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Labor Participation in Corporate Policy-Making Decisions: West Germany's Experience with Codetermination

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  • Benelli, Giuseppe
  • Loderer, Claudio
  • Lys, Thomas

Abstract

If workers are wealth maximizers, codetermination should lead to less risky investments, smaller dividends, reduced firm leverage, higher and more stable salaries, and more capital- intensive production processes. Unless codetermination also increases productivity by raising workers' morale and satisfaction or reduces information asymmetries within the firm, shareholder wealth and firm value will decline. An analysis of West Germany's case, however, indi cates that codetermination has little, if any, effect on corporate op erations and performance. Copyright 1987 by the University of Chicago.

Suggested Citation

  • Benelli, Giuseppe & Loderer, Claudio & Lys, Thomas, 1987. "Labor Participation in Corporate Policy-Making Decisions: West Germany's Experience with Codetermination," The Journal of Business, University of Chicago Press, vol. 60(4), pages 553-575, October.
  • Handle: RePEc:ucp:jnlbus:v:60:y:1987:i:4:p:553-75
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    Cited by:

    1. Pejovich Svetozar, 2001. "After Socialism: Where Hope for Individual Liberty Lies," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 11(1), pages 1-24, March.
    2. Boneberg Franziska, 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), De Gruyter, vol. 231(3), pages 440-457, June.
    3. John T. Addison & Claus Schnabel, 2011. "Worker Directors: A German Product that Did Not Export?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 354-374, April.
    4. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," NBER Working Papers 7945, National Bureau of Economic Research, Inc.
    5. Becht, Marco & Bolton, Patrick & Roell, Ailsa, 2003. "Corporate governance and control," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 1, pages 1-109 Elsevier.
    6. repec:eee:jfinec:v:127:y:2018:i:2:p:303-324 is not listed on IDEAS
    7. 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.
    8. Vikas Mehrotra & Randall Morck, 2017. "Governance and Stakeholders," NBER Working Papers 23460, National Bureau of Economic Research, Inc.

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