Worker Directors: A German Product that Didn't Export?

34 Pages Posted: 19 Jan 2009

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Abstract

Despite its lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU.

Keywords: codetermination, board-level employee representation, firm performance, Germany

JEL Classification: J50

Suggested Citation

Addison, John T. and Schnabel, Claus, Worker Directors: A German Product that Didn't Export?. IZA Discussion Paper No. 3918. Available at SSRN: https://ssrn.com/abstract=1329556

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
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HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

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Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
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Germany
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+49 911 5302 721 (Fax)

HOME PAGE: http://https://www.arbeitsmarkt.rw.fau.de/english-version/staff/prof-dr-claus-schnabel/

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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