Editorial Open Access Velte, Bus Eco J 2014, 5:1 DOI: 10.4172/2151-6219.1000e103 Volume 5 • Issue 1 • 1000e103 Bus Eco J ISSN: 2151-6219 BEJ, an open access journal Under the term of corporate governance, reform approaches, primarily from a legal point of view, will be discussed and transformed into standards, in order for capital market orientated companies to be managed more efciently and to be controlled more efectively. In the two tier system of German corporate governance, corporate governance in public limited companies is primarily aimed at the rights and responsibilities of the management board, supervisory board and shareholder’s meeting, which, as main entities, sustain the target- oriented management and controlling of the company. However, also in the Anglo-American board system, corporate governance has a central signifcance. Te bundling of management and control tasks for inside and outside directors based on the board system admittedly provides a fexible allocation of powers and responsibilities, however, at the same time, contains risks with reference to the neutrality of controlling. Te fact that neither the one nor the two tier model can be referred to as being an absolute supremacy has induced the European Commission to implement a company voting right between a dual and board system when introducing the "Societas Europaea (SE)". Tis article is based on the interdependent relationship between corporate governance and controlling. Te regulation tightness has also distinctly increased with regard to capital market regulation over the past few years, mainly attributable to internationalisation ambitions in the area of fnancial accounting and integrated reporting. Here an intensifcation of controlling by corporate management in particular is to the fore, which, alongside internal instances (internal audit, supervisory board), is carried out by external control bearers (external auditors, enforcement, market for corporate control). In the next two chapters the article initially covers a theoretical funding of corporate governance, as well as an explanation as to why there is a necessity to implement a integrated reporting system. In view of the fact that corporate governance substantially determines the embodiment of controlling by companies, the question arises as to what the concrete efects from the corporate governance discussion are on the controlling practice of listed companies. In the following chapters the areas of auditing, supervision and control will be analysed separately, in order to clarify how the role of corporate governance from the point of view of management theory and practice presently depicts itself, and in what shape they need to be in order adjust to future developments. Te article concludes with a summary of the fndings. Teoretical Implications of Corporate Governance Te historic development of the US-American economy (and thus also society) features diferent models of governance. Te term of corporate feudalism is summarised by Liefmann [1] as the early voting trusts (owners transferred their shares to a trust in exchange for certifcates) and the later holding companies in particular. Te resulting (powers) owners were also named Captains of Industry. Later the managerial corporation with reference to the comments by Holmström and Kaplan [2] pointed to the ideal of a company controlled by management. Because of the increasing number of shareholders, ownership and the authority to dispose fell apart. As a result of this, the US-American discussion on the corporate problem arose. Eventually the endeavours of the creation of shareholder democracy and minority representation, summarised since the 1960’s under the heading of shareholder activism, could be interpreted as reform approaches, which are geared towards improving corporate governance. Against this background, the US-American literature from the 1960s and 1970s investigated the question of how management, in the sense of the objective of the owner, can be disciplined. Te most *Corresponding author: Patrick Velte, Visiting Professor of Accounting, Faculty of Economics, Leuphana University Lueneburg, Germany, Tel: 00494131 677-2117; Fax: 00494131 677-2122; E-mail: velte@leuphana.de Received February 03, 2014; Accepted February 04, 2014; Published February 11, 2014 Citation: Velte P (2014) Improving Corporate Governance Quality Through Modern Controlling - Integrated Reporting in the German Two Tier System. Bus Eco J 5: e103. doi: 10.4172/2151-6219.1000e103 Copyright: © 2014 Velte P. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Abstract Purpose: The purpose of this article is to describe the interdependencies between corporate governance and controlling for the German two tier system. In German listed corporations, the management board is responsible for the implementation and development of the controlling system, while the supervisory board has to review the effectiveness. Approach: After a theoretical funding of corporate governance an impact analysis based on the area of auditing, supervision and control will be focused. The main implications of the international integrated reporting project are presented. Findings: The analysis shows that the development of fnancial accounting and corporate social responsibility to an integrated reporting together with an increase in importance of controlling goes hand in hand. Controlling will form the central link between corporate governance quality and integrated reporting. Value: After the fnancial crisis, integrated reporting can be classifed as a key instrument to increase trust in the quality of corporate governance and accounting for global companies. This project will lead to best practice reporting standards to communicate sustainable fnancial, social and environmental values to the stakeholders. Improving Corporate Governance Quality Through Modern Controlling - Integrated Reporting in the German Two Tier System Patrick Velte* Faculty of Economics, Leuphana University Lueneburg, Germany Business and Economics Journal B u s i n e s s a n d E c o n o m i c s J o u r n a l ISSN: 2151-6219