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We estimate the wage effects of shared governance, or codetermination, in the form of a mandate of one third of corporate board seats going to worker representatives. We study a reformin Germany that abruptly abolished this mandate for stock corporations incorporated after August 1994, while it locked the mandate for the slightly older cohorts. Our research design compares firm cohorts incorporated before the reform and after; in a robustness check we additionally draw on the analogous difference in unaffected firm types (LLCs). We find no effects of board-level codetermination on wages and the wage structure, even in firms with particularly flexible wages. The degree of rent sharing and the labor share are also unaffected. We reject that disinvestment could have offset wage effects through the canonical hold-up channel, as shared governance, if anything, increases capital formation.

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We estimate the wage effects of shared governance, or codetermination, in the form of a mandate of one-third of corporate board seats going to worker representatives. We study a reform in Germany that abruptly abolished this mandate for stock corporations incorporated after August 1994, while it locked the mandate for the slightly older cohorts. Our research design compares firm cohorts incorporated before the reform and after; in a robustness check we additionally draw on the analogous difference in unaffected firm types (LLCs). We find no effects of board-level codetermination on wages and the wage structure, even in firms with particularly flexible wages. The degree of rent sharing and the labor share are also unaffected. We reject that disinvestment could have offset wage effects through the canonical hold-up channel, as shared governance, if anything, increases capital formation.

To assess the substitutability between workers within a firm, and between incumbent workers and outsiders, we estimate how exogenous worker exits affect a firm's demand for incumbent workers and new hires. Using matched employer-employee data from Germany, we analyze the effects of 34,000 unexpected worker deaths and show that these worker exits on average raise the remaining workers' wages and retention probabilities for a period of several years. The average effect masks substantial heterogeneity: Coworkers in the same occupation as the deceased see positive wage effects; coworkers in other occupations instead experience wage decreases when a high-skilled worker or manager dies. Finally, when the external labor market in the deceased's occupation is thin, incumbents' wages respond more and external hiring responds less to a worker death. Taken together, our findings imply that incumbent workers are closer substitutes to one another compared to outsiders, that high-skilled workers and managers are complements to coworkers in other occupations, and that thin external markets for skills lead to higher firm-specificity of human capital and lower replaceability of incumbents. * The paper previously circulated as a solo-authored paper by Simon Jäger. The updated version, which replaces the previously circulated one, includes new analyses, including on working hours. Jäger thanks his advisors Raj Chetty, Edward