Work of the Commission in 2024 – Year in Review

Our work in 2024 was very much in keeping with our credo that the Commission is more than the Code. This principle expresses our commitment not to confine our work solely to the Code itself, but also to keep the conversation going and provide food for thought on relevant topics. We at the Commission would also like to offer companies practical ideas and suggestions for refining their day-to-day corporate governance practices. To that end, the Commission has introduced a new publication series entitled "Practical Impulses".

Our mission to bring greater transparency to the work we do has inspired us to present this year-end review showcasing our work in 2024.

To provide some context, we note that the Commission has formed three working groups, which continued their efforts to achieve our programme priorities.

The first of these working groups (Code) regularly considers how the Code might be simplified, streamlined or even condensed. Its members are Dr Daniela Favoccia, Dr Nicolas Peter, Ingo Speich and Clara Streit (and, until the end of September, Prof. Klaus-Peter Naumann).

The second working group (Investors) focuses on engagement with investors and proxy advisers in order to promote a better understanding of German corporate gov-ernance practices and to assess how the code compares to investor requirements. Commission members Claudia Kruse, Dr Bettina Orlopp, Marc Tüngler, Dr Sebastian Schulte and Clara Streit make up this working group.

Finally, the third working group (Supervisory Board) examines how to increase the professionalism and effectiveness of supervisory boards. This group brings together the following Commission members: Dr Werner Brandt, Dr Margarete Haase, Dr Dan-iela Favoccia, Dr Ariane Reinhart, Dr Sebastian Sick, Ingo Speich, Clara Streit and Prof. Jens Weidmann.

Each of these three working groups cultivates a spirit of engagement with the relevant stakeholders. The Commission's work also relies on valuable insights gleaned through targeted surveys as well as extensive dialogue and information sharing with supervisory boards, management boards, academics, lawyers, investors and proxy advisers.

Here is a brief look back on the most important events and activities of 2024.

Q1:

The appointment of Dr Sebastian Sick to the Commission was extended. Mr Sick is Head of Corporate Law and Corporate Governance at the Institute for Codetermina-tion and Corporate Governance of the Hans Böckler Foundation. The appointment of Dr Michael Kemmer expired in 2024.

The Commission analysed the findings of a survey of DAX 40 supervisory board members with international board experience, which quizzed the target group on their specific experiences on supervisory boards in Germany and asked them how German supervisory boards stacked up against their international counterparts.

Plenary session on 5 February: The Investors working group presented the first instalment of the new publication series: Practical Impulse on the procedure for the Annual General Meeting. The aim was to provide companies with suggestions on how to organise and conduct their AGMs more efficiently within the existing legal framework.
Presentation of the findings of the survey of international supervisory board members at DAX 40 companies: The respondents acknowledged that progress had been made in the development of good corporate governance practices at German companies.

However, the vast majority criticised the size of German supervisory boards on the DAX in particular. Compared to supervisory boards abroad, boards with more than 12 members are limited in their ability to function and make it difficult to build a culture of trust. The use of German as the working language in supervisory boards was also con-sidered to be a drawback, as was the fact that some supervisory board members lacked the necessary qualifications to perform their appointed duties.

The Code working group focused its attention on the topic of remuneration. It met with remuneration consultants, the study group on sustainable management board remuneration and various issuers. Its aim was to identify points that could be simplified in the next revision of the Code.

In March, the first Practical Impulse on the procedure for the Annual General Meeting was published. To mark the occasion, Commission Chairwoman Clara Streit gave an interview which appeared in the Frankfurter Allgemeine Sonntagszeitung on 15 March.  

Q2:

In April, a virtual meeting of the "Seven Chairs" was held. The "Seven Chairs" is an informal forum with the chairs of corporate governance commissions or committees from seven countries (Germany, Belgium, France, Italy, the Netherlands, Sweden and the United Kingdom) in which views on developments in corporate governance are shared on a regular basis. Participants discussed the current status of their corporate governance codes as well as topics such as sustainable corporate governance, cybersecurity and ESG rating agencies.

On 19 April, the Corporate Governance Conference, sponsored by Deutsches Ak-tieninstitut, hkp/// group, FEA and DIRK, was held at the Frankfurt School of Finance & Management. Chairwoman Clara Streit gave a keynote speech on Corporate Governance – where transformation meets sustainability.

Plenary session on 11 June: The Investors working group presented their report on the year's AGM season. One major focus was placed on discussions surrounding the different stances of proxy advisers on the topics of supervisory board independence and cooling-off periods for supervisory board chairpersons. The Commission intends to take a clear stance on this issue.

The Supervisory Board working group reported on its conversations with academics, in which they examined issues such as how to identify the most contemporary and useful understanding of the role that supervisory boards play in shaping strategic decision-making processes – particularly from a comparative international perspective. These conversations inspired the working group to develop a new instalment in the Practical Impulses series.

On 12 and 13 June, the "2024 Böckler Conference for Supervisory Boards" was held in Berlin. The event was organised by the German Trade Union Confederation (DGB)'s Hans Böckler Foundation. Chairwoman Clara Streit presented on the topic of sustainable corporate governance. In the panel discussion that followed, she noted the need for extensive engagement with investors, which would offer the opportunity to better explain the German model of co-determination as well as the two-tier corporate governance model often encountered in Germany, which features a separate management board and supervisory board.

At the end of June, an opinion piece penned by Clara Streit appeared in the Frankfurter Allgemeine Zeitung  which takes a critical look at the recommendations of investors and proxy advisers on the subjects of independence, term of office and cooling-off periods.

Q3:

On 15 July, a virtual workshop was held for all Commission members with Claudia Plattner, President of the German Federal Office for Information Security (BSI). Ms Plattner provided insights into the subjects of cybersecurity and artificial intelligence from the view of supervisory boards.

July marked the start of a systematic exchange and dialogue with major international investors and proxy advisers. These two target groups were specifically asked for their assessment of German corporate governance and the Code.

On 26 September, the Commission published a press release announcing the appointment of Melanie Sack as a new member. Ms Sack was appointed to the Com-mission as representative of the Institute of Public Auditors in Germany (IDW), effective as of 1 October; she succeeds Prof. Klaus-Peter Naumann.

Q4 and outlook for 2025:

Plenary session on 4 November: The Investors working group presented its findings from its discussions with investors and proxy advisers, highlighting that the talks helped to promote mutual understanding.

However, differences of opinion still lingered with regard to relevant issues, such as the criteria for assessing the independence of supervisory board members. The Com-mission intends to keep the conversation going on these issues and will continue to advocate its position.

The Supervisory Board working group presented another publication in the Practical Impulses series: The supervisory board as a strategic sparring partner: An asset for the company. It is both an appeal for and a practical guide to finding ways for the supervisory board to play a more active role in a company's strategic decision-making processes. The new Practical Impulses instalment will be published in January 2025.

In November, another meeting of the "Seven Chairs" will be held in London. Topics of discussion will include the question of how to promote economic growth and how EU legislation and corporate governance codes affect competitiveness.