Deutsches Aktieninstitut and Gleiss Lutz publish joint study: Increasing regulatory density slows down entrepreneurial activity

The increasing regulatory density with ever new regulations makes it more difficult for management boards and supervisory boards to assess the legal implications of business decisions and slows down entrepreneurial activity. Deutsches Aktieninstitut and the law firm Gleiss Lutz today published a study entitled ‘Securing business decisions – Decision-making in uncertain times’. The results of the study show once again how important it is to reduce regulation and cut red tape in order to maintain the innovative strength and competitiveness of the German economy.

‘When regulations are complex, companies need and seek legal certainty. This slows down their ability to act. Our survey identifies a need for reducing and simplifying regulation, particularly in the area of sustainability,’ emphasises Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

Due to the multitude of new regulations, companies are increasingly having to make decisions under legal uncertainty. There is a clear trend towards greater involvement of legal expertise in decision-making. ‘Acting under legal uncertainty leads to an increased need for protection. The study confirms the practical experience that legal departments in particular play a key role here,’ explains Dr Adrian Bingel, partner at Gleiss Lutz. The study also showed that executive boards and supervisory boards rely on business judgement opinions for protection when making complex decisions.

The study provides important insights into how management boards prepare business decisions, when they seek internal legal advice, when they resort to external expertise, and to what extent companies already use artificial intelligence in their decision-making. ‘There are few standardised requirements in companies for an adequate information basis for business decisions. Internal processes for compiling sufficient information are more important,’ says Steffen Carl, partner at Gleiss Lutz, summarising one of the study's key findings.

The study also shows that companies are increasingly recognising the advisory role of the supervisory board. This is particularly true for management board decisions with strategic implications or significant risk potential.

New regulations and cyber security have gained in importance 

Over the past five years, compliance with new regulations has been the biggest concern for companies when preparing business decisions. A total of 92 per cent of participants stated that the issue had become much more important (47 per cent) or very much more important (45 per cent). Cybersecurity has also become a key issue, with 90 per cent of participants citing a significant increase in its importance. 

This development is also associated with a greater need for legal certainty: over 90 percent of company representatives stated that they needed greater legal certainty when applying new regulatory requirements. This comes as little surprise, given that recent years have seen a particularly large number of new requirements imposed on companies' compliance structures and reporting, especially in the area of sustainability.

The survey was completed by CEOs, heads of legal departments and people in similar positions. Of the 160 companies contacted, 55 responded. Of these, 42 per cent of participants represent MDAX companies. 36 per cent of participants are representatives of DAX 40 companies, while 23 per cent work for SDAX companies.

Here you can find the detailed study by the German Stock Institute and the law firm Gleiss Lutz, ‘Securing business decisions – Decision-making in uncertain times’.