Self-Commitments and the Binding Force of Self-Regulation with Respect to Third Parties in Germany

Abstract

Codes of conduct are a well-accepted feature of European corporate governance. Listed corporations are obliged to annually state their compliance with a corporate governance code or to explain their non-compliance. Whilst it is agreed that self-commitments to non-statutory rules or standards of good conduct are an important component of self-regulation, it is widely unexplored how and to what extent they influence legal duties. The main purpose of this article is to show that a typology of binding mechanisms helps to narrow this uncertainty. In section II, a brief look at the theory and practice of self-commitments will explain where the discussion stands and which challenges need to be addressed. Section III presents the typology of binding mechanisms, these including norms, contracts, charters, and disclosure. Section IV looks at the consequences of non-compliance with a self-commitment in respect of third parties. Section V concludes with a summary of the main findings regarding the binding effects of self-commitments towards third parties.