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We analyze the law regarding the adequacy of executive directors’ compensation in Germany. First we provide an overview of the law’s contents clustered in four different fields. We also introduce economic theories to analyze the principal-agent relationship with one principal (shareholders) and two agents (supervisory board, board of directors) as well as the D &amp; O insurance in the context of two contradicting theories. We debate whether regulation can be viewed as justified and go into detail analyzing each new aspect of the law and possible economic consequences on the compensation level. We also provide a short overview and discuss the implication of the law by German firms.

Das Gesetz zur Angemessenheit der Vorstandsvergütung