The codetermination bargains: the history of German corporate and labour law

Ewan McGaughey

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Why does codetermination exist in Germany? Law and economics theories have contended that if there were no legal compulsion, worker participation in corporate governance would be ‘virtually nonexistent’. This positive analysis, which flows from the ‘nexus of contracts’ conception of the corporation, supports a normative argument that codetermination is inefficient because it is supposed that it will seldom happen voluntarily. After discussing competing conceptions of the corporation, as a ‘thing in itself’, and as an ‘institution’, this article explores the development of German codetermination from the mid-19th century to the present. It finds the inefficiency argument sits at odds with the historical evidence. In its very inception, the right of workers to vote for a company board of directors, or in work councils with a voice in dismissals, came from collective agreements. It was not compelled by law, but was collectively bargained between business and labour representatives. These ‘codetermination bargains’ were widespread. Laws then codified these models. This was true at the foundation of the Weimar Republic from 1918 to 1922 and, after abolition in 1933, again from 1945 to 1951. The foundational codetermination bargains were made because of two ‘Goldilocks’ conditions (conditions that were ‘just right’) which were not always seen in countries like the UK or US. First, inequality of bargaining power between workers and employers was temporarily less pronounced. Second, the trade union movement became united in the objective of seeking worker voice in corporate governance. As the practice of codetermination has been embraced by a majority of EU countries, and continues to spread, it is important to have an accurate positive narrative of codetermination’s economic and political foundations.

JEL-codes: J50 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015
New Economics Papers: this item is included in nep-his, nep-lab and nep-law
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eprints.lse.ac.uk/61593/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:61593

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().