Codetermination in Germany

Last updated

Codetermination in Germany is a concept that involves the right of workers to participate in management of the companies they work for. [1] Known as Mitbestimmung , the modern law on codetermination is found principally in the Mitbestimmungsgesetz of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors. The legislation is separate from the main German company law Act for public companies, the Aktiengesetz . It applies to public and private companies, so long as there are over 2,000 employees. For companies with 500–2,000 employees, one third of the supervisory board must be elected.

Contents

There is also legislation in Germany, known as the Betriebsverfassungsgesetz whereby workers are entitled to form Works Councils at the local shop floor level.

Goals of codetermination

Views differ on the goals of codetermination in general. Some social reformers maintain that workers are not merely factory parts, but citizens with equal rights. The Prussian state aimed for a conciliatory policy between capital and labour, and worker committees were one way to involve and bind workers into a system, and avoid conflict. In return unions conceded objectives on the establishment of a socialist state.

Codetermination aims principally to give workers a voice in the company decisions. This means matters on organisation of the business, the conditions of work and the management of personal and economic decisions affecting the future of the company and jobs. Workers therefore choose Works council representatives and members of the board to represent them.

Interests of workers

On the assumption that the primary goal of employers is to maximize profits in the interests of shareholders, codetermination can reorient the company's goals in the interests of workers. A better balance may be struck so that the company interests are not so one sided. For unions, codetermination is part of democratizing the economy. It is also a way for workers to better the terms and conditions of their contracts in an orderly and regulated way.

Interests of employers

Much economic discussion mentions the thesis that employers also have an interest in codetermination. Some economists find that it can be an instrument for long term increase in productivity of the company, [2] while others dispute this on the basis that the losses in efficiency in production outweigh any gains in productivity. [3]

Types of codetermination

Three forms of codetermination are distinguished,

Codetermination in job places

According to the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law) the worker has a claim to codetermination about his own work position. He has to be informed about his position and responsibilities, and the job procedures (see also, the Arbeitsschutzgesetz ). He has a right of making suggestions and to inspect certain company documents.

Operational codetermination

Operational codetermination (Betriebliche Mitbestimmung) concerns the organisation of the business, job arrangements, personal planning, guidelines for hiring, social services, time registration and performance assessments. This is found in the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law).

The Betriebsrat or Works Council is the organ of operational codetermination. In the public sector it is known as the Personalrat or Staff Council.

Corporate codetermination

Corporate codetermination (Unternehmensmitbestimmung) concerns private (GmbH) and public limited companies (AktG). The Drittelbeteiligungsgesetz provides for one third of the supervisory board to be elected by workers in companies with more than 500 employees. For companies with more than 2000 employees the Mitbestimmungsgesetz requires half of the Supervisory Board (Aufsichtsrat) to be representative of the workers (subject to the chairman of the board being a shareholder appointee).

In the coal, mining and steel industry the Montan-Mitbestimmungsgesetz allows complete parity between workers and shareholders for companies with over 1000 workers.

In December 2005 there were 729 companies with supervisory boards regulated by the Mitbestimmungsgesetz and around 30 under the Montan-Mitbestimmungsgesetz .

Historical development

Codetermination laws

Coal and Steel Codetermination Act of 1951

After threats of massive strikes by Metalworker unions, the Montan-Mitbestimmungsgesetz  [ de ] was passed in 1951 in West Germany. It applied to workplaces with over 1,000 employees, which impacted 105 companies at the time. [4] : 36  It provided for equal representation on the supervisory board of directors for workers and employers.

On the worker side, representatives are to name an "additional member" who acts explicitly in the interests of the community. The purpose was that in the lead up to World War II, these companies were openly supporting the Nazis financially. To prevent a stalemate on the board, a neutral member is to be appointed, which the parties must agree on. On the management board, one member must be a Staff-director (Arbeitsdirecktor) who cannot be appointed against the votes of the worker directors on the supervisory board. [5]

Companies attempted to avoid the effects of the law after it was passed. The steel company Mannesmann registered another holding company outside the steel industry, intended to evade the law. In response, the Mitbestimmungsergänzungsgesetz (The Codetermination Supplement Act, known as "Lex Mannesmann") was passed to prevent the practice by allowing subsidiary companies to vote for the supervisory board of the parent companies. [4] : 38 

Works Constitution Act

Passed on the 11 October 1952, this law introduce one third selection of Supervisory Board directors by workers (§§ 76 ff. BetrVG). An exception is made for family companies. For every two shareholder members, the Works Council can send a third worker representative. They may also participate in committees of the Supervisory Board.

On 15 January 1972, the Act of 1952 was updated giving more powers for participation in personal and social affairs of company employees. Individual worker rights were strengthened in relation to trade unions.

Codetermination Act of 1976

Third Participation Act 2004

On 18 May 2004 the Drittelbeteiligungsgesetz replaced provisions of the 1952 Works Constitution Act. It applied to workplaces between 500 and 1,000 employees who are not already covered under the (Montan-)Mitbestimmungsgesetz. [6]

European law

See also

Further reading

Related Research Articles

<span class="mw-page-title-main">Board of directors</span> Type of governing body for an organisation

A board of directors is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organization, or a government agency.

<i>Societas Europaea</i> Public company registered under the corporate law of the European Union

A societas Europaea is a public company registered in accordance with the corporate law of the European Union (EU), introduced in 2004 with the Council Regulation on the Statute for a European Company. Such a company may more easily transfer to or merge with companies in other member states.

A works council is a shop-floor organization representing workers that functions as a local/firm-level complement to trade unions but is independent of these at least in some countries. Works councils exist with different names in a variety of related forms in a number of European countries, including Great Britain ; Germany and Austria (Betriebsrat); Luxembourg ; the Netherlands and Flanders in Belgium (ondernemingsraad); Italy ; France ; Wallonia in Belgium, Spain and Denmark.

In corporate governance, codetermination is a practice where workers of an enterprise have the right to vote for representatives on the board of directors in a company. It also refers to staff having binding rights in work councils on issues in their workplace. The first laws requiring worker voting rights include the Oxford University Act 1854 and the Port of London Act 1908 in the United Kingdom, the Act on Manufacturing Companies of 1919 in Massachusetts in the United States, and the Supervisory Board Act 1922 in Germany, which codified collective agreement from 1918 and expanded it in the 1976 Mitbestimmungsgesetz.

In German corporate governance, a Vorstand is the executive board of a corporation. It is hierarchically subordinate to the supervisory board (Aufsichtsrat), as German company law imposes a two-tier board of directors.

In corporate governance, a governance board also known as council of delegates are chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and fire the board of directors.

The UK Corporate Governance code, formerly known as the Combined Code is a part of UK company law with a set of principles of good corporate governance aimed at companies listed on the London Stock Exchange. It is overseen by the Financial Reporting Council and its importance derives from the Financial Conduct Authority's Listing Rules. The Listing Rules themselves are given statutory authority under the Financial Services and Markets Act 2000 and require that public listed companies disclose how they have complied with the code, and explain where they have not applied the code – in what the code refers to as 'comply or explain'. Private companies are also encouraged to conform; however there is no requirement for disclosure of compliance in private company accounts. The Code adopts a principles-based approach in the sense that it provides general guidelines of best practice. This contrasts with a rules-based approach which rigidly defines exact provisions that must be adhered to. In 2017, it was announced that the Financial Reporting Council would amend the Code to require companies to "comply or explain" with a requirement to have elected employee representatives on company boards.

Mitbestimmungsgesetz 1976 or the Codetermination Act 1976 is a German law that requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers, and just under half the votes.

<span class="mw-page-title-main">German company law</span>

German company law (Gesellschaftsrecht) is an influential legal regime for companies in Germany. The primary form of company is the public company or Aktiengesellschaft (AG). A private company with limited liability is known as a Gesellschaft mit beschränkter Haftung (GmbH). A partnership is called a Kommanditgesellschaft (KG).

The Report of the committee of inquiry on industrial democracy (1977) Cmnd 6706, also the Bullock Report for short, was a report proposing for a form of worker participation or workers' control, chaired by Alan Bullock. The idea was seen by some as a way to solve the chronic industrial disputes and to enhance participation of employees in their workplace.

<span class="mw-page-title-main">Shareholders in the United Kingdom</span>

Shareholders in the United Kingdom are people and organisations who buy shares in UK companies. In large companies, such as those on the FTSE100, shareholders are overwhelmingly large institutional investors, such as pension funds, insurance companies, mutual funds or similar foreign organisations. UK shareholders have the most favourable set of rights in the world in their ability to control directors of corporations. UK company law gives shareholders the ability to,

<span class="mw-page-title-main">Workplace participation in the United Kingdom</span>

Workplace participation in the United Kingdom refers to the structures that people at work have to participate in the way their organisation is managed. UK labour and company law generally leaves this up to the management of the company, appointed by shareholders and banks, to determine, and in contrast to most European jurisdictions requires only a minimum participation practices. Workers have the right to,

Industrial democracy is an arrangement which involves workers making decisions, sharing responsibility and authority in the workplace. While in participative management organizational designs workers are listened to and take part in the decision-making process, in organizations employing industrial democracy they also have the final decisive power.

Control Council Law No 22, Works Councils was a German labour law drafted by the Allied Control Council to enable the formation of work councils in rebuilding the economy and society after World War II. Work councils, which employees of a firm organised and elected democratically to determine workplace issues, had existed in Germany in various forms since 1889. They had been abolished by Adolf Hitler's Nazi party. The new Control Council Law No 22 provided a template for democratic German trade unions to re-organise through collective agreements with employers.

Erzberger v TUI AG (2017) C-566/15 is an EU law and European labour law case, concerning the scope of free movement of workers, in relation to codetermination.

Worker representation on corporate boards of directors, also known as board-level employee representation (BLER) refers to the right of workers to vote for representatives on a board of directors in corporate law. In 2018, a majority of Organisation for Economic Co-operation and Development, and a majority of countries in the European Union, had some form of law guaranteeing the right of workers to vote for board representation. Together with a right to elect work councils, this is often called "codetermination".

The Reward Work Act of 2018 is a proposed United States Act of Congress to ban unjustified stock buy-backs, and to require that every listed company enable employees to elect one-third of the board of directors. The Bill was sponsored initially by Senators Tammy Baldwin, Elizabeth Warren and Brian Schatz in March 2018, joined in April 2018 by Kirsten Gillibrand, and in November 2018 by Bernie Sanders. It was sponsored in the House of Representatives in June 2018 by Keith Ellison and Ro Khanna.

The Works Constitution Act, abbreviated BetrVG, is a German federal law governing the right of employees to form a works council.

<span class="mw-page-title-main">Volkswagen and unions</span> Collective worker action at the German auto firm Volkswagen

Workers of the German auto manufacturer Volkswagen Group are collectively organized and represented across a variety of worker organizations including trade unions and Works Councils across the globe. Workers are organized on multiple levels; locally, regionally, nationally, internationally and by marque.

SAP SE employs 22,000 employees globally. Employees in Germany have been represented by a works council since 2006, and also have employee and trade union representatives in the Supervisory Board. Employees in Israel are unionised with Histadrut.

References

  1. ↑ McGaughey, Ewan (2015-03-25). "The Codetermination Bargains: The History of German Corporate and Labour Law". Rochester, NY. doi:10.2139/ssrn.2579932. SSRN   2579932.{{cite journal}}: Cite journal requires |journal= (help)
  2. ↑ Jäger, Simon; Schoefer, Benjamin; Heining, Jörg (November 2019). "Labor in the Boardroom". Working Paper Series. doi: 10.3386/w26519 . S2CID   198974939.{{cite journal}}: Cite journal requires |journal= (help)
  3. ↑ Kuffner, Andrea (2003). Die Beteiligung der Arbeitnehmer in der Europäischen Aktiengesellschaft auf der Grundlage der Richtlinie über Europäische Betriebsräte. Berlin. ISBN   978-3-936749-47-2. OCLC   611572503.{{cite book}}: CS1 maint: location missing publisher (link)
  4. 1 2 McGaughey, Ewan (2015-03-25). "The Codetermination Bargains: The History of German Corporate and Labour Law". Rochester, NY. SSRN   2579932.{{cite journal}}: Cite journal requires |journal= (help)
  5. ↑ "I. Bedingungsfaktoren für die Einführung der paritätischen Mitbestimmung in der Eisen- und Stahlindustrie 1945–1949", Mitbestimmung in der Montanindustrie, DEUTSCHE VERLAGS-ANSTALT, pp. 18–36, 1982, doi:10.1524/9783486703351.18, ISBN   978-3-486-70335-1 , retrieved 2023-06-16
  6. ↑ Teichmann, Christophe; Monsenepwo, Justin (2018-12-01). "Co-management (Mitbestimmung) in German law". Revue de droit comparé du travail et de la sécurité sociale (4): 86–99. doi: 10.4000/rdctss.1772 . ISSN   2117-4350.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.