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The Economics of Codetermination by John T. Addison download in iPad, pdf, ePub

In effect, shareholder voices still govern the company for a number of reasons, but not least because the supervisory board's vote for the management will always be a majority of shareholders. The new board's head would represent the firm's owners and had the right to cast the deciding vote in instances of stalemate. One of the main achievements seems to be that workers are more involved and have more of a voice in their workplaces, which sees a return in high productivity. The typical one-tier system with codetermination is the Swedish system.

In effect shareholder voices

Information flows and work council presence Beyond worker representation on boards, work councils as the other pillar of codetermination institutionalize cooperation between workers and employers. Shareholders and trade unions elect members of a supervisory board Aufsichtsrat. An employee representatives on management boards are not present in all economies. In one-tier systems with codetermination the employees usually have only one or two representatives on a board of directors. The question is whether the interests of each group overlap or are in contrast with each other, and which benefits and costs employee representation entails.

The chairman of the supervisory board, with a casting vote, is always a shareholder representative under German law. On the empirical side the findings are quite mixed, however. The management board is required to have one worker representative Arbeitsdirektor. In two-tier systems the seats in supervisory boards are usually limited to one to three members.

With the supervisory board approving major strategic decisions, ultimate corporate power resides with it FitzRoy and Kraft and thus also with employee representatives. While the latter wish to maximize the value of the firm in the long run, executives maximize their own utility, for which compensation, prestige, power etc. In tandem, a practical approach has evolved among both parties, with each aiming to reach decisions based on consensus.

The chairman of the supervisory board, who is elected by shareholders, has an extra vote in case of a tie. Republishing and referencing Bruegel considers itself a public good and takes no institutional standpoint. The typical two-tier system with codetermination is the German system.

They never have representatives among the executive directors. Codetermination at the company level, on the other hand, consists in the participation of employees or their representatives in the supervisory board. Journal of the European Economic Association Vol. The optimal level of labor representation might thus be below parity. Shareholder vs labour interests, efficiency, and the supervisory board Some authors have questioned why codetermination should be made mandatory.

The supervisory board is meant to set the company's general agenda. In practice, there are many calls for amendments to the laws in various ways. They also find evidence for high staffing levels and thus potential overstaffing in equal-representation firms. Dyballa and Kraft find evidence that employee representation is beneficial in that regard. Boards could be larger as long as the proportion of representation was maintained.

The new board's head

One study argues that the functioning of work councils also depends on its age, i. For obvious reasons, macroeconomic effects are hard to measure seriously. The committee is elected by all the workers employed in a plant.