Codetermination: A Poor Fit for U.S. Corporations

52 Pages Posted: 9 Apr 2020

See all articles by Jens Dammann

Jens Dammann

University of Texas at Austin - School of Law; European Corporate Governance Institute (ECGI)

Horst Eidenmueller

University of Oxford; European Corporate Governance Institute (ECGI)

Date Written: April 1, 2020

Abstract

The idea that a corporation’s employees should be allowed to elect some of the corporation’s board members, a system known as codetermination, has moved to the forefront of U.S. corporate law policy. Elizabeth Warren’s Accountable Capitalism Act calls for employees of large firms to elect 40% of all board members. Bernie Sanders’s Corporate Accountability and Democracy Plan goes even further and states that 45% of Board Members should be elected by workers.

Both Warren’s and Sanders’s plans are loosely modeled on the German law on codetermination, which for many decades has allowed employees of large German corporations to elect up to half of all board members. It is therefore unsurprising that Senator Sanders points to Germany’s successful economic development as evidence that economic progress and mandatory codetermination can go hand in hand.

However, this Article argues that codetermination promises to be a poor fit for U.S. corporations. While Germany arguably reaps significant benefits from codetermination, legal, social, and institutional differences between Germany and the United States make it highly unlikely that the United States would be able to replicate those benefits. Furthermore, the costs of codetermination would probably be much higher in the United States than they are in Germany.

Keywords: Codetermination, Corporate Governance, Corporate Objectives, Shareholder Value, Comparative Law, United States Corporations, Sanders Proposal, Warren Proposal, German Law

JEL Classification: K2, L2

Suggested Citation

Dammann, Jens and Eidenmueller, Horst G. M., Codetermination: A Poor Fit for U.S. Corporations (April 1, 2020). European Corporate Governance Institute - Law Working Paper No. 509/2020; Oxford Legal Studies Research Paper No. 17/2020. Available at SSRN: https://ssrn.com/abstract=3565955 or http://dx.doi.org/10.2139/ssrn.3565955

Jens Dammann

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/jens-dammann

Horst G. M. Eidenmueller (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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