Volkswagen's Bad Decisions & Harmful Emissions: How Poor Process Corrupted Codetermination in Germany's Dual Board Structure

Michigan Business & Entrepreneurial Law Review, Volume 7, Issue 1, 2017

University of Illinois College of Law Legal Studies Research Paper No. 19-13

45 Pages Posted: 8 Mar 2019

See all articles by Nicola F. Sharpe

Nicola F. Sharpe

University of Illinois College of Law

Date Written: 2017

Abstract

This Article directly challenges the often argued proposition that Germany’s two-tier board of directors is superior to America’s single-tier board structure. It argues that regardless of structure, any decision-making body that lacks effective decision-making processes is at significant risk of failure, scandal, and ineffectiveness. Legal scholars and policymakers have largely ignored the connection between decision-making processes and the efficacy of corporate leadership. The Article is the first to examine this under-explored relationship in the context of the German dual-board. Volkswagen’s 2015 emissions scandal provides a vehicle to critically assess the relationship between Germany’s two-tiered board and an effective decision-making process. This Article argues that the structure of Volkswagen’s dual board did not automatically result in an effective decision-making processes. Additionally, an effective decision-making process—the attributes of which can be found in organizational behavior theory—is essential to helping German boards accomplish their legislative mandate. Moreover, it is essential to helping the boards of transnational corporations, which have a wide range of structural variations, effectively govern the organizations for whom they work. In sum, Volkswagen and other German corporations may follow the structural requirements of German corporate law, but without effective processes, German directors are likely to fail in their monitoring and supervisory roles. Without effective processes, directors are watchers asleep at their post, uninformed, dormant, and ineffective in preventing gross failures of corporate integrity. Unless German boards adopt and implement a Process Oriented Approach, the Volkswagen emission scandal will simply be another mark on a timeline for a century plagued by corporate failure.

Suggested Citation

Sharpe, Nicola F., Volkswagen's Bad Decisions & Harmful Emissions: How Poor Process Corrupted Codetermination in Germany's Dual Board Structure (2017). Michigan Business & Entrepreneurial Law Review, Volume 7, Issue 1, 2017; University of Illinois College of Law Legal Studies Research Paper No. 19-13. Available at SSRN: https://ssrn.com/abstract=3348663

Nicola F. Sharpe (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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