New Public Corporate Governance Code (PCGK) strengthens the management of federal companies

On January 1, 2024, the Public Corporate Governance Code, or PCGK for short, was updated in order to improve the management of companies in which the federal government holds a stake. This measure was taken against the backdrop of legal changes at national and European level and crisis situations such as the coronavirus and energy crises.

The revised Code aims to strengthen the resilience of federal companies, promote digitalization measures, comply with the new European sustainability requirements and adapt the auditing requirements to the legal requirements.

In addition to linguistic clarifications, such as the definition of federal shareholdings via special funds as direct shareholdings, the Public Corporate Governance Code must be applied to all direct and indirect domestic majority shareholdings. 

Furthermore, particular emphasis was placed on control systems, which are of great importance in such a dynamic and demanding corporate environment in order to respond to challenges at an early stage. The importance of internal auditing for the management and the supervisory body was also emphasized. The selection criteria for management were expanded to include empathy as an important quality in addition to the knowledge, skills and experience already required. It is also recommended that the management should not hold more than two external supervisory board mandates.

With regard to sustainability, measures for climate adaptation and the creation of climate-neutral organizations have been included in the Code. With the intention of ensuring modern processes and products, the management is encouraged to make use of the company's digitalization potential. 

With regard to the new European CSR Directive, the sustainability reporting obligations, which are graded according to company size, have also been further developed. With the aim of reducing bureaucracy, the sustainability reporting of federal companies is to be based on company size. This means that small and medium-sized companies that are not active on the capital market should apply the German Sustainability Code and large corporations should apply the CSRD requirements.

The recommendations on auditing were also adapted to the current requirements, including the internal and external rotation of auditors.