Employee Supervisory Board Elections

Supervisory board elections in Germany: an overview

Supervisory board elections for employee representatives are a recurring, highly formalised process in co-determined German companies. Under the Co-determination Act (Mitbestimmungsgesetz, MitbestG), companies with more than 2,000 employees have a parity supervisory board in which half of the members are elected by the employees; under the One-Third Participation Act (Drittelbeteiligungsgesetz, DrittelbG), companies with more than 500 employees have a board in which one third of the members are employee representatives. The elections follow detailed election regulations, involve election boards in every establishment and can take many months. Errors can lead to a challenge before the labour court and, in the worst case, to an invalid election.

For management, the elections are not merely an employee matter. The company bears the costs, must provide information and support to the election bodies, and has an interest in a lawful and timely process because the composition of the supervisory board affects the validity of board resolutions and the appointment of the management board. Groups with listed companies must also observe gender quota rules that affect who can be elected.

Which regime applies: MitbestG or DrittelbG

The applicable regime depends on the legal form and the number of employees normally employed. The MitbestG applies to stock corporations, partnerships limited by shares, GmbHs and cooperatives with more than 2,000 employees. The DrittelbG applies to such companies, and to mutual insurance associations, with more than 500 employees. Employees of group companies are attributed to the controlling company in certain constellations, and agency workers count in the hirer's company if their deployment exceeds six months.

If management believes that the board is not composed in accordance with the applicable rules, for example because headcount has crossed a threshold, it must start a status procedure by publishing a notice in the company gazette and in all establishments (§ 97 of the Stock Corporation Act, AktG). Unless an application to the court is filed within one month, the board is then composed according to the rules stated in the notice. Only after the status procedure is completed can the new supervisory board elections take place.

Supervisory board elections under the MitbestG

Under the MitbestG, the size of the board depends on headcount: six employee representatives in companies with up to 10,000 employees, eight in companies with up to 20,000 and ten above that, with matching numbers of shareholder representatives (§ 7(1) MitbestG). The articles may opt for a larger board. Among the employee representatives, two seats (three on a board with ten employee representatives) are reserved for representatives of trade unions represented in the company or the group (§ 7(2) MitbestG), and one seat is reserved for a senior executive (leitender Angestellter) (§ 15(1) MitbestG).

In companies with more than 8,000 employees, employee representatives are elected by delegates unless the employees vote for direct election; in smaller companies the reverse applies (§ 9 MitbestG). A vote on the election method requires a petition signed by one twentieth of the eligible employees and a turnout of at least half of them. Delegate elections involve two stages: employees in each establishment first elect delegates, who then elect the board members. Union representatives are elected in a separate ballot on the basis of union nominations (§ 16 MitbestG).

The process is governed by three election regulations (Wahlordnungen) issued under the MitbestG, depending on whether the company has one establishment, several establishments or whether employees of several companies participate. A main election board at company level and establishment election boards organise the process. Nominations for employee candidates must be supported by one fifth of the eligible employees or 100 of them.

Typical sequence of a delegate election

1. The main election board is formed and the company provides headcount and establishment data.
2. The main election board announces the election and the number of seats to be filled, including union and senior executive seats.
3. Where requested, employees vote on whether delegates or direct election will be used.
4. Establishment election boards draw up voter lists and conduct delegate elections in each establishment.
5. Nominations for employee candidates, union candidates and the senior executive candidate are submitted and checked.
6. Delegates meet, usually in one assembly, and elect the supervisory board members by secret ballot under proportional representation.
7. The result is announced in the establishments and published by management in the Federal Gazette, which starts the two-week challenge period.

Each step has its own formal requirements and deadlines laid down in the election regulations, for example on the content of announcements, the period for objections to voter lists and the conditions for postal voting. Many supervisory board elections fail not because of conflict but because a notice was posted too late in one establishment or a voter list omitted employees on parental leave. Coordinated checklists for all establishment election boards are therefore the most effective risk control.

Supervisory board elections under the DrittelbG

Under the DrittelbG, one third of the supervisory board consists of employee representatives (§ 4(1) DrittelbG). If one or two employee representatives are to be elected, they must be employees of the company; if more than two are to be elected, at least two must be employees, which leaves room for external candidates such as union officials (§ 4(2) DrittelbG). Employee candidates must be at least 18 years old and have belonged to the company for one year. Women and men should be represented according to their numerical ratio in the company.

Elections under the DrittelbG are direct and follow a single election regulation. Works councils and employees can nominate candidates. Because there are no reserved union or senior executive seats, the process is simpler than under the MitbestG, but the formal requirements for election notices, voter lists, nominations and postal voting still apply in every establishment.

Gender quotas and the composition of the board

For listed companies subject to the MitbestG, the supervisory board must consist of at least 30% women and at least 30% men (§ 96(2) AktG). The quota applies to the board as a whole unless either the shareholder side or the employee side objects before the election, in which case each side must meet it separately. An election that would breach the quota is void for the seats concerned, which remain vacant. Employee election boards and unions must therefore coordinate their lists with the quota position of the board, and companies should share the current composition early.

For non-listed co-determined companies, targets for the proportion of women on the supervisory board must be set and reported, but there is no fixed quota. The MitbestG and DrittelbG contain softer rules on gender representation among employee representatives.

Challenges to election results

An election of employee representatives can be challenged before the labour court if essential provisions on the right to vote, eligibility or the election procedure were breached, the error was not corrected, and the breach could have changed or influenced the result (§ 22(1) MitbestG; § 11(1) DrittelbG). Entitled to challenge are, among others, at least three eligible employees, the works councils, the senior executives' committees, the unions represented in the company and the company's management board. The challenge must be filed within two weeks from the day the election result is published in the Federal Gazette.

Typical grounds include errors in voter lists, improper exclusion of candidates, defects in postal voting, breaches of secrecy, and incorrect application of the delegate or direct election method. A successful challenge takes effect for the future: the board member loses office when the court's decision becomes final, but board resolutions adopted in the meantime generally remain valid. In rare cases of gross and obvious violations, an election can be void from the outset, which can be asserted at any time.

Illustration: a GmbH with 2,300 employees conducts direct elections without first giving employees the opportunity to vote on the election method. A union challenges the result within two weeks of publication. If the court finds that the omission could have influenced the result, the employee representatives lose office and the election must be repeated, delaying the board's full composition by months.

The company's role and costs

The company bears the costs of the elections, including the costs of the election boards, election materials and any external support, and must release members of election bodies from work with pay. Members of election boards and candidates enjoy protection against dismissal similar to that of works council candidates. Management must not influence the election, but it must provide the information that election boards need, in particular headcount, establishment structure and personal data for voter lists, in compliance with data protection rules.

Management also has an interest in legal certainty. It can support the process by providing legal guidance to election boards on request, using reliable election software and documenting each step. Where the company is uncertain whether co-determination applies at all, it should resolve that question through the status procedure before elections begin. Our page on co-determination explains the thresholds, and our article on SE and co-determination covers the alternative of negotiated participation in a European Company.

How TRW & Co helps with supervisory board elections

We advise companies on supervisory board elections under the MitbestG and DrittelbG: status procedures when thresholds are crossed, timetables, cooperation with election boards, data protection for voter lists and the interaction with gender quota rules. We prepare management's communications, support HR in providing headcount data, and review election documents on request. If an election is challenged, we represent the company before the labour courts and advise on the consequences for the board's composition and resolutions. Our corporate governance team coordinates the shareholder side. To discuss an upcoming election, contact us. This article provides general information and is not legal advice.