Labor Participation in Corporate Policy-making Decisions: West Germany's Experience with Codetermination.

The article analyzes effect of legally mandating codetermination rights on corporate operations and performance in West Germany. During the recent past, West Germany, the Netherlands, Norway, Sweden, Austria, Denmark, and Luxembourg introduced or expanded legislation requiring corporations to grant worker representatives voting power on their governing boards. This paper analyzes the effect of legally mandating these codetermination rights on corporate operations and performance. Opponents, however, argue that codetermination expropriates firm owners, furthers the separation of ownership and control of productive resources, reduces investment incentives, and worsens the working environment. Surprisingly, given the heated debate typically surrounding the issue, the author find little evidence that codetermination has any effect. This result suggests that employees are unable or unwilling to affect management decisions, possibly because they lack a common objective.