The Economic Consequences of One-third Co-determination in German Supervisory Boards

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. There remains great uncertainty about the economic consequences of co-determination in German supervisory boards. Because employee representation on company boards is mandatory, depending on the legal form and size of the company, a direct comparison of those companies that apply co-determination and those that do not has not yet been possible. Terms of use: Documents in EconStor mayHowever, based on a new kind of combined data set, this paper conducts such a direct comparison, leading to more reliable results about the economic consequences of workers' participation on two core performance indicators: productivity and profitability. Accordingly, the existence of a co-determined supervisory board seems to positively affect productivity, but not profitability.

Codetermination: The Presence of Workers on the Board. A Depth Analysis

“…Freeman and Lazear (1995) support that codetermination increases productivity because the workers are more involved in the decisional process and therefore they have more incentive to work harder, but this reduces the profitability as a consequence of raised salaries that the workers require due to the larger work load. Similar results derive from a study by Boneberg (2010). Baums and Frick (1998) analyse the impact of the parity-codetermination using the methodology of event study without any significant statistical findings.…”

“…The fact that stockholders must be forced by law to accept codetermination is the best evidence we have that they are adversely affected by it". On the other hand, there are researchers who believe the advantages deriving from codetermination surpasse the disadvantages (Boneberg 2010). Levine and Tyson (1990) support the presence of workers on the board, because this gives them more responsibility, more motivation and therefore more involvement in business decisions.…”