Codetermination and Power in the Workplace

Abstract

decisively confirm or reject the important claim, implicit in American corporate law, that employers must retain exclusive discretion over firm governance or else economic performance will suffer. On the one hand, the existing evidence shows it is possible to involve workers in workplace decision-making in ways that, if anything, weakly improve firm performance while also plausibly benefiting workers. However, the representation arrangements for which we possess the most credible evidence do not involve very substantial restrictions on employer discretion. Causal evidence on the economic performance effects of shared governance arrangements that more substantively limit employer discretion—such as powerful German works councils or parity codetermination in German iron, coal, and steel sector firms—remains scarce. In sum, codetermination laws may perform valuable functions even if they do not substantially affect the balance of power in workplaces.