Principle: all tasks of the Executive Board can be delegated

In principle, the Management Board can delegate its duties as the executive body of the AG without restriction. However, there are important exceptions to this principle. The following cannot be delegated:

• The so-called overall responsibility of the members of the Executive Board is “indivisible, unlimited and inalienable,
• Personal obligations enshrined in law, e.g: Reporting obligations, the obligation to prepare annual financial statements, the fulfillment of certain tax obligations, etc.,
• Duties relating to resolutions of the Annual General Meeting, reporting to the Supervisory Board, convening the shareholders’ meeting, submitting transactions requiring approval to the Supervisory Board (Section 111 (4) sentence 2 AktG) and certain duties in connection with the annual financial statements, management report and proposal for the appropriation of profits,
• The obligations pursuant to Section 91 (2) AktG, according to which the Management Board must take suitable measures to ensure that developments that could threaten the continued existence of the company are identified as early as possible (early risk detection system),
• The duty of every Management Board member to “manage the company” in accordance with Section 76 (1) AktG; it follows that basic strategic decisions (corporate planning) must remain non-transferable to the Management Board,
• The task of “providing the company with an organizational framework, structuring it into functional and coordinated units and ensuring the flow of information within the company (corporate coordination)”,
• Within the following limits, the control of the proper execution of delegated management tasks (corporate control),
• The decision on the filling of subordinate management positions in the company (management staffing).

In the event of a company crisis or in certain exceptional situations (such as an accumulation of loss events), all members of the Executive Board (even those who are otherwise not responsible) may have joint responsibility despite the fact that the allocation of responsibilities is in principle effective.

Obligation to delegate

It goes without saying that the delegation of duties, which is permissible in principle, does not automatically lead to the Executive Board being released from liability. Rather, the managing director has a comprehensive duty of control and supervision following the delegation. This applies in detail:

• In all forms of delegation (horizontal, vertical or external), care must be taken to ensure that responsibilities are clearly and unambiguously assigned so that they can be clearly localized to specific individuals.
• All tasks must be defined as precisely as possible and assigned without overlap.
• The situation of “one relying on the other” must be avoided; everyone must know exactly what their duties are.
• Ambiguities and gaps mean that the delegation is ineffective and the duty remains with the management as a whole.
• It is therefore recommended that all delegations of board duties be set out in writing, for example in organizational charts and job descriptions

Selection

The following qualifications must be checked and ensured before tasks are assigned to a person in the company:

• Personal aptitude (reliability, ability to work under pressure);
• Professional competence (training, qualifications, experience) to fulfill the task to be performed (the more complex the task and the greater the risk of damage in the event of poor performance, the stricter the standard of care to be applied).

Briefing

Before the person to whom tasks have been assigned begins his or her work, it must be ensured:

• Instruction in the area of responsibility in the required breadth and depth,
• Provision of the necessary powers and material resources to accomplish the tasks,
• Clarification of the task and the reporting lines,
• Identification of particular hazards in the functional area,
• Warning of typical errors

Monitoring

The duty to monitor includes:

Regular information

Regular information is required in order to learn as early as possible of facts that may indicate a lack of fulfillment of duties (information and communication task).

Establishment of a reporting system

It is advisable to set up a reporting system, the specific design of which is subject to broad discretion. However, it must ensure that at least serious deviations, such as regularly recurring serious misconduct or even criminal offenses, are detected.

Monitoring the delegation persons

The persons to whom delegation is made must be monitored and controlled on an ongoing basis in order to be able to intervene immediately if necessary. The monitoring of the persons to whom the Board of Directors has delegated responsibility can be delegated in turn – in particular to specialists. If these have been carefully selected and instructed and are equipped with the necessary human and material resources, structures and powers, the company director can “limit himself to monitoring the monitors” (meta-monitoring).

The so-called principle of trust applies: If the company manager has no concrete reason to doubt that the supervisors appointed by him are fulfilling their duties correctly, and if he has also ensured that he learns as reliably and early as possible of possible irregularities in the otherwise properly set up monitoring organization, he can trust in the functioning of this organization.

Ongoing control

Ongoing monitoring is required that is not limited to sporadic measures, but ensures that irregularities do not occur even without permanent close monitoring. This includes random checks that make it clear to employees that misconduct can be detected and sanctioned. The Management Board must appoint suitable and reliable persons and either check these themselves from time to time or have them checked by others, such as an auditing department. Random, surprise checks are necessary and regularly sufficient to prevent deliberate violations of legal regulations and instructions from the management. They make employees aware that violations can be detected and, if necessary, punished.

Increased monitoring in the event of grievances or exceptional situations

All monitoring measures must be intensified in the event of deficits, objective irregularities, crises or exceptional situations. However, if it is foreseeable that random checks will not be sufficient to achieve the aforementioned effect, e.g. because the review of only individual processes could not uncover any infringements, the entrepreneur is obliged to take other suitable supervisory measures. In such cases, it may be necessary to carry out surprisingly comprehensive business audits. The extent to which audits must be carried out in a specific case depends on the overall circumstances of the individual case. Increased supervisory measures are required in any case if irregularities have already occurred in the business or if this is to be expected due to special circumstances and also if important regulations or difficult legal issues are in question.