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Corporate Governance and Employees in Germany: Changing Linkages, Complementarities, and Tensions

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  • Gregory Jackson
  • Martin Hopner
  • Antje Kurdelbusch

Abstract

This article examines institutional linkages between corporate governance and labour management in Germany. German corporate governance was characterised by the importance of banks, ownership concentration, long-term investment, and stable corporate networks. This system displayed important complementarities with stable long-term employment, investment in worker training, flexible quality production, low variability and dispersion in pay, and cooperative industrial relations during the post-war period. Since the mid-1990s, corporate governance has changed dramatically - a decline in the role of banks, the unwinding of corporate networks, the rise of foreign and institutional investors, en emerging market for corporate control, and changing careers and compensation of top managers. The paper investigates the resulting introduction of shareholder-value management practices and their impact on employees in large German companies. The findings show that these changes are related to the shrinking of stable core employment and the growth of variable pay. However, such tensions with shareholder value management have not undermined employee codetermination and collective bargaining institutions. Both play an important mediating role between capital market pressures and employment outcomes. The implications for the German "model" of corporate governance are discussed.

Suggested Citation

  • Gregory Jackson & Martin Hopner & Antje Kurdelbusch, 2004. "Corporate Governance and Employees in Germany: Changing Linkages, Complementarities, and Tensions," Discussion papers 04008, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:04008
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    References listed on IDEAS

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    1. Kaplan, Steven N, 1994. "Top Executives, Turnover, and Firm Performance in Germany," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 142-159, April.
    2. Masahiko Aoki & Serdar Dinc, 1997. "Relational Financing as an Institution and its Viability under Competition," Working Papers 97011, Stanford University, Department of Economics.
    3. Deeg, Richard, 2001. "Institutional change and the uses and limits of path dependency: The case of German finance," MPIfG Discussion Paper 01/6, Max Planck Institute for the Study of Societies.
    4. Höpner, Martin, 2001. "Corporate governance in transition: Ten empirical findings on shareholder value and industrial relations in Germany," MPIfG Discussion Paper 01/5, Max Planck Institute for the Study of Societies.
    5. Streeck, Wolfgang, 2001. "The transformation of corporate organization in Europe: An overview," MPIfG Working Paper 01/8, Max Planck Institute for the Study of Societies.
    6. Hassel, Anke & Rehder, Britta, 2001. "Institutional change in the German wage bargaining system: The role of big companies," MPIfG Working Paper 01/9, Max Planck Institute for the Study of Societies.
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    Cited by:

    1. Chilosi, Alberto & Damiani, Mirella, 2007. "Stakeholders vs. shareholders in corporate governance," MPRA Paper 2334, University Library of Munich, Germany.
    2. Lantenois, Christopher, 2010. "Direction des sociétés, modèle de reproduction des élites managériales et financiarisation du capitalisme allemand : Enseignements à partir d’un panel de vingt-cinq sociétés cotées," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 8.
    3. Gregory Jackson, 2004. "Toward a Comparative Perspective on Corporate Governance and Labour Management," Discussion papers 04023, Research Institute of Economy, Trade and Industry (RIETI).

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