This paper focuses on the current situation of supervisory board committees in large German corporations, while taking into consideration national factors at play. Although it seems that these committees were originally imported from the United States in the 1990s, Germany incidentally has a long history of supervisory board committees. There are many surveys that provide the data on establishments of board committees and compare them across nations, but do not mention the differences between one-tier and two-tier board systems. It is unclear whether nomination committees in Germany nominate members to supervisory boards or executive boards.
Firstly the paper arranges all supervisory board committees among the 25 German corporations that comprise the Deutscher Aktienindex (DAX-30). All 25 sample corporations establish not only mandatory committees but also principle-based committees that are recommended in the German Corporate Governance Code. Various spontaneous committees, such as the strategy, personnel, and risk committees are also quite popular.
Secondly, the paper conceptually differentiates between nomination and compensation committees for both supervisory and executive boards. All “nomination” committees nominate supervisory board members, while two of them also nominate executive board members. All 25 sample corporations establish compensation committees targeting executive board members, and 22 of them doubled as nomination committees for executive board members.
These findings can be explained as a result of the hybridization of the German and foreign corporate governance systems. German corporations have utilized board committees to solve managerial inefficiencies for at least 95 years, and recent globalizing process has made this system more common. On the other hand, German corporations have been adhering to two main systems that is, codetermination and two-tier board systems, and this influence has come down to board committees. For example, mandatory board committees for co-determination exist in Germany, and nomination and compensation committees for executive board members often consist of the same number of shareholder and employee representatives.
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