Codetermination in Germany
Encyclopedia
Codetermination in Germany is a concept with a solid history that involves the right of workers to participate in management of the companies they work for. Known as Mitbestimmung, the modern law on codetermination is found principally in the Mitbestimmungsgesetz
of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors. The legislation is separate from the main German company law Act for public companies, the Aktiengesetz. It applies to public and private companies, so long as there are over 2000 employees. For companies with 500-2000 employees, one third of the supervisory board must be elected.
There is also legislation in Germany, known as the Betriebsverfassungsgesetz, whereby workers are entitled to form Works Councils at local shop floor level.
Codetermination aims principally to give worker a voice in the company decisions. This means matters on organisation of the business, the conditions of work and the management of personal and economic decisions affecting the future of the company and jobs. Workers therefore choose Works council
representatives and members of the board to represent them.
Codetermination in job places
According to the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law) the worker has a claim to codetermination about his own work position. He has to be informed about his position and responsibilities, and the job procedures (see also, the Arbeitsschutzgesetz). He has a right of making suggestions and to inspect certain company documents.
Operational codetermination
Operational codetermination (Betriebliche Mitbestimmung) concerns the organisation of the business, job arrangements, personal planning, guidelines for hiring, social services, time registration and performance assessments. This is found in the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law).
The Betriebsrat or works council
is the organ of operational codetermination. In the public sector it is known as the Personalrat (or staff council).
Corporate codetermination
Corporate codetermination (Unternehmensmitbestimmung) concerns private (GmbH) and public limited companies (AktG). The Drittelbeteiligungsgesetz provides for one third of the supervisory board to be elected by workers in companies with more than 500 employees. For companies with more than 2000 employees the Mitbestimmungsgesetz
requires half of the supervisory board (Aufsichtsrat) to be representative of the workers (subject to the chairman of the board being a shareholder appointee). In the coal, mining and steel industry the Montan-Mitbestimmungsgesetz allows complete parity between workers and shareholders for companies with over 1000 workers.
In December 2005 there were 729 companies with supervisory boards regulated by the Mitbestimmungsgesetz
and around 30 under the Montanmitbestimmungsgesetz.
of directors for workers and employers.
On the worker side, representatives are to name a "further member" who acts explicitly in the interests of the community. The purpose was that in the lead up to World War, these companies were seen to openly support the Nazis financially. To prevent a stalemate on the board, a neutral member is to be appointed, which the parties must agree on. On the management board, one member must be a Staff-director (Arbeitsdirecktor) who cannot be appointed against the votes of the worker directors on the supervisory board.
Companies attempted to avoid the effects of the law after it was passed. The steel company Mannesmann
registered another holding company outside the steel industry, intended to avoid the law. In response the Mitbestimmungsergänzungsgesetz (the Codetermination Supplementary Act, known as "Lex Mannesmann") was passed to prevent the practice.
Mitbestimmungsgesetz
Mitbestimmungsgesetz of 1976 is a German law which requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers.-Background:...
of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors. The legislation is separate from the main German company law Act for public companies, the Aktiengesetz. It applies to public and private companies, so long as there are over 2000 employees. For companies with 500-2000 employees, one third of the supervisory board must be elected.
There is also legislation in Germany, known as the Betriebsverfassungsgesetz, whereby workers are entitled to form Works Councils at local shop floor level.
Goals of codetermination
Views differ on the goals of codetermination in general. Academic social reformers of a liberal persuasion maintain that workers are not merely factory parts, but citizens with equal rights. The Prussian state aimed for a conciliatory policy between capital and labour, and worker committees were one way to involve and bind workers into a system, and avoid conflict. In return unions conceded objectives on the establishment of a socialist state.Codetermination aims principally to give worker a voice in the company decisions. This means matters on organisation of the business, the conditions of work and the management of personal and economic decisions affecting the future of the company and jobs. Workers therefore choose Works council
Works council
A works council is a "shop-floor" organization representing workers, which functions as local/firm-level complement to national labour negotiations...
representatives and members of the board to represent them.
Interests of workers
On the assumption that the primary goal of employers is to maximise profits in the interests of shareholders, codetermination can reorient the company's goals in the interests of workers. A better balance may be struck so that the company interests are not so one sided. For unions, codetermination is part of democratising the economy. It is also a way for workers to better the terms and conditions of their contracts in an orderly and regulated way.Interests of employers
Much economic discussion mentions the thesis that employers also have an interest in codetermination. It can be an instrument for long term increase in productivity of the company. Some economists dispute this on the basis that the losses in efficiency in production outweigh any gains in productivity.Types of codetermination
Three forms of codetermination are distinguished,Codetermination in job places
According to the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law) the worker has a claim to codetermination about his own work position. He has to be informed about his position and responsibilities, and the job procedures (see also, the Arbeitsschutzgesetz). He has a right of making suggestions and to inspect certain company documents.
Operational codetermination
Operational codetermination (Betriebliche Mitbestimmung) concerns the organisation of the business, job arrangements, personal planning, guidelines for hiring, social services, time registration and performance assessments. This is found in the Betriebsverfassungsgesetz (BetrVG, Industrial Relations Law).
The Betriebsrat or works council
Works council
A works council is a "shop-floor" organization representing workers, which functions as local/firm-level complement to national labour negotiations...
is the organ of operational codetermination. In the public sector it is known as the Personalrat (or staff council).
Corporate codetermination
Corporate codetermination (Unternehmensmitbestimmung) concerns private (GmbH) and public limited companies (AktG). The Drittelbeteiligungsgesetz provides for one third of the supervisory board to be elected by workers in companies with more than 500 employees. For companies with more than 2000 employees the Mitbestimmungsgesetz
Mitbestimmungsgesetz
Mitbestimmungsgesetz of 1976 is a German law which requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers.-Background:...
requires half of the supervisory board (Aufsichtsrat) to be representative of the workers (subject to the chairman of the board being a shareholder appointee). In the coal, mining and steel industry the Montan-Mitbestimmungsgesetz allows complete parity between workers and shareholders for companies with over 1000 workers.
In December 2005 there were 729 companies with supervisory boards regulated by the Mitbestimmungsgesetz
Mitbestimmungsgesetz
Mitbestimmungsgesetz of 1976 is a German law which requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers.-Background:...
and around 30 under the Montanmitbestimmungsgesetz.
Historical development
- 1848: The Frankfurt ParliamentFrankfurt ParliamentThe Frankfurt Assembly was the first freely elected parliament for all of Germany. Session was held from May 18, 1848 to May 31, 1849 in the Paulskirche at Frankfurt am Main...
processed a minority proposal for industry organisation that included boundaries for corporate power by setting up Labour councils. - 1850: In four printing houses in Saxony's EilenburgEilenburgEilenburg is a town in Germany. It lies in the district of Nordsachsen in the Free State of Saxony, approximately 20 km northeast of the city of Leipzig.- Geography :...
the first worker committees were established. - 1891: after repeal of the Sozialistengesetz, worker committees could be founded freely. However, this only happened where there were active unions.
- 1905: In reaction to the strike in the Ruhr coal mines, the Prussian Berggesetz introduced worker committees in mining companies with over 100 workers.
- 1916: The Law of Fatherland Disaster Relief Team (Gesetz des Vaterländischen Hilfsdiensts) created worker committees for all companies producing for the war effort with over 50 workers. These committees had hearing rights in social affairs.
- 1920: The Betriebsrätegesetz (Works Council Act) was passed, mandating consultative bodies for workers in businesses with over 20 employees. Social and economic interests of workers were to be represented and considered to the management.
- 1933: After the Nazis seized power, works councils were abolished and unions were broken up.
- 1946/47: The Allied Control CouncilAllied Control CouncilThe Allied Control Council or Allied Control Authority, known in the German language as the Alliierter Kontrollrat and also referred to as the Four Powers , was a military occupation governing body of the Allied Occupation Zones in Germany after the end of World War II in Europe...
, through the Kontrollratsgesetz No. 22 allowed works councils as in the Weimar Republic. - 1951: The Montan-Mitbestimmungsgesetz (Coal, steel and mining codetermination law) was passed for codetermination in businesses with over 1000 employees.
- 1952: The Betriebsverfassungsgesetz was passed for participation of workers at shop floor level.
- 1955: The Bundespersonalvertretungsgesetz was passed on 5 August 1955, allowing codetermination among members of the civil service.
- 1968: The 1968 student uprisings led to demands for democratisation of companies, universities and public institutions.
- 1972: The Betriebsverfassungsgesetz was updated and reissued.
- 1976: The MitbestimmungsgesetzMitbestimmungsgesetzMitbestimmungsgesetz of 1976 is a German law which requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers.-Background:...
required codetermination for all companies with over 2000 employees.
Coal and Steel Codetermination Act of 1951
After threats of massive strikes by unions the Gesetz über die Mitbestimmung der Arbeitnehmer in den Aufsichtsräten und Vorständen der Unternehmen des Bergbaus und der Eisen- und Stahlerzeugenden Industrie vom 21. Mai 1951 was passed on the 7th of June, 1951. It provided for equal representation on the supervisory boardSupervisory board
A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO.Corporate governance varies...
of directors for workers and employers.
On the worker side, representatives are to name a "further member" who acts explicitly in the interests of the community. The purpose was that in the lead up to World War, these companies were seen to openly support the Nazis financially. To prevent a stalemate on the board, a neutral member is to be appointed, which the parties must agree on. On the management board, one member must be a Staff-director (Arbeitsdirecktor) who cannot be appointed against the votes of the worker directors on the supervisory board.
Companies attempted to avoid the effects of the law after it was passed. The steel company Mannesmann
Mannesmann
Mannesmann AG was a German corporation with headquarters in Düsseldorf. The company was founded in 1890 originally to produce seamless steel tubes. It was traded on the Frankfurt Stock Exchange. The company had 130,860 employees worldwide and revenues of €23.27 billion.Over time, Mannesmann...
registered another holding company outside the steel industry, intended to avoid the law. In response the Mitbestimmungsergänzungsgesetz (the Codetermination Supplementary Act, known as "Lex Mannesmann") was passed to prevent the practice.
Works Councils Act of 1952
Passed on the 11 October 1952, this law introduce one third selection of supervisory board directors by workers (§§ 76 ff. BetrVG). An exception is made for family companies. For each two shareholder members, the works council can send a third worker representative. They may also participate in committees of the supervisory board.Works Councils Act of 1972
On 15 January 1972 the Act of 1952 was updated giving more powers for participation in personal and social affairs of company employees. Individual worker rights were strengthened in relation to unions.Third Participation Act 2004
On 18 May 2004 the Drittelbeteiligungsgesetz replaced, and made minor amendments to the Betriebsverfassungsgesetz.See also
- German company lawGerman company lawGerman company law is an influential legal regime for companies in Germany. The primary form of company is the public company or Aktiengesellschaft . The private company with limited liability is known as a Gesellschaft mit beschränkte Haftung...
- German labour lawGerman labour lawGerman labour law refers to the regulation of the employment relationship and industrial partnership in Germany.-Contract of employment:*Burgerliches Gesetzbuch §§ 611–630...
- US corporate law
- UK company law