German Law Journal
[Vol. 11 No. 02
provide an argument for reforming German codetermination and for limiting the size of the supervisory board. Following, the remain of the paper will support the idea of allowing enterprises to choose between a one‐tier and a two‐tier board system.
G. An Argument for Reforming German Codetermination
When the German laws of codetermination were enacted, there were several theories on the legitimacy of active participation of employees in the decision‐making process of the company, such as moral approaches, democracy‐theoretical approaches, sociopolitical approaches and sociophilosophical approaches.139 Today, these theories are antiquated. Nevertheless, codetermination has had a beneficial impact on the workers’ conditions and industrial morale after World War II141, and today is still a primary structure characteristic of German corporate governance. Nowadays, German codetermination is still favored because it may improve the flow of information from the workforce to the management, and it may facilitate the participation of employees in the decision‐making process inside the large firm that may have positive effects on the motivation of the workforce and may lead to more social peace142. The crucial point is the flow of information that goes either way. Firm‐specific knowledge and expertise of employees maybottom upimprove the decision‐making process of the supervisory board. The satisfaction and motivation of the workforce is said to be improved by the information flowtop downfrom the supervisory board to the employees, especially if the point is lay‐offs or other measures that put pressure on the workforce. 140
139 See, in summary, MITBESTIMMUNG IM UNTERNEHMEN: BERICHT DER SACHVERSTÄNDIGENKOMMISSION ZUR AUSWERTUNG DER BISHERIGEN ERFAHRUNGEN BEI DER MITBESTIMMUNG (MITBESTIMMUNGSKOMMISSION) 18‐21 (1970); Wolfgang Schilling, Wirtschaftliche Mitbestimmung im Meinungsstreit, 128 ZHR 217, 219‐227 (1966). As to the evolution and development of German codetermination see, in general, Pistor (note 43), 165‐175; see also, Vagts (note 1), 35‐ 36, 65‐78; Raiser (note 2), 117‐122; Herbert Wiedemann, Codetermination by Workers in German Enterprises, 28 AM. J. COMP. L. 79‐92 (1980); Gregory Jackson, Contested Boundaries: Ambiguity and Creativity in the Evolution of German Codetermination, in BEYOND CONTINUITY: INSTITUTIONAL CHANGE IN ADVANCED POLITICAL ECONOMICS 229‐254 (Wolfgang Streeck & Kathleen Thelen eds., 2005). With regard to codetermination regimes in other countries and an explanation why those countries adopted systems of employee representation, see, Gregory Jackson, Employee Representation in the Board Compared: A Fuzzy Sets Analysis of Corporate Governance, Unionism and Political Institutions, 12 INDUSTRIELLE BEZIEHUNGEN 252‐279 (2005).
140 Christine Windbichler, Arbeitnehmerinteressen im Unternehmen und gegenüber dem Unternehmen – Eine Zwischenbilanz, 49 AG 190, 191 (2004); BERTELSMANN‐STIFTUNG & HANS‐BÖCKLER‐STIFTUNG, MITBESTIMMUNG UND NEUE UNTERNEHMENSKULTUREN 7 (1998), compared to Thomas Raiser, Bewährung des Mitbestimmungsgesetzes nach zwanzig Jahren?, in FREUNDESGABE FÜR FRIEDRICH KÜBLER, 477, 491‐492 (Heinz‐Dieter Assmann et al. eds., 1997).
Vagts (note 1), 76.
142 See, Hopt & Leyens (note 1), 145; Klaus J. Hopt, Gemeinsame Grundsätze der Corporate Governance in Europa?, 29 ZGR 779, 801 (2000); Axel von Werder, Überwachungseffizienz und Unternehmensmitbestimmung, 49 AG 166, 168 (2004); Bernd Frick, Gerhard Speckbacher & Paul Wentges, Arbeitnehmermitbestimmung und moderne Theorie der Unternehmung, 69 ZFB 745, 750, 753 (1999); Windbichler (note 140), 190‐191; see also anecdotal evidence from Vagts (note 1), 71‐72.