Conclusion
This entry has tried to render an account of the history of German codetermination from the point of view of the reason for its actually coming about. It has suggested that the solution, although innovative, was virtually the only one German decision makers in industry, trade and politics could hit upon.
As it turns out, the solution was suggested, independently or not, by four academically trained industry leaders in the industrial heartland of West Germany. Although the implementation through various legislatures of the solution required a circuitous route, the final outcome seems logical enough. However, it is an outcome that has a very specific origin. It is not clear under which circumstances German codetermination could be an attractive or even an interesting model for corporate America.The legislation on codetermination created a type of player in the labour market which was substantially different from employers operating under different rules. Codetermination emphasizes the specific location of the works, it has an impact on the product mix, it is not irrelevant with respect to technology choice, it requires heavy investment in research and development, as well as a long-term view of human capital formation, where the expectation is that the human capital will remain with the firm as long as the firm exists. A player in such circumstances will be more steady in the labour market than a player not similarly constrained and motivated. Codetermination may create, in the short run, fewer jobs, but can be expected, in the longer run, to sustain more of them than the comparable corporation.
Notes
1. BundesVerfassungsGerichtsEntscheidung (BVerfGE) 50, 1979, 290.
2. An American commentator has cast the matter differently: the workers, afraid of future stock issuance and a consequent dilution of their shares, preferred the statutory board seats to shares.
This may be a good start for didactical purposes. Yet German companies tend not to rely on stock issuance for their expansions, not even today, and certainly not then (in 1951), when there were as yet no viable capital markets.Bibliography
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