Company Law and Corporate Governance of Start-ups in Germany: Legal Stipulations, Managerial Requirements, and Modification Strategies

Two topics which currently receive substantial interest are corporate governance and start-up companies in the new economy. However, research combining both subjects is rare. This study aims to fill in this gap because corporate governance is assumed to influence start-ups' performance. Since p...

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Bibliographic Details
Published in:Journal of management and governance 2002-03, Vol.6 (1), p.1-27
Main Authors: Grundei, Jens, Talaulicar, Till
Format: Article
Language:English
Subjects:
Boards of directors
Business studies
Capital costs
Company law
Corporate governance
Decision making
Efficiency
Germany
Governance
Legal reform
Limited liability companies
Management
Organizational structure
Regulation
Startups
Studies
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Summary:Two topics which currently receive substantial interest are corporate governance and start-up companies in the new economy. However, research combining both subjects is rare. This study aims to fill in this gap because corporate governance is assumed to influence start-ups' performance. Since peculiarities of start-up companies exclude a simple application of extant governance wisdom, we develop propositions about corporate governance structures of start-up companies in Germany - a country which has the most active start-up scene in Europe but is also known for its far-reaching regulations of company law. This regulatory impact is most significantly associated with the choice of a legal form of business organization. While a certain legal form can provide some important advantages, it can require at the same time corporate governance structures which could impose problems on managing high-tech start-ups. Focusing on the increasingly prevalent stock corporation, we argue that this form, on the one hand, is advantageous for gaining resources and for the comprehensiveness of strategic decision making. On the other hand, regulations as to the obligations to have collective responsibilities in the management board and to set up a supervisory board can be expected to decelerate decision making and thus to put firms at a disadvantage in high paced industries. We suggest that start-ups, therefore, make hidden modifications in order to design effective corporate governance configurations.
ISSN:1385-3457
1572-963X
DOI:10.1023/A:1015559828219