Co-determination

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Co-determination (also: codetermination) is a practice whereby the employees have a role in management of a company. Codetermination rights are different in different legal environments. In some countries, like the USA, the workers have virtually no role in management of companies, and in some, like Germany, their role is very important. There is a lot of controversy on co-determination and its effects on performance of companies and economies.

1 Overview
2 The U.K. Bullock Report
3 See also
4 External links

[edit] Overview

In systems with co-determination workers in large companies usually form special bodies - works councils and in smaller companies elect worker representatives. These act as intermediaries in exercising the workers rights of being informed or consulted with on decisions concerning employee status and rights. They also elect or select worker representatives in managerial and supervisory organs of companies.

In systems with co-determination the employees are given seats in a board of directors in one-tier management systems or seats in a supervisory board and sometimes management board in two-tier management systems.

In two-tier systems the seats in supervisory boards are usually limited to 1/3 of all members. In some systems the employees can select 1/2 of all members of supervisory boards, but a representative of shareholders is always the president and has the deciding vote. The employee representatives in management boards are not present in all systems. They are always limited to a workers director, who votes only on matters concerning employees.

In one-tier systems with co-determination the employees usually have only one or two representatives in a board of directors. Sometimes they are also given seats in certain committees (e.g. the audit committee). They never have representatives among the executive directors.

The typical two-tier system with co-determination is the German system. The typical one-tier system with co-determination is the Swedish system.

[edit] The U.K. Bullock Report

In Britain, the proposals for co-determination were drawn up, and a command paper produced named the Bullock Report (Industrial democracy). This was done in 1977 by the Harold Wilson Labour government. It involved a similar split on the board, but its effect would have been even more radical. Because U.K. company law requires no split in the boards of directors, unions would have directly elected the management of the company. Furthermore, rather than gives shareholders the slight upper hand as happened in Germany, a debated 'independent' element would be added to the board, reaching the formula 2x + y. However no action was ever taken as the U.K. slid into the winter of discontent and, as Labour lost the next election, two decades of Thatcherism. This tied into the European Commission's proposals for worker participation in the 'fifth company law directive', which was never implemented.