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

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Author Info

  • Addison, John T.

    ()
    (University of South Carolina)

  • Schnabel, Claus

    ()
    (University of Erlangen-Nuremberg)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3918.

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Length: 34 pages
Date of creation: Jan 2009
Date of revision:
Publication status: published in: Industrial Relations, 2011, 50 (2), 354-374
Handle: RePEc:iza:izadps:dp3918

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

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References

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  1. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52 National Bureau of Economic Research, Inc.
  2. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  3. Hirsch, Barry, 2003. "What Do Unions Do for Economic Performance?," IZA Discussion Papers 892, Institute for the Study of Labor (IZA).
  4. Felix FitzRoy & Kornelius Kraft, 2005. "Co-determination, Efficiency and Productivity," British Journal of Industrial Relations, London School of Economics, vol. 43(2), pages 233-247, 06.
  5. Luis M. Granero, 2006. "Codetermination, R&D, and Employment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(2), pages 309-328, June.
  6. FitzRoy, Felix R & Kraft, Kornelius, 1993. " Economic Effects of Codetermination," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(3), pages 365-75.
  7. Addison, John T. & Schnabel, Claus & Wagner, Joachim, 2003. "The Course of Research into the Economic Consequences of German Works Councils," IZA Discussion Papers 878, Institute for the Study of Labor (IZA).
  8. Fauver, Larry & Fuerst, Michael E., 2006. "Does good corporate governance include employee representation? Evidence from German corporate boards," Journal of Financial Economics, Elsevier, vol. 82(3), pages 673-710, December.
  9. Gérard Charreaux & Philippe Desbrières, 2001. "Corporate Governance: Stakeholder Value Versus Shareholder Value," Working Papers CREGO 1010301, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  10. Kraft, Kornelius, 2001. "Codetermination as a strategic advantage?," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 543-566, March.
  11. Kornelius Kraft & Marija Ugarkovic, 2006. "Gesetzliche Mitbestimmung und Kapitalrendite," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(5), pages 588-604, September.
  12. Barry T. Hirsch, 1991. "Labor Unions and the Economic Performance of Unions," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number luepf.
  13. Kraft, Kornelius, 1998. "The codetermined firm in oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 195-201, November.
  14. Kornelius Kraft & Jörg Stank, 2004. "Die Auswirkungen der gesetzlichen Mitbestimmung auf die Innova-tionsaktivität deutscher Unternehmen," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(3), pages 421-449.
  15. Furubotn, Eirik G, 1988. "Codetermination and the Modern Theory of the Firm: A Property-Rights Analysis," The Journal of Business, University of Chicago Press, vol. 61(2), pages 165-81, April.
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Citations

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Cited by:
  1. Wagner, Joachim, 2009. "One-third Codetermination at Company Supervisory Boards and Firm Performance in German Manufacturing Industries: First Direct Evidence from a New Type of Enterprise Data," IZA Discussion Papers 4352, Institute for the Study of Labor (IZA).
  2. Franziska Boneberg, 2011. "The Economic Consequences of One-third Co-determination in German Supervisory Boards, First Evidence for the Service Sector from a New Source of Enterprise Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(3), pages 440-457, June.
  3. Hirsch, Boris & Mueller, Steffen, 2010. "Temporary agency work and the user firm's productivity: First evidence from German Panel Data," Discussion Papers 68, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  4. Franziska Boneberg, 2010. "The Economic Consequences of one-third Codetermination in German Supervisory Boards: First Evidence for the Service Sector from a New Source of Enterprise Data," Working Paper Series in Economics 177, University of Lüneburg, Institute of Economics.

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