DO HARD CASES MAKE BAD LAW? THE EFFECTIVENESS OF GERMAN’S APPROACH TO STRENGTHEN FINANCIAL MARKET INTEGRITY
Background: As a direct consequence of the Wirecard scandal from 2020, which brought the work and, above all, the cooperation of the executive board, supervisory board, and external auditors into the focus of the legal discussion, the German legislator adapted the Stock Corporation Act and also the German Corporate Governance Code has been adapted. Executive board members of Wirecard have been subjected to a criminal investigation after reporting fake revenues and air bookings worth billions. The German Stock Exchange, the Federal Institute for Financial Services Supervision, the Financial Reporting Enforcement Panel, the auditing firm, and the Wirecard supervisory board were all criticized for failing to detect the problem earlier. Former Wirecard stockholders lost money, and lawsuits were filed seeking compensation from the statutory auditor, Wirecard AG, and former board members. Research purpose: Following the formal amendment of the law and the GCGC, the focus is now on the effectiveness of the law and the GCGC in practice. The purpose of this study is to assess whether the German solution to strengthening financial market integrity is effective. Research hypothesis: It is hypothesized that German corporate governance requires additional improvements and further reforms. Methods: The analysis of academic literature, journal and magazine articles, reports, and other relevant literature has enabled the author to empirically build the hypothesis of this document and to identify and address major issues that require further amendments in law as well as and additional studies. Conclusions: The reform of the German law has a substantial impact on the work of companies, its main bodies and statutory auditors. It is evident that certain provisions require modification, and further reforms are both expected and necessary to address the gaps. Aspects of trust, transparency, control and monitoring need to be in the focus of the legal discussion as well as the internationalization of stock corporations with the overarching goal to ensure financial market integrity and to regain trust in German companies.
Keywords: Corporate governance, reforms, financial markets integrity, Wirecard