Active Owners and the Failure of Newly Adopted Works Councils

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Active Owners and the Failure of Newly Adopted Works CouncilsUwe Jirjahn University of Trier, Department of Economics, Germany Jens Mohrenweiser Centre for European Economic Research, GermanyAbstract: Using representative data from the IAB Establishment Panel, we show that employees in establishments with active owners are less likely to introduce a works council. Moreover, we show that, in case of an introduction, the new works council is less likely to survive if active owners are present. Our findings conform to the hypothesis that active owners oppose codetermination because it reduces the utility they gain from being the ultimate bosses within the establishment.JEL Classification: J50, J53, J54, M54.

Do works councils raise or lower firm productivity?

“…If it is positive, active owners should support co-determination. However, if the behavior of owners and management is mainly driven by an independence motive, they will try to prevent works councils even if co-determination would contribute to higher performance [9].…”