German Directors And Corporate Model Brief Law Company Business Partnership Essay

Published Date: 02 Nov 2017

Introduction: 2

Introduction to the Corporation: 2

Overview of Corporate Structure in Germany and Australia: 3

Australian Directors and Corporate Model Brief: 4

German Directors and Corporate Model Brief: 4

Corporate models in common law and civil law systems: 5

Australian Common-Law Model: 5

Screening and Appointing Management: 5

Regulating Management With Rules and Standards: 6

Aligning Managements Interests to Shareholders Interests: 7

Australian Corporate Social Responsibility (?CSR?): 7

German Civil Law Model: 8

Screening and Appointing Management: 8

Regulating Management With Rules and Standards: 9

Aligning Managements Interests To Shareholders Interests: 10

Co-determination History & Regimes (Three Models of Co-Determination): 10

Directors Duties of Care, Good Faith, and Loyalty Overview: 13

Intro: 13

Who do Directors Owe Duties to? 14

The Use of Rules In Situations Where Loyalty Is Often Breached: 16

Directors Duties of Care, Good Faith, and Loyalty in Australia: 16

Use of the Standard in Australia: 16

Directors Duties of Care, Good Faith, and Loyalty in Germany: 17

Use of the Standard in Germany: 17

An Ideological Comparison: 18

Conclusion: 20

Introduction:

With increased consolidation of business across the globe due to globalization, cross-border commerce and investment have increased drastically due to world markets becoming available. Increased consolidation of business activities also results in executives of multinational groups finding that they are required to become directors of companies in a variety of jurisdictions, often at short notice.1 Due to cross-border interactions, business people, investors, and directors need to know that their interactions with foreign corporate entities will be governed accordingly to protect their investments as shareholders and business associates.

This report will emphasize how corporations and the body of requisite corporate law has developed in Australia and Germany. Though Australia and Germany come from divergent legal frameworks, the common and civil law, it will be shown that despite this significant difference, the legal mechanisms, which contributed to the historical development of Directors Duties and the corporate law are highly analogous in both jurisdictions. Furthermore, the paper will attempt to establish the intriguing ideological similarities, such as concepts of loyalty to the company, ethics and societal standards and expectations placed upon directors, which are shared by the these two different jurisdictions, to draw a link between how Directors Duties have developed in Germany and Australia. This paper will demonstrate that regardless of the different legal frameworks, some ideologies are universal, and that these universal concepts have shaped the manner is which law in certain areas have developed. The consistency in ideology has then led to cohesion in the legal development of Directors Duties across both jurisdictions.

Introduction to the Corporation:

Since its inception the corporation has been the most effective structure for wealth and capital accumulation. The usefulness of a corporation is primarily due in part from the separation of management and ownership. By doing this, the corporate body is not an actual person but has a legal personality attributed to it by the law of the nation. 2 When a corporation is created by statute it?s liabilities do not rest with its owners i.e. the shareholders but rather in the management that governs the corporate body. Therefore by attaining a legal personality the corporation and its management are subject to the legal rights and liabilities as if the corporation were its own individual person. As corporations possess a significant economic, political, and social presence in the global economy, 3 its strict regulation by corporate laws is paramount. As mentioned, though the company is liable for its actions, personal liability maybe inflicted on the individuals who guide the corporate entity and have a duty to act in good faith and with confidence. These are more commonly known as director?s duties, or statute, law, and equitable which the Board of Directors must adhere to. These Directors Duties are central to the subset of law written for corporate governance and are referred to as corporate law.

A corporation has the potential to amass great power and with that power comes responsible management. An analogy of the corporation is to that of a child, they can do nothing on their own as they?re completely dependent on their parents. As directors are stewards to the well being of the corporation similar to the responsibility of parents to better their children, a director?s primary loyalty is to that of the corporation and to ensure its proper guidance. Overall the primary duties of a director are to avoid conflict of interest, to promote and exercise a high standard of care, to exercise outstanding skill and diligence to the corporation. However what is most paramount is to act in good faith and to ensure the corporations vitality is continuously maintained and acted upon.

Overview of Corporate Structure in Germany and Australia:

As previously mentioned Germany and Australia are based on two different structures of law that being the common-law and civil law. It is under these two different bodies of law that corporate structure and governance has been developed in these two nations.

Australian Directors and Corporate Model Brief:

In Australia, a corporation consists of a Board of Directors to manage the business of the company. This board is elected by members of the company (i.e. shareholders) who have meetings of the members where they elect the directors and set out rules for the company.

These roles can be seen as organs of the corporation, mechanisms that establish how the company shall be operated as a legal entity.4 When the members meet they have the opportunity to set out how the company shall be run and operated. This is commonly known as creating a ?constitution? for the corporation to abide by and sets out the procedural rules in which it needs to operate. Nonetheless, if an Australian corporation does not wish to create a constitution or if its constitution is lacking in substance (deliberately or by poor drafting), the corporation will be subjected to the ?replaceable rules? as well as the ?mandatory rules? found within the Corporations Act 2001.5

German Directors and Corporate Model Brief:

When comparing Australia to Germany, Germany uses a very different structure to govern Corporations. Within the system called co-determination incorporation consists of a supervisory board representing shareholders managers and workers as well as a management board to manage the business of the corporation. The premise is that the corporation is a contract between capital, management, and labor and therefore all interests should be represented in the way that the corporation should be run. 6 Within a German corporate structure a German corporation is required to have a two-tier system of governance, this is more commonly known in Germany as the Vorstand and the Aufsichtstrat. When comparing and contrasting Australian corporations to that of German corporations it is found that the management board, or the Vorstand, is unable to be removed by the members of the corporation, this being the shareholders of that corporation. The primary difference from that of Australia is that the Vorstand in Germany is governed by the supervisory board, known as the Aufsichtstrat, or commonly known as the Board of Directors. It is the Aufsichtstrat rather than the Vorstand who answer to that of the members of the corporation. It is therefore seen that the Board of Directors is chosen directly by the company?s members, where the members are able to advocate their interests and therefore the board of directors will pass those interests on to the management of company. It should also be noted that since the management board is only accountable to the Board of Directors there is a higher duty of care placed on the management board to operate responsibly and therefore a higher personal liability is placed on the management of the company.

Corporate models in common law and civil law systems:

Australian Common-Law Model:

Screening and Appointing Management:

In comparison to the German model of corporate governance Australian corporate governance provides a simpler model. As emphasized by the Corporations Act 2001 (Cth) the Board of Directors has no specific supervisory duties over that of any other director. Australian corporate law dictates that the board of directors are responsible for the management and running of the company and therefore liability will be placed on the Board of Directors for its management, this is dissimilar to that of German corporate law that emphasizes a system of co-determination. It should be noted however that the Corporations Law in Australia provides a far more detailed set of fiduciary duties compared to that of German corporate law. The Corporations Act 2001 (Cth) allows Australian corporations to govern themselves by the Corporations Law replaceable rules or the corporation can be governed by the articles of association as agreed upon by the corporations members, or known as the corporate constitution.7

The Corporations Act 2001 (Cth) does provide guidance as to how the Board of Directors shall be managed. However the company?s articles of association can provide for the election and removal of directors by the fact of a general or special resolution of the members. An example of this can be found with the appointment of a director in Australia where under section 201G states that a director of maybe appointed by the company at a members meeting. This is a replaceable rule and can be changed by the company?s constitution. Note however that in the legislation special rules for the appointment of single director and the creation of single shareholder proprietary companies, section 201F does exist. The Corporations Law in Australia also provides for the removal and resignation of directors. However, section 203C of the act states that for proprietary companies the replaceable rules cannot be changed. A director can be removed by an ordinary resolution at a members meeting or directors can remove other directors from their position if the company?s constitution allows. Within a public company however directors can only be removed by provisions found in the Corporations Law, i.e. section 203D. Removal from a public company is not governed by the replaceable rules. A director can only be removed by an ordinary resolution and members meeting. It should also be noted that the directors cannot remove other directors as stipulated by 203E.8

Regulating Management With Rules and Standards:

Australian Corporations Law contains numerous provisions to avoid self-dealing by directors in order to prioritize their own interests before that of the corporations. Such examples of directors? conflicts of interest can include directors generating secret profits, the diversion of business opportunities, and misappropriation of company property (to be discussed in further detail). Regardless under Australian Corporations Law and under Australian case law there has always been a high onus on the director to provide full disclosure to the Board of Directors and the members of the corporation. Proper governance by corporations? directors is also increased when the company is traded as a public entity on stock indices, i.e. Australian stock exchange (?ASX?). The stock exchange in conjunction with the Corporations Law of Australia provides that a company must be more transparent and have greater reporting responsibilities.9

Aligning Managements Interests to Shareholders Interests:

To encourage corporate responsibility by the Australian director, the use of performance-linked remuneration is allowed and recommended by the ASX. It should be noted that in a listed company the members must approve any remuneration package for the companies? directors. As required by the Australian Securities Investment Commission (?ASIC?) and the ASX corporations and listed companies on ASX are to prepare yearly reports on the corporation and remuneration of the directors. This year the report is submitted to ASIC and to the members of the corporation in connection with the annual general meeting.10

Australian Corporate Social Responsibility (?CSR?):

In Anglo-American legal systems, the principle-agent model has had a significant influence on corporate governance. The model is based on the principle where it?s believed that the corporate body if run more effectively where directors (agents) make decisions ?in the best interests of? shareholders (principles). If the directors fail to make decisions in the best interests of the shareholders it results in ?agency costs?. To prevent these agency costs from occurring, the common law system places emphasis on the interests of the shareholders and imposes obligations on the individual directors of the company to govern the company in good faith, with competence, and for the best interests of the company.11 When referring to the best interests of the company, the meaning extends to all parties involved with the corporation, including not only its shareholders/members, but also its creditors in the context of insolvency.

With regards to Corporate Social Responsibility (?CSR?) by directors of the corporation, it has been noted by the Australian Parliamentary Joint Committee on Corporations and Financial Services (?JCCFS?) that the current mechanism used for corporate governance may not be sufficient for CSR. As found by the JCCFS, the Corporations Act 2001(Cth) ?permits directors to have regard for the interests of stakeholders other than shareholders, and recommended that amendment to the Directors Duties within the Corporations Act is not required.?12 JCCFS has also noted that the Corporations Act 2001 (Cth) in conjunction with the Australian Stock Exchange (?ASX?) rules are sufficient enough to encourage CSR.13

In Australia, it has been found by JCCFS that CSR is essentially a voluntary action and that government may encourage directors to act accordingly. It has been suggested that good corporate behavior should be streamlined by the market rather than the government to guide corporate behavior in socially and economically favorable directions. Nonetheless, it has been mentioned through CSR reports that, ?the Australian Government, in consultation with relevant sections of the business community, [should] undertake research into quantifying the benefits of corporate responsibility and sustainability reporting.?14

German Civil Law Model:

Screening and Appointing Management:

The German Stock Corporation Act or Aktiengesetz (?AktG?), in conjunction with the Commercial Code (?HGB?) and Civil Code, requires that, as previously discussed, a system of co-determination. The AktG does outline requirements for members of the supervisory board15 and the management board16. These requirements include such prerequisites as an absence of a criminal record as well as the maximum number of companies on whose boards the directors may sit on. Additional guidelines and recommendations are found within the German code of corporate governance. The corporate code provides recommendations on, i.e. the creation of subcommittees within the Aufsichtstrat. Unlike Australia the terms of office of the Aufsichtstrat and the Vorstand can extend up to five years and therefore the threat of facing reelection from these bodies is weaker. Nonetheless the shareholders must vote each year17 to clear the directors of any liabilities for their actions (Entlastung) or if the members see fit, remove the elected directors.18

Regulating Management With Rules and Standards:

The AktG outlines required procedures for meetings, decision-making, and contains a number of rules for regulating the behavior of management.19 Regulations placed upon management includes having the Vorstand responsible for calling the general meeting20 as well as rules addressing the possible self-dealing by directors that forbid activity that is against the interests of the company.21 The act also outlines the requirement of one body representing the company while negotiating compensation contracts22 with the other as well as any loans the company grants to a board member be approved by specified procedures.23 Nonetheless standards and loyalty and care that directors are required to meet have been outlined within the decisions of the high federal court and within in the AktG.

Aligning Managements Interests To Shareholders Interests:

Similar to that of the Australian corporate law and as outlined in the ASX, in 1998, German law was amended to facilitate the use of stock and stock options to grant performance linked compensation for the Board of Directors or Vorstand. German commercial law was once again updated in 2005 to ensure that executive compensation, both fixed and performance linked were to be disclosed to the financial markets on an annual basis,24 as required by the annual reports in Australia.

Co-determination History & Regimes (Three Models of Co-Determination):

As previously highlighted, co-determination is a method of protection by utilizing layers of governance to act in the best interests of the employees or the administration of the corporation and to the interests of the shareholders. Co-determination in Germany has existed as early as 184825 where the German Congress attempted to introduce law which government employee entitlements and the administration of a co-determinative body or the Aufsichtstrat.26 Unfortunately, the 1848 draft failed as well as the vast majority of legislation drafted during that time with hopes of uniting Germany as a constitutional republic. However, Bismark Germany's attempt of becoming a republic failed and rather sought unity under a Prussian dominion.27, 28

It was not until the amendment of the Business Practice Act or Gewerbeordnung (?GewO?) in 1890 where co-determination came into its infancy. The amendment permitted German factory workers to voluntarily form labor councils where until 1916, the utilization of labor councils became a mandatory body within the German corporation, especially during wartime.29 The next upgrading of co-determination came within Article 165 of the Weimar Constitution (1919) that again focused on Germany?s workers, where the Act emphasized on the ?right to cooperate with employers on an equal basis in the regulation of wages and working conditions?. Under the act, employees were able to negotiate with employers on the ?economic development of production facilities.? In 1920, the Works Council Act (Betriebsrategesetz) integrated the aforementioned amendments which resulted in the ability to have employees represented via the workers council as well as having members of the council representing themselves on the Supervisory Board.30?31

The implementation and utilization of co-determination had not realized its full potential and come into modern utilization until post war era Germany in the 1950s. The need for co-determination was utilized in the mining, iron, and steel industry after the war where the entire industry was decimated. The German government attempted, to what it seemed to be to cater to the needs of corporate Germany in a time of rebuilding, significantly reducing the size of the Supervisory Board and the employee members that sat upon it. Upon the threat of mass strikes in the mining, iron, and steel industries, the law on co-determination of employees in the Supervisory Boards and Management Boards of enterprises in these industries forced the German Parliament on 21 May 1951 (Montan-Mitbesimmungsgesetz) to fully adopt the principle of employee representation on corporate boards.32 Under this Act, its application was to corporations and corporate groups operating in mining, iron, and steel sectors. The rule under this act was to force the corporation to have an eleven member Supervisory Board where five were shareholders, five were employees, and the eleventh to be a representative form both sides.33?34

To reiterate, this embodiment of law provided for equal representation of employees and shareholders on the Supervisory Board as well as the utilization of an appointed ?labor director? whose responsibility is to take matters to the attention of the Management Board.35 Unfortunately, after the threat of mass strike had subsided, the German legislature enacted the Labout Management Relations Act (1952) or Betriebsverfassungsgesetz (?BerVG?). The unfortunate implication of this Act is that it reduced representation on the Supervisory Board to one third while eliminating representation on the Management Board.36 However, 25 years later, co-determination was restored to its previous 1950?s level of employee and shareholder representation of the Supervisory Board.

Under the Co-Determination Act (1976) or Mitbestimmubgsgesetz (?MitbestG?) employee representation on the Supervisory Board represented around half rather than one third representation.37 It should be noted however that in 2004, that the co-determination rules pursuant to the Third Participation Act (?DrittelbG?) had replaced the BerVG (1952) to the effect of leaving the co-determination parameters unaffected. The DrittelbG however did give effect to ?Partnerships Limited by Shares? or Kommanditgesellschaft auf Aktien (?KGaA?) of business? that range between 50038 and 200039 employees to maintain DrittelbG regulations. The DrittelbG however possesses complicated rules for KGaA and Public Companies (?AG?) who possess fewer than 500 employees when applying co-determination requirements on the boards.40 The complication arrives where either company incorporates before or after 10 Aug 1994. If the company has entered into the commercial register before the date, they will be bound by the co-determination rules under the BetrVG (1952). However, an exception lies to the requirement of co-determination where if all of the shares are possessed by person or an entity.41?42

Lastly, AGs and KGaAs who possess more than 2000 employees will be subjected to the co-determination rules of MitbestG (1976) if they are not engaged in the mining, coal, and/or steel industries.43 The MitbestG requires that the supervisory board to consist of equal numbers relevant to the size of the company, whilst possessing a makeup of roughly equal numbers of employees and shareholders.44

In maintaining a system as outlined by MitbestG, co-determination will allow for adequate representation from all interested parties interconnected with a German company, both AG and KGaA. In doing so by utilizing a system of electoral voting schemes and rules, as outlined in MitbestG, i.e. s27(1),(2), 31(1)-(4), will allow for an adequate system that will guide the Supervisory and Managerial boards in the correct corporate direction.

Directors Duties of Care, Good Faith, and Loyalty Overview:

Intro:

The analysis of both German and Australian corporate governance has reflected historical relevance and legislative mechanisms implemented that form and govern corporate bodies and their makeup. However, though there is a prevalent system of checks and balances within both structures to maintain corporate structure, regulation and case law needs to go further in regulating the behavior of directors against incompetence and disloyalty. Both jurisdictions are analogous in the need for directors to possess standards of due-care and loyalty or as known in Germany as (?duty of care? or Sorgfaltspflicht) and loyalty (?duty of loyalty? or Treupficht). Duties of Loyalty and Care are influenced by rules and standards of conduct. These provisions advise what directors shall and shall not do and how a person should act or fulfill a function or task to which the quality of performance can be assessed.45 To further elaborate, standards possess a more flexible application to acts and procedures due to the fact that the drafter and creator of the standard are unable to foresee every application, this can be a challenge for directors when attempting to abide by standards when they do not know what they are. When considering rules and their application to directors, rules offer a ?bright line? that easily dictates what a director shall and shall not do, thus being rigid. However, the rigidity that rules possess can make it easier for directors to evade violation and repercussion. Nonetheless, both measures when it comes to directors are there to softly and firmly guide directors in their duty to the corporation.46

As previously suggested, corporations are much like children, they are completely unguided except for the parents or directors that give them guidance and allow them to grow properly. Therefore, directors are considered to be ?fiduciaries? to the company as they are to manage the company and promote its growth that is in the best interests of the company. Directors must always remember that the company shall be owned by that of the shareholders and therefore must subordinate their own interests to that of the company whilst not breaching their duties by making decisions that would harm the company and put their own personal interests forward. As long as a directors? loyalty is to that of the company, standards that permit that the director shall manage the company as they see fit until they behave in a manner which breaches their duty of care, good faith, and/or loyalty. The threat of removal or discipline of directors can and shall be reinforced by the ?rules? set out in statute and regulations. Regardless, a court in its judgment of a corporation will not dictate to a director as to how to make corporate decisions, as that is not their specialization. However, a director will be scrutinized by the court if their decision is completely irrational to that of a standard and not used in common practice. This is known as the ?business judgment rule?, where the director will be questioned as to their standard of care and/or loyalty to the best interests of the company regardless of their personal interests.47

Who do Directors Owe Duties to?

Australia:

In Common Law Australia parliament & legislators have codified the standards and rules as required by directors in significant detail. As previously mentioned, a directors? duty is to the company where the interests of the company come before that of the directors. The judicature has traditionally found that the interests of the company are usually extended by extension of the shareholders.48 The Corporations Act 2001 (Cth) does emphasize the necessity of acting in good faith and promoting the success of the company, however, the director must also look after a wider ambit of responsibilities such as the long term implications and consequences of its actions, including: their employees interests; maintaining relationships with suppliers; customer support; their interaction with the community at large and their reputation; their impact on the environment; and their ethical behavior are all standards that are assessable.49

Germany:

In Civil Law Germany, it has been found that a directors duty of care and loyalty run directly to that of the company where directors must serve the interests of the company or Unternehmensinteresse. German directors will always have to uphold this high standard regardless of how they were appointed; whether it is by the company?s articles of association or Satzung or by employees & members of the company. Unternehmensinteresse operates very much in the same way that the Australian system of rules and standards in conjunction with the Corporations Act 2001 (Cth) where, it is meant to mediate the interests of numerous groups. This duty to mediate the interests of all groups includes a duty to that of the employees, the company's? creditors, and the members.50

The Use of Rules In Situations Where Loyalty Is Often Breached:

Analogous to both jurisdictions, Australia and Germany possess rules that are able to contain predictable situations from arising and deter directors from breaching their duties. Therefore, parliaments, legislatures, and regulatory bodies have introduced a set of law that will reduce the areas where directors may act disloyally and will violate their duties; this can also be referred to a conflict of interest faced by directors when they are tempted to violate their duties to the corporation. Breaches of loyalty can very from minor offences (i.e. stealing office supplies) to very serious offences (i.e. embezzling or appropriating money) and can be described in two broad yet distinct categories:51

1 ?A director has a personal interest in a transaction that the company enters into (self-dealing), which can take the form of:

a A director actually being the contractual counterparty in the transaction, such as in the case of executive compensation, a loan or a sale of property; and

b A director receiving compensation for the transaction?s success or failure, such as a fee paid by a third party or being fired or promoted because of a merger?52

2 ?A director competes with the company, which can take the form of:

a A director owning or managing a competing business, or

b A director taking a valuable opportunity from the company for personal use.?53

Directors Duties of Care, Good Faith, and Loyalty in Australia:

Use of the Standard in Australia:

The Corporations Act 2001 (Cth) has been largely sourced from UK Corporations Law where the whole of the Corporations Law of Australia consists of a single, national statute. However, before the codification of directors? duties by the Australian Corporations Law, courts would determine on the facts of each case whether the standard was met by applying the duty of loyalty standard to require that directors? act ?in good faith? and in the ?interests of the company.?54 Nonetheless, there is uncertainty in the application of the words ?good faith? and ?interest? as their application may apply flexibility. Hence, though the Corporations Law does a good job of encapsulating the gist of duties required by directors from that of a large body of case law, the common law is still a relevant tool that continues to bring meaning and understanding to such a large body of statute.

Directors Duties of Care, Good Faith, and Loyalty in Germany:

Use of the Standard in Germany:

The duty of loyalty or Treupflicht, ?has been described as ?the duty in all matters connected with the interest of the company to focus solely on the good of the company, to the exclusion of the interests of the director and any third parties.??55 Like in Australia, a directors duty is to that of the company, and in the application of Germany, the obligation is placed on both the members of the Management (Vorstand) and Supervisory Boards (Aufsichtrat). A conflict of interest or disloyalty to the company where a ?director is found to have made a decision as director on the basis of an interest other than the good of the company, he will be liable to the company for damages.?56 ?Any transaction that a director enters into with the company must be at fair, ?arms length? conditions.57 Members of the Vorstand may not take opportunities that could be exercised by the company,58 and members of the Aufsichtrat may not take opportunities that they learn of in their position as directors with the company.?59

?If a shareholder or the company challenges a directors? decision, and proves that the company has suffered damage because of it, the director will then have the burden of proving that he acted with the requisite diligence in order to escape liability.?60 German courts have decided relatively few decisions on directors? duty of loyalty partially because the safeguards set up by the structural rules prevent much self-dealing, but mostly because the procedural hurdles for filing an action have historically been very high.?61

An Ideological Comparison:

Throughout this report it is evident that there is a clear Eastern / Western ideological divide in how Corporations Law has developed in these two jurisdictions. The role of capitalist influenced democracy, with greater focus on the individual, verses a more centralized power where government has a greater monopoly leverage over how power is divided resonates through the differences in how corporation law has developed and is structured in Australia and Germany. For example, in Germany, the five year office term for Directors, which you do not encounter under Australian Corporate Law, as in Australia Members and Shareholders have the right to remove directors fit at any point, is essentially consolidated by the fact that in Germany shareholders and members must vote each year to clear directors of any liabilities, or if members see fit, remove elected directors. Although we begin with a ideological divide where in Australia there is a greater focus on democratic style elections and focus on individual rights in the Corporate structure, in comparison to Germany where the Corporate Structure places a greater focus on community actions and rights, we can still witness the ideological gap being consolidated between the two approach taken by these nations. It then becomes evident that there is a universal significance for both countries to keep directors accountable to shareholders, and ensuring that members are protected. It is true that we are different in ideals, beliefs and structures, however it seems that there are certain ideologies that are paramount to the effective and efficient function of our laws and the maintenance of the fabric of our society. In the context of corporation law and Directors Duties we have seen that these ideologies consist of ?good faith?, ?duty of care? and ?loyalty to the corporation?. It is thus prevalent that regardless of our different approach and legal frameworks the end result that we desire to achieve remains the same. With this being stated, it is also important to note that the shared concepts and requirements held by both Australia and Germany in the field of Corporate law, such corporations possessing a legal personality attributed, illustrates that in certain circumstances we may not even be that dissimilar in our approach to the law.

Law codified in both nations emphasizes analogous underpinnings of Directors Duties to corporations in Australia and Germany. These primarily being to exercise a duty of care, good faith, and loyalty to the corporation, which the directors are responsible too. Both jurisdictions appreciate and respect the importance of leaving business decisions to business experts, but however ensure the experts function within the boundaries of the appropriate and necessary rules and regulations. This is known as the business judgment rule within both nations, where the judicature will leave such decisions to the proper and prudent person unless their actions are significantly irregular. As directors in both nations are to act in the best interests of the company, codification of the corporate law and its application have taken a different approach in their application. English influenced Australia has developed a highly robust set of statute and common law that may in its application become inflexible. However, the civil law application in Germany has allowed for greater judicial discretion in the application of the law in the enforcement of serving the best interests of the company. Nonetheless, to come to the different application of the law in both nations, the inverse is found in the structure of the corporate body and how it is run. Australia by comparison has a simpler operative structure where the directors are directly accountable for the operations of the company. However, Germany by implementing a system of co-determination encourages operative rigidity and therefore the strict application of codified laws, as found in Australia, is not needed as the judicature may have a more liberal application of the law. The approach is thus in some instances very different, and this can be attributed to the historically contextual development of corporate law in each jurisdiction. We are undeniably different in our approach and this is what creates color and intrigue, and encourages the desire for greater understanding of how different jurisdictions legally address similar or identical problems. We come from significantly divergent historical contexts, and this has ultimately shaped and developed our approach to law. History tells the story of a nation and it helps us appreciate the legal approaches undertaken by theorists and lawmakers in that jurisdiction. History is unique and its contextual specific requirements has meant that nations from different parts of the world have had to develop and progress according to their unique needs and requirements. These are the elements we can see in the divergent approach to the law from an ideological perspective in both Australia and Germany in the field of Corporations Law.

What is significant is to focus on what drives us to develop law in a certain area. Although this is profoundly shaped by the historical context of each nation, its political and ideological approach and legal framework, rendering the structure different and intriguing, sometimes the end result, in the sense of what is desired to be achieved by law and regulations seem to be consistent regardless of differences in our approach.

Conclusion:

There are some ideals, which are universal. This is to say that regardless of difference in legal framework, political and ideological beliefs and the unique atmosphere in, which we experience these concepts, essentially we are driven to achieve the same results in the field of legal practice. Our understanding of the purpose of law is that it is a mechanism through, which we structure our society, and a necessary element to maintain civility. Law consists of Statute and justice and these two elements interact to achieve a balance between what is legal (Statute) and what is fair (justice). Although the differences in structural and legal approach to Directors Duties clearly exists between Australia and Germany, these differences can be explained due to the unique historical context of each nation and application of the Western/ Eastern ideological divide. However, what is evident when looking at the experience of each nation in developing Directors Duties and regulating corporate law is the reinforcement of the three consistent elements, which are reiterated over and over through this paper. These concepts are ?good faith?, ?duty of care?, and ?loyalty to the company.? Regardless of the legal, structural, ideological and historical differences, which exist, these two nations consider these three concepts as the core of Directors Duties. This further emphasizes the notion of universal ideals. It demonstrates that as human beings there is a level of standard we expect in our society and from people in positions of power, and if these standards were compromised it would lead to chaos. These morals, ethics and practices are shared values with no borders or boundaries, and have ultimately played a crucial role in structuring our legal approach to Directors Duties. As it was stated in earlier, with increased consolidation of business across the globe due to globalization, cross-border commerce and investment have increased drastically due to world markets becoming available. This phenomenon can also be used to explain why in certain circumstances of legal approach we are similar. Cross-boarder business has meant that companies have needed to become aware of the legal practices and expectations of other jurisdictions. For them to encourage harmonious business dealings outside of their home countries business have been forced to adopt certain standards and expectations, which ensures the protection for their business associates. Therefore it is evident that with greater globalization, there has also been a greater consolidation of legal frameworks across jurisdictions.

With focus on how corporations and the body of requisite corporate law has developed in Australia and Germany this paper has clearly demonstrated the differences between these two nations approach to Directors Duties, and the reasons for them. Most importantly the similarities between these two common and civil law nations has illustrated that as people we share similar ambitions, desires and expectations of our legal system and public and private authorities. Differences make us unique and it allows us to learn from one another in a variety of areas. Law is an area where consistent development and understanding of difference in approaches will assist in obtaining the best results. Our geographical and social settings and experiences will inadvertently always demand specifically tailored laws, which are capable of achieving results in our contexts. However, regardless of this and the difference in our legal frameworks, some ideologies are truly universal, and these universal concepts have shaped the manner is which law in certain areas have developed. The consistency in ideology has then led to this cohesion we now see in the legal development of Directors Duties in Australia and Germany.