Codetermination and Power in the Workplace

Abstract

How does codetermination-entitling workers to participate in firm governance, either through membership on company boards or the formation of works councils-affect worker welfare and corporate decision-making? We critically discuss the history and contemporary operation of European codetermination arrangements and review empirical evidence on their effects on firms and workers. Our review suggests that these arrangements are unlikely to significantly shift power in the workplace, but may mildly improve worker welfare and firm performance, in part by boosting information-sharing and cooperation and in part by slightly increasing worker influence.

The German Model of Industrial Relations: Balancing Flexibility and Collective Action

“…The institution was introduced in 1948 by the post-war British occupiers, who imposed "parity" codetermination requirements (50-50 shareholder-worker board representation) on firms in the iron, coal, and steel sectors, with the goal of breaking up the power of industry leaders who had helped drive both World Wars. Lobbying campaigns by German unions later led to the extension of the institution (in a substantially weaker form) to all sectors by legislation passed in 1952 and 1976 (for more historical background, see Jäger, Noy, and Schoefer, 2022a). Other European countries later followed suit; however, board-level codetermination remains rare internationally, with fewer than 20 countries featuring the institution today (Jäger, Noy, and Schoefer, 2022b).…”

“…Although works councils were originally conceived as local representatives of industry-level trade unions, German law now maintains a clear legal separation between the two institutions (dating back to reforms in the 1950s aimed at weakening unions; Jäger, Noy, and Schoefer, 2022a). However, in practice, works council members frequently occupy leadership positions in unions, and unions are closely involved in the procedures to set up works councils.…”

Democratizing Work: Redistributing power in organizations for a democratic and sustainable future

“…In particular, we review scholarship on democratic governance structures and cooperatives to show that alternative ways of organizing work already exist and can inform the possibilities we collectively envision for a future in which power is more equitably distributed in companies. For example, in many European countries, codetermination guarantees worker representation on boards, thereby structurally empowering workers to participate in strategic decision-making (Gold & Waddington, 2019; Jäger, Noy, & Schoefer, 2021a). Cooperative models of organizing, which have existed for centuries, provide models for worker ownership, democratic decision-making, and pursuing non-financial objectives alongside financial ones (Cheney, Santa Cruz, Peredo, & Nazareno, 2014; Rothschild & Whitt, 1986).…”