The public enterprise sector is as economically important as it is publicly disreputable: There are about 16,500 public enterprises in Germany. From the point of view of tax-paying citizens, it is often a reservoir of unsuccessful politicians or those who have been voted out of office for other reasons, and party friends provide them with a warm, lavishly furnished reclining chair. Current scandals about nepotism in the Frankfurt and Wiesbaden Arbeitewohlfahrt (Workers’ Welfare Association) with considerable salaries (about 300,000 €), company cars for kindergarten managers with more than 500 hp, the eternal misery around the Berlin airport “Willy Brandt”, the job haggling when filling the chief positions of the Cologne public utility company or the Academy of Architecture continue to promote the fact, that the trust in transparency and expertise in the sense of selection of the best is very limited in the population. Now, a proposal for a model code of corporate governance for public companies was published in the middle of this month: The German Public Corporate Governance Model Code (D-PCGM), see www.pcg-musterkodex.de.

The project unites diverse experience, as it was attended by practitioners such as current or former mayors of large cities, including the cities of Mainz and Mannheim, the treasurer of Cologne, board members of public companies as well as legal and economic professors and, among others, the former Federal Minister of Justice and Economics, Brigitte Zypries. The model code of conduct could serve as a guideline for local authorities to follow. It itself is based in many points on the code for private companies, but takes into account special features which result in particular from the fact that public companies often manage tax money, which can lead to problems in the area of sponsoring in particular. Just as in the Corporate Governance Code of the private sector, the accumulation of offices and the qualification for offices is also an issue, as well as incompatibilities in political mandate holders. 

The D-PCGM is not a law, but gives recommendations for good corporate management and organization according to the rule of thumb “comply or explain” – as in the private sector. At present, about 60 local entities of over 2,000 German cities and more than 200 administrative districts have a similar code, although some of them are very inconsistent and incomplete.

However, if the model code were to be adopted by the city council or state parliament, it may also have legal impact: For as in the private sector, it is conceivable that a deviation and inadequate explanation from a conduct recommended by the D-PCGM could trigger liability consequences – as in the private sector. It could thus become more than an “etiquette manual for public companies” („Knigge für öffentliche Unternehmen“, cf. SZ of 7 January 2020).