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Labour co-determination and corporate governance in Germany: The economic impact of marginal and symbolic rights

Listed author(s):
  • Sadowski, Dieter
  • Junkes, Joachim
  • Lindenthal, Sabine
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    For decades, some governments have fiercely opposed any statute of the Societas Europaea that foresaw German-type co-determined supervisory boards. Considering firms as pools of specific investors, we ask about the conditions that are necessary to secure the interests of specific human capitalists in an efficient way, if the real capital owners' right to residual control does not solve the ex-post bargaining problems over the sharing of quasi-rents. We disregard contract-theoretic approaches as solutions to the ex-post bargaining conflicts and suggest a constitutional approach to this major problem in the theory of the firm. From a constitutional perspective, the (non-executive) board members of the German Aufsichtsrat (Supervisory Board) - unlike the Betriebsrat (Works Council) - essentially dispose only of marginal, extremely symbolic, i.e., non-enforceable rights to represent worker investors. Legally, however, these rights are to be used first in the interests of the corporation and only secondarily in the interests of partial investors. Marginal and symbolic rights as well as fiduciary duties will make a difference in distributive bargaining, if they are legally imposed. Who is to be heard and to be involved in decision-making and what is counted as a legitimate argument or action - these are basically questions of political culture that in principle leave room for efficient international diversity. Option rights in the European directive on the Societas Europaea should thus be considered as an apt and wise decision.

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    Paper provided by University of Trier, Institute for Labour Law and Industrial Relations in the European Community (IAAEG) in its series Quint-Essenzen with number 60.

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    Date of creation: 1999
    Handle: RePEc:zbw:iaaegq:60
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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
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    3. Larry W. Hunter, 1998. "Can Strategic Participation Be Institutionalized? Union Representation on American Corporate Boards," ILR Review, Cornell University, ILR School, vol. 51(4), pages 557-578, July.
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    5. Schmidt, Reinhard H & Spindler, Gerald, 2002. "Path Dependence, Corporate Governance and Complementarity," International Finance, Wiley Blackwell, vol. 5(3), pages 311-333, Winter.
    6. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    7. Prescott, Edward C & Boyd, John H, 1987. "Dynamic Coalitions: Engines of Growth," American Economic Review, American Economic Association, vol. 77(2), pages 63-67, May.
    8. Williamson, Oliver E, 1991. "Economic Institutions: Spontaneous and Intentional Governance," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 159-187, Special I.
    9. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
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