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The Code, issued by the German government, is not legally binding in its entirety. Instead, it operates on a “comply or explain” basis. This means that companies are expected to follow the recommendations outlined in the Code, but they can deviate from them if they have a good reason to do so. They must then explain why they are not following a specific recommendation. This flexibility allows companies to tailor their governance practices to their specific circumstances while still adhering to the core principles of good governance. This approach fosters a culture of transparency and accountability.
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