The Economic Consequences of One-third Co-determination in German Supervisory Boards

Abstract

There remains great uncertainty about the economic consequences of co-determination in German supervisory boards. Because employee representation on company boards is mandatory, depending on the legal form and size of the company, a direct comparison of those companies that apply co-determination and those that do not has not yet been possible. However, based on a new kind of combined data set, this paper conducts such a direct comparison, leading to more reliable results about the economic consequences of workers’ participation on two core performance indicators: productivity and profitability. Accordingly, the existence of a co-determined supervisory board seems to positively affect productivity, but not profitability.

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