Local confidentiality of oversight committees

In Germany, municipal supervisory board members are tasked with a delicate balancing act between corporate confidentiality obligations and municipal transparency requirements. These duties require them to protect sensitive company information, while ensuring sufficient transparency to the municipal owners and public.

Key legal and practical guidelines for this balancing act include:

Confidentiality Obligations: Supervisory board members are bound by fiduciary duties and corporate law obligations to maintain confidentiality about sensitive business information. This typically includes non-disclosure of trade secrets, internal financial details, and personnel information unless legally required to disclose.
Municipal Transparency: Public law frameworks and municipal governance require transparency towards the municipal council and citizens for accountability, particularly for financial reporting, decisions affecting public interests, and use of public funds. Freedom of Information laws may give citizens the right to access certain municipal company information, but exemptions exist for confidential business data.
Legal Framework Intersection: Members must navigate the interface of German corporate law with public transparency principles embedded in municipal codes and federal transparency laws. For municipal companies, specific transparency regulations may stem from state-level municipal codes.
Whistleblowing and Reporting Channels: German law protects whistleblowers and requires mechanisms to confidentially report misconduct without retaliation, which supervisory board members need to respect within internal governance structures.
Disclosure and Reporting Duties: Corporate law mandates certain disclosures and annual financial statements to be audited and published, supporting municipal transparency agendas.

A recent case involving the Mayor of Mönchengladbach, who is a member of the supervisory board of a listed company, highlights the complexity of this balancing act. The Mayor was requested to provide access to documents related to a supervisory board meeting by several factions in the city council. The case involved the interpretation of Paragraph 394 of the German Stock Corporation Act.

The ruling provided clarity on the limits of legal interpretation in the conflict between confidentiality and reporting for municipal supervisory boards. However, it has sparked criticism that it shifts corporate confidentiality in favor of disclosure to the municipal main body.

It is worth noting that supervisory board members who have been elected or sent to the supervisory board on behalf of a regional authority are not bound by a duty of confidentiality regarding the reports they have to submit to the regional authority.

Municipalities often hold shares in private companies, such as municipal utilities, waste management companies, or hospitals, as an expression of self-government. These mandates are based on different and at least partly conflicting legal guidelines, making it essential for supervisory board members to exercise informed discretion, legal compliance, and often consultation with legal counsel to ensure compliance with both confidentiality and transparency obligations in the municipal context.

Christian Bischoff, a lawyer at Menold Bezler, made a statement about the ruling, emphasising the need for a nuanced approach to these complex issues. The ruling serves as a reminder of the importance of balancing corporate confidentiality and municipal transparency in the interest of accountability and effective governance.