german companies, have been discussed and have served for quite a few controversial arguments. Originally during the 1980’s Economists originally stated that it was good to have representatives in the individual companies, and having power within the company making decisions. Now in the 1990’s their perception appears to have turned. What was at first seen as safety and conservativeness, is now called stiff, inflexible and short of creativity.
The main reason for this discrepancy is the fact that the German system of old-age income security relies on the pay as you go principle. Fifteen percent of the pensions are funded, two thirds of these are private and the other one thirds are occupational funds. Doing it this way serves the purpose of having funds, and makes the process more tax efficient. If you compare the system to the U. S. you will agree that the flexibility and openness is much higher, and people are more willing to take a risk, over small long term profits, as the German banks.
This can be seen by looking at the amounts of outstanding bonds. The U. S. has about four times more bonds outstanding than Germany. Where in Germany these make up 95 Percent of the GDP compared to the U. S.
with 122 percent. The percentage of shares held by institutional investors as insurance companies, pension funds, and mutual funds in make up for about half, if not more of the outstanding stocks. The main issuers in Germany are gvt entities. Where in the U.
S. it is presented by great variety of issuers. German banks combine commercial and investment banking, that is they give loans and arrange equity and bond issues. However, holdings in the industrial companies, supervisory board mandates, and proxy voting rights provide further channels of influence on listed companies and from the main basis for the recurring debate on the power of banks.
The supervisory board in a AG (Aktien Gesellschaft) is appointed by the shareholders and the employees 50/50. The chairperson is elected by a two-thirds majority vote of the supervisory members. The problems which have occured up to date are members which have enriched themselves by the priviledges of being on the board, by fraud and embezzlement. Another downfall is the efficiency of control, due to the fact of shareholder representatives not wanting to criticise board members since they perceive them as peers. The main companies listed are banks and government entities are mostly Involved in companies, when sitting on the supervisory board, now passed to have no more than a five percent shareholder of the companyBasic Government StructureUnder the German Constitution, known as the Basic Law, the FederalRepublic of German (FRG) is a parliamentary democracy with a bicamerallegislature, an independent judiciary and executive power exercised by aPrime Minister whose title is Chancellor. The lower house of Parliament, The Bundestag, currently consists of 672deputies elected for a 4-year term.
Members are elected through a mixtureof direct constituency candidates and party lists. The Basic Law and theLaender (state) constitutions stipulate that parties must receive atleast 5 percent of the national vote (or at least three directly electedseats in federal elections) in order to be represented in the federal andstate parliaments. The last national elections took place on October 16,1994. One must be 18-years old in Germany to vote. The president may be elected to two 5-year terms and his duties as chiefof state are largely ceremonial. Executive power is exercised by theChancellor who is elected by and responsible to the Bundestag.
TheChancellor cannot be removed from office during a 4-year term unless theBundestag has agreed on a successor. The upper house, the Bundesrat, is composed of delegations from the 16state governments and has a proportional distribution of its 68 votes,depending on the population of the state. The role of the Bundesrat islimited but it can exercise substantial veto powers over legislationpassed in the Bundestag when the proposed legislation would affect thenumerous prerogatives of the Laender. Among these are matters relating totax reform, law enforcement and the courts, culture and education, theenvironment, and social assistance. The political parties represented in the Bundestag are: — The Christian Democratic Union and its Bavarian sister party, the Christian Social Union (CDU/CSU).
The CDU/CSU is generally conservative on economic and social policy. — The Social Democratic Party (SPD), which abandoned the concept of a class party in 1959 while continuing to stress social welfare programs. — The Free Democratic Party (FDP), which is composed of those who consider themselves “independents” and heirs to the European liberal tradition. — The Party of Democratic Socialism (PDS), which is the successor party to the SED (the communist party of the former German Democratic Republic). — The Alliance 90/The Greens (Buendnis 90/Die Gruenen), which has an environmentalist, pacifist platform.
