Expert Commission publishes new version of the German Public Corporate Governance Model Code

Good governance and sustainable organizational management in public administrations and public enterprises are of particular importance for the state and society. As a support offer for local authorities, federal states and the federal government, a commission of experts under the scientific chairmanship of Professor Dr. Ulf Papenfuß of ZU has now published a new version of the model code after a comprehensive consultation process. It is intended to serve as a basis for states, cities and municipalities to establish or evaluate a suitable public corporate governance code.

In the opinion of the Commission of Experts, such “rules of good corporate governance” or “etiquette for good corporate governance” are structurally relevant and highly urgent in order to ensure the sustainable fulfillment of public tasks even in times of crisis. A public corporate governance code compiles principles for the responsible management, leadership and supervision of and in public companies that have proven their worth in practice and according to scientific analyses. It reflects how a city or state sees itself as the owner of public enterprises, what public enterprises are supposed to achieve, and how to ensure responsible management and governance.

In the current debate on the efficiency of critical infrastructure and security of supply in Germany, there are also particularly intense discussions about the role of public companies. Good governance and management at public companies and the public sector as shareholder are key prerequisites for the best possible performance of public tasks.

“Crisis management in the context of the impact of the Ukraine war must be linked to sustainability goals. The topic of a Public Corporate Governance Code belongs on the agenda of all relevant political bodies such as city councils, among others, in view of the intense debate on critical infrastructure, security of supply, sustainability, participation of women in leadership positions and trust in the state,” explained Ulf Papenfuß, holder of the Chair of Public Management & Public Policy at ZU and initiator and coordinator of the project.

The Association of German Cities and the German Association of Towns and Municipalities have passed supporting resolutions on the use of the model code, and many organizations such as the German Federal Government’s Council for Sustainable Development have published supporting statements. Among other things, the model code offers recommendations for action on strengthening sustainability, on the representation of women in corporate bodies, on the structure and transparency of compensation for managing directors and supervisory bodies, on the structure of the audit of financial statements, on the avoidance and disclosure of potential conflicts of interest, and on the social responsibility of public companies. In Germany, numerous different public corporate governance codes have been established by local authorities, federal states and the federal government since 2005. Nevertheless, of the more than 2,000 German local authorities, only just over 50 have a Public Corporate Governance Code to date.

The expert commission includes renowned experts such as former Federal Minister of Justice Brigitte Zypries, the Mayor of Mainz and President of the Association of Municipal Enterprises Michael Ebling, and the Executive Board Spokeswoman of the Gesellschaft für Internationale Zusammenarbeit (GIZ) Tanja Gönner.

“Precisely because we are living in particularly intense and challenging times, now is a very good and important time for municipalities, cities and states to introduce new public corporate governance codes and evaluate existing ones. The problem areas are out there in everyday life for all to see anyway, and it can be very helpful for everyone involved to have a supportive set of rules with synergies to day-to-day business that don’t require a great deal of effort,” explained Papenfuß.

The German Public Corporate Governance Model Code can be downloaded at https://pcg-musterkodex.de/

The Expert Commission has again invited comments on the German Public Corporate Governance Model Code.