p. 26.
335.
See FAZ of 17th March 2016, p. 29.
336.
See FAZ of 25th November 2015, p. 15.
337.
See The Economist of 5th March 2016, p. 53.
338.
See FAZ of 11th April 2016, p. 23.
339.
See FAZ of 11th April 2016, p. 23; FAZ of 8th April 2016, p. 22.
340.
See FAZ of 4th September 2015, p. 20.
341.
See Knop (2016), p. 28; Germis (2016b), p. 1; Astheimer (2016), p. C2. Above all, the trade unions asked the members of the board of directors to voluntarily waive their claims for bonuses (see FAZ of 20th April 2016, p. 20).
342.
See supra Sect. 5.5.3.1.
343.
See FAZ of 11th April 2016, p. 17.
344.
Internet-edition of ‘Der Spiegel’, a German weekly; see http://www.spiegel.de/wirtschaft/unternehmen/volkswagen-tarifbeschaeftigte-bekommen-3950-euro-anerkennungspraemie-a-1092360.html.
345.
See the list of extra payments to employees supra Sect. 5.3.3.1.
346.
See FAZ of 14th April 2016, p. 22; FAZ of 13th April 2016, p. 18; FAZ of 15th April 2016, p. 21.
347.
FAZ of 13th April, p. 18; FAZ of 16th April 2016, p. 19.
348.
FAZ of 9th May 2016, pp. 1 and 15; FAZ of 10th May 2016, pp. 22 and 23; FAZ of 11th May 2016, p. 19; FAZ of 12th May 2016, p. 20.
349.
See FAZ of 11th May 2016, p. 19. The TCI is known for its influence on institutional investors who often follow his recommendations. See FAZ of 10th May 2016, pp. 22 and 23.
350.
It is true that TCI only possesses around 2% of the non-voting shares. Other key investors are the German Federal State Lower Saxony (disposing of 20% of the voting shares) and the Emirate of Qatar (disposing of 17% of the voting shares). But 52.2% of the voting shares lie in the hands of the families Piëch and Porsche. TCI and its eventual allies would therefore be in a minority position at the shareholders’ assembly. See FAZ of 10th May 2016, pp. 22 and 23.
351.
Lutter (2016), p. 16.
352.
See https://www.justice.gov/dag/file/769036/download.
353.
Sally Q. Yates, US Assistant Attorney General at the US Department of Justice.
354.
For a thorough analysis of the Yates Memorandum and its impact on German enterprises, see the in-depth study by Luttermann (2016), p. 1059.
355.
The Memorandum describes its policy changes as follows (ibid., p. 2): ‘policy changes of (l) in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) criminal and civil attorneys handling corporate investigations should be in routine communication with one another; (4) absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (5) Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (6) civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.’
356.
See FAZ of 13th May 2016, p. 17. The original German version of this passage reads: ‘Selbstbereicherung und Selbstentlastung: Ist das der vielbeschworene neue Geist bei Volkswagen?’.
357.
See FAZ of 2nd May 2016, p. 20. The original German version of his commentary reads: ‘Ich habe kein Verständnis dafür, wenn man ein großes DAX-Unternehmen erst in eine existenzbedrohende Krise führt und dann in einer öffentlichen Debatte die eigenen Boni verteidigt. Das zeigt, dass etwas nicht funktioniert’.
358.
See supra Sect. 5.1.
359.
See Frankfurter Allgemeine Zeitung (nation-wide daily newspaper) of 12 Jan 2013, p. 15 (‘IG-Metall-Vorstand will sich aus Thyssen-Krupp-Aufsichtsrat zurückziehen’); Handelsblatt (nation-wide German economic newspaper), internet edition of 11 January 2013 (Thyssen-Krupp lud Betriebsräte zu Luxusreisen’).
360.
For further details see below Sect. 5.5.8.1 as well as Chap. 6, Sect. 6.6.1.
361.
It was the Dutch lawyer Pieter Sanders who first propagated that idea. See Sandrock (2012), pp. 259–272.
362.
See the Regulation of October 2001 for the Establishment of the European Company (SE) (SE Regulation), Council Regulation (EC) 2157/2001 on the Statute of a European Company (SE), 8 Oct 2001 Official Journal of the European Union J 294/1.
363.
Official Journal of the European Union no. 294 of 10 Nov. 2001, 22–33.
364.
See Jahn (2013), p. 9 as well as ‘Axel Springer Verlag will sich in eine Europa-AG umwandeln’, Frankfurter Allgemeine Zeitung of 9 Jan 2013, in its economic section (Wirtschaftsteil). See also Binz (2011), p. 2.
365.
See http://ecdb.worker-participation.en/show_factsheets.php?letter=A&status_id=38&title=Established%20SEs.Facts&Figures,workers-participation.eu.
366.
See Bayer and Schmidt (2015), p. 1731.
367.
See Teichmann (2013a); Teichmann (2013b); and Anonymous (2011).
368.
See below in Chap. 6, Sect. 6.6.1.4.
369.
There is no general responsibility of the German parent companies for the debts of its subsidiaries; separate accounting of subsidiaries gives more insight into their profitability; appearance of subsidiaries as local entities facilitates the conduct of the subsidiaries’ business with local authorities and other local firms; etc.
370.
European Parliament, Report with Recommendation to the Commission of the European private company statute of 29 November 2006, 2006/2013 (INI).
371.
COM (2008) 396/3.
372.
For further details see Sandrock and du Plessis (2012), pp. 245–247.
373.
See the critique, inter alia, by Hommelhoff and Teichmann (2011a), p. 23; Hommelhoff and Teichmann (2011b), p. 23; Teichmann (2013).
374.
See para. 1 of the bulky Art. 352 TFEU reading: “If action by the Union should prove necessary, within the framework of the policies of the Treaties, to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers, the Council, voting unanimously on a proposal from the Commission obtaining the consent of the European Parliament, shall adopt the appropriate measures. Where the measures in question are adopted by the Council in accordance with a special legislative procedure, it shall also act unanimously on a proposal from the Commission and after obtaining the consent of the European Parliament.”
375.
See Art. 294 para. 13 TFEU.
376.
COM(2014) 212 final or 2014/0120 (COD).
377.
For details see the extensive description by Kindler (2015), pp. 330–384, who illustrates also how a proposal by the Italian Government tries to even out some weaknesses of the Proposal.
378.
See Art. 7 para. 3 of the Proposal.
379.
See Art. 9 of the Proposal.
380.
See Art. 10 of the Proposal.
381.
See Art. 15 para. 1 of the Proposal.
382.
See Art. 16 para. 1 of the Proposal.
383.
Gerum (2007), p. 48.
384.
Ibid., p. 49.
385.
See Hank (2006), p. 18.
386.
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 Raabe (2010), pp. 55–58.
387.
See FAZ 15 Nov 2006, 14. See also Gerum (2007), p. 48.
388.
See FAZ 21 Dec 2006, 11.
389.
See also the Editorial by Bernhardt (2006), first page (unnumbered) and his comments, BB- Forum: Unternehmensmitbestimmung nach Biedenkopf’, (2007) BB 381 et seq.
390.
The reporter was Thomas Raiser, a law professor at the Humboldt University in Berlin.
391.
The paper comprises 116 pages and is published in Juristentag (2006), pp. B1–B116.
392.
For further details see below Sects. 6.6.1.4, 6.6.1.7 and 6.6.1.9 as well as 6.7 and 6.7.2.
393.
See the brochure edited by the 66th German Lawyers Forum Stuttgart 19–22 Sept 2006, at 6 as well as FAZ of 22nd September 2006, p. 6.
394.
See Arbeitskreis (2009), pp. 885–899; FAZ of 11th May 2009, p. 11.
395.
For details, see Sects. 6.6.1.4 and 6.6.1.2.
396.
Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen Gesellschaft—SE- Beteiligungsgesetz (SEBG). See Chap. 6, Sect. 6.6.1.1 and ibid. fn. 170.
397.
See below Sect. 6.6.1.9.
398.
See Habersack (2009), pp. 1–5.
399.
As to the following, see the new development described above Sect. 5.4.2.
400.
See Teichmann (2009), pp. 10–17. See also Hanau (2009), pp. 6–9.
401.
See Hellwig and Behne (2010), pp. 871–874.

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Jean J. du Plessis

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Sandrock, O., du Plessis, J.J. (2017). The German System of Supervisory Codetermination by Employees. In: German Corporate Governance in International and European Context. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-54198-2_5

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DOI: https://doi.org/10.1007/978-3-662-54198-2_5
Published: 26 September 2017
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