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In German corporate governance, a Vorstand is the executive board of a corporation (public limited company). It is hierarchically subordinate to the supervisory board (Aufsichtsrat),^[1] as German company law imposes a two-tier board of directors.

German law confers executive powers on the executive board as a body. It is expected to act collectively and collegially. Unlike the executive committee (a.k.a. operating committee or executive council) of a U.S. or UK company, the executive board is not an adjunct of the CEO (managing director). In contrast to Japanese corporate governance, the German executive board has real decision-making power.^[2] It is, by law, the managing body of a company and cannot be instructed by any legal person, be they natural or artificial, to act in such a way as to harm the business. Executive board members are personally liable for accepting any such instructions.^[1]

The specific scope of an executive board's duties varies from business to business. (A group of companies may each have their own individual executive boards, for example). The president of the executive board (i.e., the CEO) and the position's role are determined by the supervisory board. German law permits, but does not require, executive board members to elect a president/CEO from among their number. There are no specific legal requirements regarding the CEO's role, or even for the title given to the holder of the CEO position, although in practice the most common title is simply Vorstandsvorsitzender, literally, "Vorstand chairman". A noticeable minority refer to their CEOs as Sprecher (lit., "speaker"), implying that the CEO is no more than primus inter pares;^[1] probably the best-known example of a company which uses this terminology is Deutsche Bank.

The exact relationship between the CEO and the other executive officers depends on the company's type, how it was founded, and indeed the individual personalities of the people involved. A family business could, for example, have a strong CEO who is a member of the founding family and exercises a great deal of power over the rest of the board. In other companies, executive officers may hold themselves accountable to the executive board as a whole and not at all accountable to the CEO as an individual.^[1]

The relationships among executive officers can vary, too. It is common practice for board members to be senior executives with specific areas of functional responsibility. However, the law requires that they oversee the activities of their fellow officers, since they are still personally liable for any failings outside their specific departments/subdivisions.^[1] Each board member has one vote. Decisions are never escalated, when there is a lack of consensus, to the supervisory board. Executive board meetings are commonly held on a weekly basis and can last up to a whole day.^[1]

Formally, the power to appoint executive officers to the board lies with the supervisory board, which can appoint officers with a two-thirds majority vote of approval, or a simple majority if multiple rounds of voting are required in order to reach a decision. Since up to 50% of the supervisory board members are delegates of the employees (or even external trade union representatives, for details see Mitbestimmung), this prevents employees from blocking the appointment of executive officers to the executive board.^[1]

Executive officers have a certain degree of job security, which is partly a preventative measure aimed at ensuring that executive boards are not dominated and that they are not "packed" with hand-picked appointees. Officers are usually appointed for the maximum statutory term—5 years. Removal must be for good cause, such as serious breach of duty, and is subject to the supervisory board's veto. When an executive officer's ability to perform their duties is diminished due to old age, it is customary for them to serve out the remainder of their term, but with a deputy to help perform their duties. Neither the shareholders nor the executive board can compel an officer to retire, whereas the supervisory board can.^[1]

Commonly, the CEO receives between 30% and 50% greater salary than that of the other executive officers. An officer's remuneration usually comprises 65% basic salary, and 35% that is equally split between annual bonuses and benefits.^[1]

References

^ ^a ^b ^c ^d ^e ^f ^g ^h ⁱ Jonathan P. Charkham (1994). Keeping Good Company: A Study of Corporate Governance in Five Countries. Oxford University Press. pp. 14–21. ISBN 0-19-828987-1.
^ Charkham, page 85

[Charkham-1] ^ ^a ^b ^c ^d ^e ^f ^g ^h ⁱ Jonathan P. Charkham (1994). Keeping Good Company: A Study of Corporate Governance in Five Countries. Oxford University Press. pp. 14–21. ISBN 0-19-828987-1.

[2] Charkham, page 85

[1]

[2]

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+{{Short description|German business term}}
-In [[Germany|German]] [[corporate governance]], a '''Vorstand''' is the management board of a [[corporation]]. It is controlled by the [[Aufsichtsrat]] or Supervisory Board.<ref name=Charkham>{{cite book|title=Keeping Good Company: A Study of Corporate Governance in Five Countries|author=Jonathan P. Charkham|pages=14&ndash;21|date=1994|publisher=Oxford University Press|isbn=0198289871}}</ref>
+{{Use dmy dates|date=July 2022}}
+In German [[corporate  governance]], a '''''Vorstand''''' is the [[executive board]] of a [[corporation]] ([[public limited company]]). It is hierarchically subordinate to the [[supervisory board]] (''Aufsichtsrat''),<ref name=Charkham>{{cite book|title=Keeping Good Company: A Study of Corporate Governance in Five Countries|url=https://archive.org/details/keepinggoodcompa0000char|url-access=registration|author=Jonathan P. Charkham|pages=[https://archive.org/details/keepinggoodcompa0000char/page/14 14]&ndash;21|year=1994|publisher=Oxford University Press|isbn=0-19-828987-1}}</ref> as German company law imposes a two-tier [[board of directors]].
-German law confers power on the Vorstand as an organ.  It is expected to act collectively and collegiately.  In contrast to a [[board of directors]] in a [[United States]] or [[United Kingdom]] company, the Vorstand is not an adjunct to a [[Chief Executive Officer]].  In contrast to [[Japan]]ese corporate governance, the Vorstand has a real decision-making power.  It is, by law, the driving management of a company, and may not be instructed by any person or entity to act in a way that is injurious to the business.  The members of the Vorstand are personally liable for accepting any such instructions.<ref name=Charkham />
+German law confers executive powers on the executive board as a body. It is expected to act collectively and collegially. Unlike the [[Committee#Executive committee|executive committee]] (a.k.a. operating committee or executive council) of a U.S. or UK company, the executive board is not an adjunct of the [[Chief executive officer|CEO]] (managing director). In contrast to Japanese corporate governance, the German executive board has real decision-making power.<ref>Charkham, page 85</ref> It is, by law, the managing body of a company and cannot be instructed by any [[legal person]], be they natural or artificial, to act in such a way as to harm the business. Executive board members are personally liable for accepting any such instructions.<ref name=Charkham />
-The scope of duties of a Vorstand varies from business to business.  (A group of companies may each have their own individual Vorstands, for example.)  The head of the Vorstand, and the role of that office, is determined by the Aufsichtsrat.  German law permits, but does not require, members of the Vorstand to elect a chairman from amongst their number.  There are no specific legal requirements for the role of chairman, or even for the name of the office of chairman, although in practice the most common title is [[wikt:Sprecher|Sprecher]] (cf. [[Speaker (politics)|Speaker]]) with the implication that the chairman is no more than ''[[primus inter pares]]''.<ref name=Charkham />
+The specific scope of an executive board's duties varies from business to business. (A group of companies may each have their own individual executive boards, for example). The president of the executive board (i.e., the CEO) and the position's role are determined by the supervisory board. German law permits, but does not require, executive board members to elect a president/CEO from among their number.  There are no specific legal requirements regarding the CEO's role, or even for the title given to the holder of the CEO position, although in practice the most common title is simply ''Vorstandsvorsitzender'', literally, "''Vorstand'' chairman". A noticeable minority refer to their CEOs as ''[[wikt:Sprecher|Sprecher]]'' (lit., "[[Speaker (politics)|speaker]]"), implying that the CEO is no more than ''[[primus inter pares]]'';<ref name=Charkham /> probably the best-known example of a company which uses this terminology is [[Deutsche Bank]].
-The exact relationship between the chairman and the other members of the Vorstand can depend from the type of company, how it was founded, and indeed the individual personalities of the people involved.  A family-founded family-run company could, for example, have a strong chairman who is a member of the founding family who exercises a great deal of power over the other members of the Vorstand.  In another company members of the Vorstand could consider themselves accountable to the Vorstand as a whole and not at all accountable to the chairman as an individual.<ref name=Charkham />
+The exact relationship between the CEO and the other executive officers depends on the company's type, how it was founded, and indeed the individual personalities of the people involved.  A family business could, for example, have a strong CEO who is a member of the founding family and exercises a great deal of power over the rest of the board.  In other companies, executive officers may hold themselves accountable to the executive board as a whole and not at all accountable to the CEO as an individual.<ref name=Charkham />
-The relationships of members of the Vorstand to one another can vary, too.  It is common practice for individual members to have individual areas of executive responsibility.  However, the law requires that they oversee the activities of their colleagues, since they are still personally liable for any failings outside of their specific departments.<ref name=Charkham />
-Each member of a Vorstand has one vote.  Decisions are ''never'' referred, when there is a lack of [[consensus]], to the Aufsichtsrat.  Vorstand meetings are commonly held on a weekly basis, and can last up to a whole day.<ref name=Charkham />
+The relationships among executive officers can vary, too. It is common practice for board members to be senior executives with specific areas of functional responsibility. However, the law requires that they oversee the activities of their fellow officers, since they are still personally liable for any failings outside their specific departments/subdivisions.<ref name=Charkham /> Each board member has one vote.  Decisions are ''never'' escalated, when there is a lack of [[Consensus decision-making|consensus]], to the supervisory board. Executive board meetings are commonly held on a weekly basis and can last up to a whole day.<ref name=Charkham />
-Formally, the power to appoint members of the Vorstand lies with the Aufsichtsrat, which can appoint members with a two-thirds majority vote of approval, or a simple majority if multiple rounds of voting are required in order to reach a decision.  Because 50% of the members of the Aufsichtsrat are employees, this prevents employees from blocking the appointment of members of the Vorstand.<ref name=Charkham />
+Formally, the power to appoint executive officers to the board lies with the supervisory board, which can appoint officers with a two-thirds majority vote of approval, or a simple majority if multiple rounds of voting are required in order to reach a decision.  Since up to 50% of the supervisory board members are delegates of the employees (or even external trade union representatives, for details see [[Co-determination in Germany|Mitbestimmung]]), this prevents employees from blocking the appointment of executive officers to the executive board.<ref name=Charkham />
-Members of a Vorstand enjoy a degree of [[job security]], which is in part a preventitive measure aimed at ensuring that Vorstands are not dominated and that they are not "packed" with hand-picked appointees.  They are usually appointed for the maximum term permitted by law: 5 years.  Removal can only be for good cause such as gross breach of duty, and is subject to veto by the Aufsichtsrat.  When a member of a Vorstand is less able to perform their duties because of old age, it is customary for them to serve out their term but with their duties being performed with the aid of a deputy.  Neither the shareholders nor the Vorstand may compel a member to retire.  However, the Aufsichtsrat may.<ref name=Charkham />
+Executive officers have a certain degree of [[job security]], which is partly a preventative measure aimed at ensuring that executive boards are not dominated and that they are not "packed" with hand-picked appointees. Officers are usually appointed for the maximum statutory term—5 years. Removal must be for good cause, such as serious [[Breach of duty in English law|breach of duty]], and is subject to the supervisory board's veto. When an executive officer's ability to perform their duties is diminished due to old age, it is customary for them to serve out the remainder of their term, but with a deputy to help perform their duties. Neither the shareholders nor the executive board can compel an officer to retire, whereas the supervisory board can.<ref name=Charkham />
-Commonly the chairman receives between 30% and 50% greater salary than that of the other members.  A member's remuneration usually comprises 65% basic salary, and 35% that is equally split between annual bonuses and benefits.<ref name=Charkham />
+Commonly, the CEO receives between 30% and 50% greater salary than that of the other executive officers. An officer's remuneration usually comprises 65% basic salary, and 35% that is equally split between annual bonuses and benefits.<ref name=Charkham />
+==See also==
+*[[Vorstandsassistent]]
 ==References==
+{{Reflist}}
-<references />
+{{Authority control}}
-[[Category:Management]][[Category:Corporate governance]][[Category:German law]]
+[[Category:Corporate governance]]
-[[de:Vorstand]]
+[[Category:German business law]]