Corporate governance reporting: Compliance with upper limits for severance payments to members of executive boards in Germany

Alexander Dilger () and Ute Schottmüller-Einwag

No 7/2019, Discussion Papers of the Institute for Organisational Economics from University of Münster, Institute for Organisational Economics

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.

JEL-codes: D86 G34 G38 J33 J63 J65 K12 K31 M12 M52 M55 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-hrm, nep-lab and nep-law
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:umiodp:72019

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