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The Influence of German Top Executives on Corporate Policy and Firm Performance

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Marcel Normann

The question of whether strategic leaders really matter is important to a wide array of topics. Three essays contribute to empirical top executive research on the relative importance of German CEOs and CFOs. The analyses are based on a unique dataset that includes observations from more than 300 CEOs and 100 CFOs working for 110 publicly listed German firms that operated in 10 different industries between 1983 and 2002. The first essay describes and analyzes characteristics of top executives. The second essay examines the existence and size of top executive-specific effects as well as industry-, company- and executive-level moderating factors. The third essay sheds light on the circumstances under which CEOs and CFOs matter the most (or least).

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2. Essay 1: Top Executives made in Germany

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3 2.1 Governance system and top executives in Germany: Legal perspective The main German law for the public limited company is the Aktiengesetz von 1965 (AktG; public corporation act of 1965), which has been amended over time, especially by the Gesetz zur Kontrolle und Transparenz im Unterneh- mensbereich von 1998 (KonTraG, law on control and transparency in public corporations of 1998). The AktG requires a mandatory organizational separation of manage- ment and control (two-tier board system). The Vorstand (management board, board of executive directors) leads the company under its own responsibility, whereas the Aufsichtsrat (supervisory board, board of non-executive direc- tors) monitors the management board. Overlapping membership is prohi- bited. The system of Mitbestimmung (employee codetermination) is also an essential part of the German governance structure. Employee representation takes place at the shop-floor level and at the board level. The codetermina- tion at the shop-floor level is based on the Betriebsverfassungsgesetz (BetrVG 1952, 1972, works constitution act of 1952, 1972) and describes the right of the employees at the level of individual plants to elect Betriebsräte (work coun- cils), which have information-gathering and codetermination rights in social, personnel, and economic matters. Codetermination at the board level is based on three codetermination regimes that also regulate size and organization of the supervisory and management board. The supervisory board oversees the management of the corporation (§ 111 (1) AktG), appoints and removes the members of the management board (§ 84 AktG), sets their compensation, and has the right to co-approve par- ticularly important...

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