Codetermination: Workers on Company Boards

How German law gives workers seats on company supervisory boards and works councils, and what research says about effects on firms and workers.

In Germany, workers have a formal voice in company decisions through codetermination (Mitbestimmung).

Supervisory boards

Large companies have a two-tier board structure.
Under the 1976 Codetermination Act, in firms with over 2,000 employees, workers elect half of the supervisory board members, though the chair (from shareholders) has a casting vote.
In firms with 500 to 2,000 employees, workers elect one-third.

Works councils

Workers in firms with at least five employees can elect works councils, which have rights over issues like working hours, layoffs and workplace rules.

Effects

Research suggests codetermination has little negative effect on firm performance and may increase investment and job security.
It promotes cooperation and fewer strikes.
During the 2008-09 crisis, cooperation helped firms use short-time work instead of layoffs.

Debates

Critics say it can slow decisions.
Some US politicians have proposed similar ideas.

The short-time deal

In 2009, a German carmaker's works council agreed to shorter hours for workers instead of layoffs, with government support topping up wages. When demand recovered, skilled staff were ready.

Thinking worker representation always harms firms

Research finds limited negative effects and some benefits.

Key takeaways

Workers elect half the supervisory board in large German firms.
Works councils have rights over working conditions.
Research finds little harm to performance and more cooperation.
Cooperation helped firms avoid layoffs in 2008-09.