Economics of labour co-determination in view of corporate governance

Abstract

The article examines the economic effects of co-determination (by supervisory boards) with regard to theoretical and empirical aspects. We show theoretically, that co-determination can be an efficiency-increasing institution in a market-based economy. An empirical check of the economic effects of German co-determination fails because of the non-existence of large companies without co-determination. Co-determination can also be found in corporate governance systems in other European countries. In the EC a harmonization of co-determination on corporate level is not yet achieved. The reason is the specific historical development of industrial relations in Europe. Instead of an integration through harmonization the European Commission favors system competition with good reasons.

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