Advanced Search
MyIDEAS: Login

The Dutch works council from an institutional economics point of view: an efficient solution to the governance structure problem?

Contents:

Author Info

  • Annette van den Berg

    ()

Registered author(s):

    Abstract

    The aim of this paper is to explain, with the aid of institutional economic theories, why Dutch works councils may contribute to an efficient governance structure. To this end, in this study a sketch will be given of the existing structure, in which the particular Dutch two-tier system plays an important role. After a short discussion of the property rights theory, transaction costs theory and the principal-agent theory, these theories will be applied to the Dutch corporate governance structure and more specifically to employee participation rights. The paper intends to show that works councils fulfil an important economic function, by protecting the interests of the employees as well as those of the shareholders. Several agency problems can be solved. By giving the workers consultation and codetermination rights, this will reduce their dependence on unilateral decisions by the management and may stimulate them to be more cooperative, leading to greater productivity and less monitoring costs. By giving the workers information rights, the management becomes more disciplined as well. Because the works councils usually do not determine the terms of employment, the owners of the firm do not need to fear (as expressed by Lazear 1998) that the employees will be able to extract a portion of the firm's profits. Even if the control rights are granted to workers who have made no firm-specific investments, it can be argued that the fear (as expressed by Furubotn 1988) of mismanagement is unwarranted.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.uu.nl/faculty/leg/NL/organisatie/departementen/departementeconomie/onderzoek/publicaties/DParchive/2003/Documents/03-06.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Utrecht School of Economics in its series Working Papers with number 03-06.

    as in new window
    Length: 16 pages
    Date of creation: Aug 2003
    Date of revision:
    Handle: RePEc:use:tkiwps:0306

    Contact details of provider:
    Postal: P.O. Box 80125, NL-3508 TC Utrecht
    Phone: +31 30 253 9800
    Fax: +31 30 253 7373
    Email:
    Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: corporate governance; information asymmetries; multiple agency problem; property rights; stakeholder value; transaction costs; works councils.;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    2. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
    3. Henry B. Hansmann, 1998. "Employee Ownership Of Firms," Yale School of Management Working Papers ysm96, Yale School of Management.
    4. Wolfgang Streeck, 1995. "Works Councils in Western Europe: From Consultation to Participation," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 313-350 National Bureau of Economic Research, Inc.
    5. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    6. 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.
    7. Smith, Stephen C., 1991. "On the economic rationale for codetermination law," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 261-281, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0306. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.