EMERGING

EMERGING MARKETS:
A Review of Business and Legal Issues
The German model of corporate governance
Although German economy is one of the most important in the world, its corporate
governance, which has been developing at least since the industrial revolution, was analysed
relatively late. 1
The classic German model of management and corporate governance
(ordnungsgemäße Unternehmensführung) and its environment consists of, inter alia,
perceiving the enterprise as a social institution, supervisory board separate from the Board of
Directors, significant participation in the supervisory board of employee representatives (from
33% to 50% of its composition) and bank representatives, large blocks of shares and family
ownership in listed companies, large impact of banks on the management of the company by
means of crediting, trusteeship of voices and/or ownership of blocks of company shares,
intersecting capital and personal links between companies and political establishment (the socalled
Deutschland AG symptom), as well as relatively low capitalisation of the stock
exchange (as compared to the GDP), lesser role of investment funds and of the acquistions
market. 2 The case of Siemens illustrates the German model but also provides a lot of evidence
confirming the evolution of the German corporate system. 3 Although the founder’s family
remains the largest shareholder, it is not the shareholders that decided about the events which
took place in the last year, but a group of managers who are members of the supervisory
board. Although the representatives of employees and trade unions still dominate the
supervisory board, the dispersed structure of Siemens shareholders, with a large share of
institutional investors, already reminds of the companies of the American model, though the
percentage of shares represented at the general shareholders’ meeting is much higher than in
the US.
1 Inter alia Prowse S.:Corporate Governance In an International Perspektive. BIS Economic Papers No.41,
1994,; K.J. Hopt et al.: Comparative Corporate Governance. Oxford 1998,: Clarendon, Boehmer E.:
Corporate governance in Germany: Institutional background and empirical results (1999). [in:] Corporate
governance and economic performance, ed. K. Gugler, Oxford University Press, Oxford 2002.
2 Charkham J.P., H.Ploix: Keeping Better Company. Corporate Governance Ten Years On, Oxford University
Press, Oxford 2005.
3 Hackethal A., R.H. Schmidt, M.: Tyrell Banks and German Corporate Governance: on the way to a capital
market-based system? Corporate Governance: An International Review Vol. 13 Issue 3, 2005, p. 397
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