Executive compensation and employee benefits—Germany—Q&A guide

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • Executive compensation and employee benefits—Germany—Q&A guide
  • 1. Provide an overview of the primary sources of law, regulation and practice that govern or affect executive compensation arrangements or employee benefits.
  • 2. What are the primary government agencies or other entities responsible for enforcing these rules?
  • 3. Are any types of compensation or benefits generally subject to specific corporate governance requirements or approval by shareholders or government agencies? What is the general process for obtaining approval?
  • 4. Under what circumstances does the establishment or change of an executive compensation or benefit arrangement generally require consultation with a union, works council or similar body?
  • 5. Are any types of compensation or benefit arrangements prohibited either generally or with respect to senior management?
  • 6. What rules apply to compensation and benefits of non-executive directors?
  • 7. Must any aspects of an executive’s compensation be publicly disclosed or disclosed to the government? How?
  • 8. Are employment agreements required or prevalent? If so, what provisions are common? Are any terms prohibited or unenforceable?
  • 9. What are the prevalent types and structures of incentive compensation? Do they vary by level or type of organisation?
  • More...

Executive compensation and employee benefits—Germany—Q&A guide

This Practice Note contains a jurisdiction-specific Q&A guide to executive compensation and employee benefits in Germany published as part of the Lexology Getting the Deal Through series by Law Business Research (published: November 2020).

Authors: Bird & Bird LLP—Thomas Hey

1. Provide an overview of the primary sources of law, regulation and practice that govern or affect executive compensation arrangements or employee benefits.

The primary sources of law regarding executive compensation and employee benefits are the corresponding employment contracts. Statutes for employees are not usually applicable for executives, such as members of the executive board of stock corporations or managing directors of limited liability companies (GmbH).

Laws that affect executive compensation generally depend on the company form. The compensation for members of the executive board of stock corporations is primarily ruled by section 87 of the Stock Corporation Act (AktG). Besides, special rules for listed stock corporations - such as paragraph 4, section 120 of the AktG - do apply. Furthermore, the German Corporate Governance Code (DCGK) summarises legislature for executive compensation and provides ‘best practice’ guidelines. The DCGK is not binding, but partially lists obligatory laws.

Compensation for managing directors of limited liability companies is regularly subject to individual negotiations. Section 87 of the AktG is not applicable.

Furthermore, one has to note that section 612 of the Civil Code (BGB) generally foresees that

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