Codetermination in Germany

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 2000 employees. For companies with 500-2000 employees, one third of the supervisory board must be elected.

There is also legislation in Germany, known as the Betriebsverfassungsgesetz,[2] whereby workers are entitled to form Works Councils at 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 maximise 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 democratising 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. It can be an instrument for long term increase in productivity of the company. Some economists 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 Montanmitbestimmungsgesetz.

Historical development

Codetermination laws

Coal and Steel Codetermination Act of 1951

After threats of massive strikes by unions the Gesetz über die Mitbestimmung der Arbeitnehmer in den Aufsichtsräten und Vorständen der Unternehmen des Bergbaus und der Eisen- und Stahlerzeugenden Industrie vom 21. Mai 1951 was passed on 7 June 1951. It provided for equal representation on the supervisory board of directors for workers and employers.

On the worker side, representatives are to name a "further member" who acts explicitly in the interests of the community. The purpose was that in the lead up to World War, these companies were seen to openly support 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.

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 avoid the law. In response the Mitbestimmungsergänzungsgesetz (the Codetermination Supplementary Act, known as "Lex Mannesmann") was passed to prevent the practice.

Works Councils Act of 1952

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 each two shareholder members, the works council can send a third worker representative. They may also participate in committees of the supervisory board.

Works Councils Act of 1972

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 unions.

Codetermination Act of 1976

Third Participation Act 2004

On 18 May 2004 the Drittelbeteiligungsgesetz replaced, and made minor amendments to the Betriebsverfassungsgesetz.

European law

See also

Notes

  1. ↑ For historical development of codetermination in Germany, see E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2015) LSE Legal Studies Working Paper No. 10/2015
  2. ↑ "Betriebsverfassungsgesetz law text (german)". www.gesetze-im-internet.de.
  3. ↑ Andrea Kuffner: Die Beteiligung der Arbeitnehmer in der Europäischen Aktiengesellschaft, Wiku-Verlag, 2003, S.6

References

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