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

The Act was passed on May 4 after long consultations and debates in Parliament (the Bundestag).

Content

It applies to all German capital companies, including public companies (Aktiengesellschaft), cooperatives (eingetragene Genossenschaft), private limited companies (Gesellschaft mit beschränkter Haftung) and partnerships (Kommanditgesellschaft auf Aktien) if they have over 2000 employees.

The principle is to having almost parity of representation between employee representatives and shareholder representatives on the supervisory board

Supervisory 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...

(Aufsichtsrat). Germany company law has two levels of boards of directors. The supervisory board then elects a management board which leads the company. The head of the supervisory board is always a shareholder representative who has two votes in case of a deadlock.

Under the Codetermination Act, the supervisory board must have 12, 16 or 20 members depending on the company's size. Two or three seats will usually be reserved for union representatives. the other seats will be workers, officials and appointees of other interest groups.

Developments

Former Chancellor Gerhard Schröder established a Commission on Codetermination (Mitbestimmungskommission), which in 2005 came to no conclusion about possible reforms of the law. Different members disagreed with one side wanting to reduce worker influence and the other side increase it.