In Germany, workers help run their companies. And it’s going great!

– Bravo for some ‘new thinking’.

– dennis

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Think workers don’t have enough of a say in U.S. companies? Look to Germany, Boston College professor Kent Greenfield argues in the latest issue of Democracy.

Through a process called “codetermination,” large German companies are required to elect half their board of directors by a vote of their employees, rather than of their shareholders. And it’s “now the economic powerhouse of Europe,” Greenfield contends.

How much the latter is true is pretty arguable. Germany does not have the kind of widespread unemployment that plagues the rest of the continent, but it also has much moresevere wage stagnation. So it’s hardly a paradise. But Greenfield’s piece raises a good question: What have the results of codetermination been for Germany, both for growth and for workers’ share of that growth?

The best research on this in English-language publications has come from John Addison of the University of South Carolina. He, along with Claus Schnabel and Joachim Wagner, recently produced a literature review summarizing all 17 studies that have been conducted on codetermination to date. There have been three stages of research, each using better data than the last, but the most recent is almost uniformly positive toward the councils.

While there’s little evidence that they increase sales or overall employment, they do seem to have a positive effect on productivity, according to the two most recent studies on that question. One, from Bernd Frick, found that Western German firms saw a huge 25 percent spike in productivity, while Eastern German firms transitioning out of Communism saw an even bigger 30 percent jump. Previous research almost uniformly found that the councils increase wages.

– More…


One Response to “In Germany, workers help run their companies. And it’s going great!”

  1. Alan says:

    Great concept. Had a little problem understanding it at first. Code-termination kept tripping me up. When I substituted co-determination, it all fell in place.