Restructuring "Germany Inc.": The Politics of Company and Takeover Law Reform in Germany and the European Union

The reform of German company law by the Control and Transparency Law (KonTraG) of 1998 reveals the politics of corporate governance liberalization. The reforms strengthened the supervisory board, shareholder rights, and shareholder equality, but left intra‐corporate power relations largely intact. Major German financial institutions supported the reform's contribution to the modernization of German finance, but blocked mandatory divestment of equity stakes and cross‐shareholding. Conversely, organized labor prevented any erosion of supervisory board codetermination. Paradoxically, by eliminating traditional takeover defenses, the KonTraG's liberalization of company law mobilized German political opposition to the European Union's (EU) draft Takeover Directive and limited further legal liberalization.