A Break for Stockholders

Like the Nazi ideology that spawned it in 1937, Germany's corporate law is based on the "Fuhrer" principle: it al lows company board chairmen almost unlimited power, stockholders practically no rights. As a result Germans are understandably reluctant to buy stock.

While they have invested $23.5 billion in savings accounts and $21 billion in bonds since the 1948 currency reforms, they have purchased only $4 billion in new issues of stock, thus sorely limiting the amount of capital available to German industry.

Last week in Bonn, after five years of committee hearings and debate, the Bundestag finally voted to deNazify corporate law. The sweeping reform legislation that it passed is virtually a stockholders' Magna Carta that will curb the power of industrial kings and guarantee the rights of stockholders. The law, which applies to publicly owned companies, should also provide German industry with a new flow of badly needed capital.

Some of the major reforms:

-- For the first time, companies will be required to publish regular and accurate consolidated financial reports, forbid den to accumulate hidden reserves by underrating assets and overrating liabilities -- a device long used to mislead stockholders.

-- Boards will be permitted to plow as much as half of annual profits back into the company but will have to distribute the other half as the stockholders see fit.

-- If the practices of the dominant com pany in a German combine damage the profits of a subsidiary company, the dominant company will have to protect the subsidiary's stockholders by guaranteeing them a fixed dividend or reimbursing them with stock or cash.

>-To prevent secret concentrations of power and to alert stockholders to ma jor changes in ownership, companies now will have to publicize acquisition of 25% or more of another company.

-- German banks, which now get blanket authorization to cast proxy votes for their shareholders at annual meeings, from now on will have to seek and follow voting instructions from each stockholder on each proposal.

The new reform law is so thorough that one of its provisions limits mem -bership of any individual to 15 company boards, ostensibly to keep him from being spread so thin that he cannot carry out his responsibilities to stock holders. The provision has already been dubbed "Lex Abs" by the German busi ness community. Reason: It most severely restricts Deutsche Bank Chairman Herman J. Abs, who holds lucrative memberships on the boards of more than 20 of Germany's leading companies.

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