Germany adopts "good example" rules for state firms

BERLIN, July 1 (Reuters) - The German cabinet approved on Wednesday rules that aim to improve monitoring and transparency for firms in which Berlin holds a majority stake, the government said in a statement.

The Public Corporate Governance Code will be somewhat stricter than voluntary standards adopted in the private sector in the hope state firms will set an example for others.

"The federal government wants to set a good example with "its" companies," the government said.

Executive salaries will be based on long-term performance, in line with recent legislation passed, and companies will be encouraged not to grant loans to board members or their relatives in order to avoid conflicts of interest.

State-owned companies, such as national rail operator Deutsche Bahn, will also have to submit a yearly report detailing how they are adhering to the code.

New rules passed by the lower house of parliament last month will prevent board members in all companies from cashing in share options before four years, instead of two at present.

Those rules also make it easier for supervisory boards to cut board pay in the case of "extraordinary" developments.

The new Public Corporate Governance Code will affect non-listed private companies with a state holding immediately, while companies listed on the stock market will adhere to the already-in-place German Corporate Governance Code. (Reporting by Brian Rohan; Editing by Victoria Main)