The Two-Tier Board Structure and Co-determination: Should South Africa follow the Germany Example?

Abstract

The German corporate governance system differs significantly from the South African system. Unlike the shareholder-oriented corporate governance system that exists in the South Africa, German corporate governance is stakeholder-oriented. Stakeholders, particularly employees, have an important role in German corporate governance. They participate in decisions that affect them directly through workers councils, as well as those that affect the corporation through union representation on the supervisory board. The German corporate governance system is characterized by the two-tier board, with co-determination between employees and shareholders on the supervisory board. This paper examines the German stakeholder-oriented corporate governance. The main concern is whether there are lessons to be drawn from the German model of corporate governance that may influence corporate law reform in South Africa. The paper concludes that for the effective protection of stakeholders’ interests, the German two-tier board structure and co-determination provisions should be adopted in South Africa with some variation.

DOI: 10.5901/mjss.2014.v5n9p142