Corporate Governance Reporting: Compliance with Upper Limits for Severance Payments to Members of Executive Boards in Germany

Discussion Paper of the Institute for Organisational Economics 7/2019

30 Pages Posted: 9 Jun 2020

Date Written: July 1, 2019

Abstract

This paper examines how corporate governance reporting corresponds to actual conduct regarding severance payment caps for prematurely departing members of companies’ executive boards in Germany. For this purpose, we first evaluate the declarations of conformity for all companies listed in the CDAX between 2010 and 2014, which we use to determine conformity and deviation rates, and analyse reasons for deviation. In a further full survey, we assess the compensation amounts of all severance payments made and published by DAX companies to their executive board members who were prematurely terminated, which allows us to compare the respective severance ratio with the cap recommended by the German Corporate Governance Codex (GCGC). We find that more than 20% of companies listed in the CDAX declared deviation in the declaration of conformity, and one-third of all deviations were justified by a rejection of the normative decision of the recommendation. Moreover, in 57% of actual severance cases where DAX companies had previously declared their compliance, the cap was exceeded; yet, none of the companies that had exceeded the cap in a severance case disclosed this in the following declaration of conformity. In the years under review, for the majority of severance cases in companies listed in the DAX, the GCGC’s cap did not have any factual binding effect. Finally, in most cases the corporate reports deviated from reality and therefore could not serve as a suitable basis for decisions by the capital market.

Keywords: Codex, Corporate Governance, Executive Board, Germany, Reporting, Severance Payment

JEL Classification: D86, G34, G38, J33, J63, J65, K12, K31, M12, M52, M55

Suggested Citation

Dilger, Alexander and Schottmüller-Einwag, Ute, Corporate Governance Reporting: Compliance with Upper Limits for Severance Payments to Members of Executive Boards in Germany (July 1, 2019). Discussion Paper of the Institute for Organisational Economics 7/2019, Available at SSRN: https://ssrn.com/abstract=3601033 or http://dx.doi.org/10.2139/ssrn.3601033

Alexander Dilger (Contact Author)

University of Münster ( email )

Institute for Organisational Economics
Scharnhorststr. 100
Münster, D-48151
Germany
+49-251-83-25330 (Phone)
+49-251-83-28429 (Fax)

HOME PAGE: http://www.wiwi.uni-muenster.de/io/en/organisation/Dilger.html

Ute Schottmüller-Einwag

University of Münster ( email )

Scharnhorststr. 100
Münster, D-48151
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
5
Abstract Views
68
PlumX Metrics