# kaal:claim:1558614-019

**Claim.** Because the Aufsichtsrat owes its duty of loyalty to the firm rather than to shareholders alone, and because non shareholder constituencies such as employees and creditors are more risk averse than diversified shareholders, German supervisory boards may take a more conservative attitude toward risk than U.S. shareholder oriented boards.

**Type.** mechanism  **Support.** argued

**Holds when.**

- German courts treat the duty as protecting the interests of the firm, not only shareholders
- reinforced by codetermination

**Source quote.**

> The Aufsichtsrat's legal duty of loyalty to the firm as distinct from its shareholders thus may dictate a more conservative attitude toward risk than that of a shareholder oriented board of di- rectors in the United States.

**From.** Painter and Kaal, *Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in* (2010), III. Cultural Components of Risk Taking and Controlling Risk, page 25

**Cite as.** Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614

**Verify.** sha256 of source PDF `e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Painter%20and%20Kaal%20-%202010%20-%20Initial%20Reflections%20on%20an%20Evolving%20Standard%20Constraints%20on%20Risk%20Taking%20by%20Directors%20and%20Officers%20in.pdf

**Topics.** corporate-governance, governance-design, risk-and-incentives

**Keywords.** duty-of-loyalty, aufsichtsrat, stakeholder-governance, risk-aversion, german-governance

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