What does "Aktiengesellschaft" Mean?

The German term "Aktiengesellschaft" is most accurately translated into English as “a public stock company.” Aktiengesellschaften, the plural form, are similar in their company structure and governance to corporations that are based in other countries and that have shares available to the investing public through regulated stock exchanges. In Germany, for example, shares of Aktiengesellschaften are commonly traded on the Frankfurt Stock Exchange. As with most publicly traded companies in the industrialized world, an Aktiengesellschaft — designated by the acronym "AG" after the company’s name — is a highly regulated entity.

An Aktiengesellschaft is one of two primary organization forms prevalent in Germany, Austria, Switzerland and, to a lesser extent, Belgium. The second organizational form, which is actually more common in Germany than the Aktiengesellschaft, is known as Gesellschaft mit beschrankter Haftung (GmbH), which translates to "company with limited liability." In fact, GmbH comprise approximately 95 percent of German companies in part because the GmbH structure is more easily created than that of the Aktiengesellschaft, which requires a certain minimum amount of starting capital, requires publishing financial statements annually and requires a two-tiered corporate governance structure that resembles that of typical corporations in other countries but with a slight variation.

Like many other corporations, an Aktiengesellschaft generally has a two-tiered management structure that includes a board of directors, which often consists of industry leaders, academics, scientists, economists and philanthropists; and a management or executive board, made up of the corporation’s highest-level officers. The board of directors is charged with establishing the corporation’s overall goals and objectives, and the management board focuses on creating strategies to meet those goals and day-to-day operations of the company. Unlike many other types of corporations, however, an Aktiengesellschaft is required to have a board of directors that includes a certain percentage — based on the company’s size and number of employees — of the corporation’s employees from all levels in order to insure that employees are directly involved in the direction of the corporation’s activities. This requirement derives from the fact that until the 20th century, most German companies were family owned and therefore privately held, with no involvement of the company’s employees in the direction of these companies. As the concept of the corporation was being developed in Germany, the country's economic authorities perceived an opportunity to “democratize” the corporate structure by requiring Aktiengesellschaften to have, as part of their governance structure, representatives of their employees.