The commission that oversees Germany’s corporate governance code has announced three major changes to the code, including recommending that listed companies set age limits on board directors, ensure that candidates to their boards really have enough time to serve – and inform shareholders when directors attend less than half of the meetings.
The commission, known in German as the ‘Regierungskommission Deutscher Corporate Governance Kodex (DCGX),’ was created in 2001 by the Justice Ministry. Its purpose was to draft the country’s first, albeit legally non-binding, corporate governance code for listed companies and then watch over it.
DCGX today comprises 14 experts including Chairman Manfred Gentz. Gentz was formerly Chief Financial Officer at German automaker Daimler AG and Chairman of Deutsche Börse, Frankfurt’s stock exchange operator. DCGX’s members are appointed by the Ministry, though the commission can recommend candidates.
Following a recent review of the code, the commission said it had concluded that age limits for board directors were needed for the sake of diversity. “The commission is of the opinion that board directors should be people with different skill sets, gender and age,” the DCGX said. It did not, however, specify what those age limits should be saying instead that this should be decided by the companies.The DCGX also said that for the first time, it was recommending companies ensure that candidates to their boards had enough time to devote to the task.
It said: “Experience shows that the time pressures on board members have increased. Beyond board meetings and annual shareholder meetings, the work in the committees is more involved, as are the preparations.”
Indeed, there has been criticism in Germany of the practice of nominating chief executives of one company to the board of another. In 2013 for example, Frankfurt asset management firm Union Investment voted against the nominations of the CEOs of Allianz and France’s GDF-Suez to be directors at Siemens, arguing that they had enough to do managing such big and complex firms (see earlier report).
The third recommendation the DCGX makes in the revised code is that listed companies inform shareholders when directors attend less than half of board meetings. According to the commission, this will in part ensure that directors do not simply “rubber stamp” board decisions, but take active part in the discussions leading up to them.
Asked about the commission’s revised code, German shareholder association DSW praised in particular the recommendation regarding attendance of board directors. “This is not common practice among listed firms, so we welcome such disclosure. For it would be one consideration in deciding whether or not to vote for board discharge or not,” a spokesman for the DSW said. Link (German)