Worker Directors: A German Product that Didn’t Export?

Despite its seeming lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has thus far held up fairly well. We recount the theoretical arguments for and against this form of codetermination, and survey the evolving empirical evidence as to its economic impact. Even if theory and the more recent empirical findings hold out the prospect that the apparatus of good corporate governance might include employee representation on company boards, caveats attach to the extent of representation and the composition of the worker side. But even if the entity has performed better than its external reputation might indicate, it is clearly in the process of adapting to change. In particular, the availability of alternative forms of corporate governance will increasingly shape the German institution.codetermination, worker directors, board-level employee representation, firm performance, legal arbitrage, Germany

Worker Directors: A German Product that Didn't Export?

Despite its lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU.codetermination, board-level employee representation, firm performance, Germany

Worker Directors: A German Product that Didn’t Export?

Despite its lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU.codetermination, board-level employee representation, firm performance, Germany

Worker directors: a German product that didn't export?

Despite its lack of attractiveness to other countries, the German system of quasiparity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU. -- Trotz seiner geringen Attraktivität für andere Länder hat sich das deutsche System der quasi-paritätischen Unternehmensmitbestimmung als bemerkenswert stabil erwiesen. Wir erörtern die theoretischen Argumente für und gegen Mitbestimmung und bieten einen Überblick über die empirische Evidenz zu den Auswirkungen dieser Institution, wobei wir drei Phasen einer eher spärlichen Literatur nachzeichnen. Jüngere Erkenntnisse deuten darauf hin, dass zu einer guten Corporate Governance auch die Beteiligung der Arbeitnehmer (aufgrund ihrer Überwachungsfunktion und der Verringerung von Agency-Kosten) gehören könnte, wobei jedoch das optimale Ausmaß der Mitbestimmung unter 50 Prozent liegen dürfte. Auch wenn das deutsche System besser sein mag als sein Ruf im Ausland, muss es sich wohl an die Globalisierung und die Verfügbarkeit alternativer Unternehmensformen in der EU anpassen.codetermination,worker directors,board-level employee representation,firm performance,Germany

The course of research into the economic consequences of German works councils

In a recent survey, Frege (2002) concludes that economic analysis of the works council has reached a `dead end´. The present treatment offers a different conclusion based on a more encompassing review of the evidence. It will identify three distinct phases in the economic analysis of codetermination at the workplace. While Frege just considered studies from the first two phases, it is the third phase of research that contains some of the most positive evaluations to date of works council impact. Even if such estimates appear much exaggerated and the effect of works councils is likely to be small on average, the new literature redirects our research effort towards the factors that produce swings around this average, including differences in works council types and their workplace environments. -- In einem jüngst veröffentlichten Überblicksartikel kommt Frege (2002) zu dem Schluss, die ökonomische Analyse des Betriebsrats sei in eine Sackgasse geraten. Die vorliegende Arbeit zieht ein anderes Fazit, das auf einer umfassenderen Betrachtung der empirischen Evidenz beruht. Dabei werden drei Phasen der ökonomischen Analyse der betrieblichen Mitbestimmung unterschieden. Während Frege nur Studien aus den ersten beiden Phasen berücksichtigte, ist es gerade die dritte Forschungsphase, die einige der positivsten Bewertungen von Betriebsräten enthält. Selbst wenn derartige Einschätzungen stark übertrieben erscheinen und der Betriebsratseffekt im Durchschnitt relativ gering sein dürfte, weist die neuere Literatur darauf hin, dass unsere Forschungsbemühungen sich stärker auf Faktoren konzentrieren sollten, die Schwankungen um diesen Durchschnitt hervorrufen (wie z.B. unterschiedliche Typen von Betriebsräten und deren Arbeitsplatzumgebung).Works council,codetermination,Germany

The (Parlous) State of German Unions

This paper traces the profound decline in German unionism over the course of the last three decades. Today just one in five workers is a union member, and it is now moot whether this degree of penetration is consistent with a corporatist model built on encompassing unions. The decline in union membership and density is attributable to external forces that have confronted unions in many countries (such as globalization and compositional changes in the workforce) and to some specifically German considerations (such as the transition process in postcommunist Eastern Germany) and sustained intervals of classic insider behavior on the part of German unions. The ‘correctives’ have included mergers between unions, decentralization, and wages that are more responsive to unemployment. At issue is the success of these innovations. For instance, the trend toward decentralization in collective bargaining hinges in part on the health of that other pillar of the dual system of industrial relations, the works council. But works council coverage has also declined, leading some observers to equate decentralization with deregulation. While this conclusion is likely too radical, German unions are at the cross roads. It is argued here that if they fail to define what they stand for, are unable to increase their presence at the workplace, and continue to lack convincing strategies to deal with contemporary economic and political trends working against them, then their decline may become a rout.