Composition of the Supervisory Board in the AG in Germany
Co-determination - Employees, Employee Representatives on the Supervisory Board of a Stock Corporation pursuant to DrittelbG, MitbestG.
The supervisory board in Germany is an essential part of the corporate governance system under the german stock corporation law. In its control and monitoring function, it is not only a trustee for the shareholders, but also a trustee for the interests of the company's employees.
Unlike the vast majority of other legal systems, german stock corporation law then provides for direct employee participation on the supervisory board. In this respect, the provisions of labor law play a special role in the composition of the supervisory board.
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Composition of the Supervisory Board in Germany
The composition of the supervisory board of a german stock corporation, including the number of members of the supervisory board, depends on the amount of the capital stock of the stock corporation as well as the number of employees working for the company.
Based on employee co-determination, the law provides for three basic models for the composition of the supervisory board:
- Supervisory Board without participation of employees / employee representatives
- Supervisory Board with one third employee / employee representatives in accordance with DrittelbG
- Supervisory board with one half employee / employee representatives in accordance with the MitbestG
Supervisory board without participation of Employees / Employee Representatives
The supervisory board of a gemran stock corporation is to be composed without employee / employee representatives if none of the relevant co-determination laws, in this case above all the German One-Third Participation Act (DrittelbG) and the German Co-Determination Act (MitbestG), apply.
In german practice, the shareholders as stockholders determine the composition of the supervisory board exclusively only if
- the stock corporation has less than 500 employees or
- the stock corporation is a so-called trend company.
The number of members of the supervisory board in Germany is determined on the basis of Art. 95 AktG. In principle, the supervisory board consists of (at least) three members. The articles of association may stipulate a higher number. However, the number must be specified and in this respect the decision on the number of supervisory board members may not be left to the general shareholders' meeting. A provision in the articles of association according to which the annual general meeting elects "at least 4" or "at most 5" members of the supervisory board is inadmissible and therefore invalid.
The maximum number of supervisory board members for german stock corporations with a capital stock of
- with a capital stock of up to 1,500,000 EUR nine,
- with a share capital of more than 1,500,000 EUR fifteen,
- with a share capital of more than 10,000,000 EUR twenty-one
supervisory board members. The statutory maximum number serves to ensure the functionality and workability of the supervisory board.
The members of the supervisory board in Germany are usually determined by a corresponding election / appointment resolution of the shareholders' meeting with a simple majority. The law expressly stipulates that supervisory board members shall not be appointed for a longer period than until the end of the shareholders' meeting which resolves on the discharge for the fourth fiscal year after the beginning of the term of office - i.e., simply speaking, the appointment can be made for a maximum of 5 years.
Supervisory board with one-third employee / employee representatives in accordance with the German One-Third Employee Representation Act (DrittelbG)
According to the DrittelbG, the supervisory board of a german stock corporation with generally more than 500 (and less than 2,000) employees is composed of one third employee / employee representatives. No special rules apply with regard to the number of supervisory board members (minimum 3, maximum number in accordance with § 95 AktG). However, the number must be divisible by 3.
When calculating the number of employees, employees of any affiliated companies shall be included in the calculation if a control agreement exists between the companies or the dependent company is integrated into the controlling stock corporation. Regularly employed temporary workers are also to be taken into account when calculating the threshold value in Germany.
The One-Third Participation Act does not apply to companies which are directly and predominantly involved in
- political, coalition-political, denominational, charitable, educational, scientific or artistic provisions or
- purposes of reporting or expression of opinion to which Article 5 (1) sentence 2 of the German Constitution (GG) applies,
serve such purposes. In the view of the legislator, the interests of employees should be secondary in the case of companies whose object consists in activities which are particularly protected by the German Constitution.
The employee representatives for the supervisory board in Germany shall be elected in accordance with the principles of majority voting by universal, secret, equal and direct suffrage for the period specified by law or in the articles of association for the supervisory board members to be elected by the shareholders' meeting.
The ordinary rules of the German Stock Corporation Act apply to the appointment of shareholder representatives, i.e. appointment by the annual general meeting or delegation by a person entitled to delegate.
Supervisory Board with one half Employee / Employee Representatives in accordance with the MitbestG
The supervisory board of a german stock corporation with more than 2,000 employees is generally composed in accordance with the MitbestG. This provides for equal representation on the supervisory board, i.e. half of the members of the supervisory board are employee representatives.
The specific number of members of the supervisory board is determined on the basis of Art. 7 MitbestG. The supervisory board of a german company
- with generally no more than 10,000 employees consists of 12 members,
- with generally more than 10,000 employees but not more than 20,000 employees consists of 16 members,
- with generally more than 20,000 employees shall consist of 20 members.
With regard to the employee representatives on the supervisory board, the German Codetermination Act stipulates further details. For example, the employee representatives on the supervisory board must include not only members of the stock corporation's workforce but also representatives of trade unions:
- in a 12-member supervisory board: four employees of the company and two representatives of trade unions;
- in a 16-member supervisory board: six employees of the company and two representatives of trade unions;
- in a 20-member supervisory board: seven employees of the company and three representatives of trade unions.
The employee representatives in Germany are appointed in a very complicated and time-consuming procedure in accordance with Articles10-24 of the Codetermination Act and the corresponding statutory election regulations.
The usual rules of the German Stock Corporation Act apply to the appointment of shareholder representatives, i.e. appointment by the annual general meeting or delegation by a person entitled to delegate.
Either the supervisory board or (but only in the case of the dismissal of delegated members) a minority of shareholders holding 10% of the capital stock or the pro rata amount of 1 million EUR are entitled to submit a motion.
Excursus
The above mentioned explanations apply accordingly to german limited liability companies (GmbH) insofar as these have
- in accordance with their statutes form a supervisory board in accordance with the German Stock Corporation Act (AktG),
- are obliged to form a supervisory board under the One-Third Participation Act,
- are obliged to form a supervisory board under the Codetermination Act.