With Vigour and Zeal

The comparitive law paper Disney in a Comparative Light (author; with thanks to Adam Savett, now at Securities Litigation Watch, for the notification) explores a number of differences between Delaware and German corporate law, using cases against The Walt Disney Company (NYSE: DIS; opinion) and Mannesmann AG (opinion and press release, both in German) as a starting point. (Note that Mannesmann AG, as it then was, is no more (see here, in German or here, in English) and that the case was actually not against the company but six of its directors.)

The Disney case was brought in Delaware Chancery Court, the Mannesmann case in the German Federal Court of Justice (Bundesgerichthof).

After having given the details of the two cases, the paper examines the following six differences between the two jurisdictions’ laws and policies: the degree of courts’ deference to the business judgment of corporate directors; the role of disinterested directors; employee representation on the board of directors, or ‘co-determination’ (Mitbestimmung); the attitude towards executive compensation; the ability for shareholders to waive fiduciary duties; and the means by which to enforce fiduciary obligations.

Each of the six contrasts is conclusively discussed on its own and there is no final, single conclusion, other than that, well, the two jurisdictions are different and have dealt with common concerns with executive compensation in their own ways.

The paper ends with this final thought on convergence of laws:

[B]efore becoming too immersed in debate about whether Germany should import corporate law from Delaware or Delaware should import corporate law from Germany, it is useful to keep in mind that Japanese automobile corporations currently are outperforming both the Americans and the Germans.

What’s more: if you haven’t taken The Economist’s Corporate Non-Governance quiz yet, the answer to question 7 is in the paper, on page 32. But, of course, you’ll know the answer anyway.