Officers’ and Directors’ Liability Under German Law — A Potemkin Village
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Gerhard Wagner
Abstract
The liability regime for officers and directors of German companies combines strict and lenient elements. Officers and directors are liable for simple negligence, they bear the burden of proof for establishing diligent conduct, and they are liable for unlimited damages. These elements are worrisome for the reason that managers are confronted with the full downside risk of the enterprise even though they do not internalize the benefits of the corporate venture. This overly strict regime is balanced by other features of the regime, namely comprehensive insurance and systematic under-enforcement. Even though the authority to enforce claims against the management is divided between three different actors - the supervisory board, the shareholders assembly, and individual shareholders - enforcement has remained the exception. Furthermore, under the current system of Directors’ and Officers’ (D&O) liability insurance, board members do not feel the bite of liability as they are protected by an insurance cover that is contracted and paid for by the corporation. Thus, the current German system may combine the worst of two worlds, i.e., the threat of personal liability for excessively high amounts of damages in exceptional cases, and the practical irrelevance of the liability regime in run-of-the-mill cases. The present Article analyzes the shortcomings of the present regime and submits proposals for reform.
© 2015 by Walter de Gruyter Berlin/Boston
Artikel in diesem Heft
- Frontmatter
- Contents
- Introduction
- The Corporate Governance Movement, Banks, and the Financial Crisis
- A State of Inaction: Regulatory Preferences, Rent, and Income Inequality
- Officers’ and Directors’ Liability Under German Law — A Potemkin Village
- Dividend Policy with Controlling Shareholders
- The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation
- Corporate Fiduciary Duties and Prudential Regulation of Financial Institutions
- Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive
- Brave New World: A Proposal for Institutional Investors
- The Vickrey-Clarke-Groves “Pivotal Mechanism” as an Alternative to Voting for Organizational Control
- Self-Selection and Heterogeneity in Firms’ Choice of Corporate Law
Artikel in diesem Heft
- Frontmatter
- Contents
- Introduction
- The Corporate Governance Movement, Banks, and the Financial Crisis
- A State of Inaction: Regulatory Preferences, Rent, and Income Inequality
- Officers’ and Directors’ Liability Under German Law — A Potemkin Village
- Dividend Policy with Controlling Shareholders
- The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation
- Corporate Fiduciary Duties and Prudential Regulation of Financial Institutions
- Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive
- Brave New World: A Proposal for Institutional Investors
- The Vickrey-Clarke-Groves “Pivotal Mechanism” as an Alternative to Voting for Organizational Control
- Self-Selection and Heterogeneity in Firms’ Choice of Corporate Law
