ESG – Governance in Times of Crisis – BusinessLaw Magazine

ESG becomes more important for ­executives in Germany when enterprises are faced with operational and financial challenges.

Sustainability and ESG still remain the most relevant topics these days. But is the focus on governance enough in times of crisis? Would leaders be better advised to concentrate on compliance instead? And is self-governance perhaps the better compliance management?

Management needs to initiate appropriate measures to recognize any developments of a damaging character relevant to their company. Such means include establishing a monitoring system as stipulated in the German Stock Corporation Act. However, in times of crisis, this mandatory obligation to monitor and supervise becomes more important and failure to do so could ultimately result in D&O liability.

D&O liability is twofold in Germany – different obligations exist at the management and the supervisory board levels. Cases were rarely brought before the courts but in the last decade this has changed due to the highly publicized ­instances of corruption, bribery, and antitrust involving DAX-listed companies (see Magotsch/Otto, Germany: Take ­Action Now, Sustainability and Human Resources, 29 June 2022).

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