German Corporate Law in the 20th Century

Abstract

German corporate law in the 20th century was marked by a steady flow of reforms molding and shaping the corporation. Having started at the outset of the century with a corporate governance model revolving around shareholder power (at least according to the law in the books), the reform of 1937 established a shift to a board-centered structure, which prevails until today. Adhering to the structure set nearly 30 years earlier, another reform in 1965 mainly readjusted several details and sharpened the model’s features, with two exceptions: It contained a section on Konzernrecht, the law of corporate groups, and massively restricted the freedom of contract in corporate law by disallowing deviations from the Aktiengesetz in the corporate charter. Codetermination laws in 1951, 1952 and 1976 established board-level employee participation. Beyond these and other, smaller, reforms, German corporate law was part of broader political developments in Germany – the agony of the Weimar Republic, the rise and fall of the Third Reich, democratization, and Europeanization. This chapter aims at providing a longitudinal view of German corporate law. For the years 1945 to 1990, it is a history of corporate law in West Germany. Readers will, for the most part, not find an explanation of the specific rules governing board members’ duties, capital maintenance, or other details. Instead, they will find out about how the two-tier board structure evolved and why it is still in place today, why German corporate law abolished the shareholder-centric model of old, and which ideas lie behind the concept of board-level codetermination so foreign to many non-Germans.

Keywords: German law, company law, corporate law, history, codetermination, two-tier board, supervisory board, Konzernrecht, law of corporate groups, law and finance, corporate governance, Rathenau, Unternehmen an sich, German Stock Corporation Act, German Codetermination Act

JEL Classification: E22, F63, G32, G34, G 38, J51, J53, J54, K 22, K31