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SOME CONSEQUENCES OF CODETERMINATION

Based on Wofgang Streeck. 1984. "Co-determination: The Fourth Decade." B. Wilpert & A. Sorge (eds.), International Perspectives on Organizational Democracy: 391-422.

Yonatan Reshef
School of Business
University of Alberta
Edmonton, Alberta
T6G 2R6
CANADA

1. Almost all the "internal" workforce representatives on Supervisory Boards are also works councilors. These interlocking offices render the legally clear separation of functions fictitious. The information obtained by someone as a member of the Supervisory Board will also influence her/him in her/his capacity as a works councilor and vice versa. The reality is a progressive de facto integration of workplace and enterprise codetermination. 

2. The presence of some works councilors on the Supervisory Board strengthens the position of the works council vis--vis the management. The fact that they have a say in the appointment of members of the Management Board prevents career-oriented managers from antagonizing the works councilors. Moreover, the Management Board tries to avoid taking conflicts to the Supervisory Board, making every effort to settle controversial issues beforehand. 

3. A divergence between the interests of the employees of the company and those of the union is likely to emerge. The employees are interested in narrow, immediate economic benefits. The unions, on the other hand, derive part of their strength from the sense of solidarity of all workers. Their credibility is based on their ability to articulate and to defend overall workers' interests including the interests of the unemployed. 

4. Because they are better informed and have a deeper understanding of the firm's economic situation than the rest of the workers, the works councilors often find themselves in the position of having to defend management decisions before their fellow workers. 

5. Codetermination facilitates the creation of a "productivity coalition," or "company egoism," in that management, the internal employee representatives, and the shareholders share a common interest in company-specific interests. They'll do anything they can to promote the interests of the company at the expense of other interest groups. For example, under codetermination layoffs are almost impossible. As manpower policy grows inflexible, management would work together with the employee representatives to turn the workforce more productive, yet at the same time would refrain from hiring from the external labor market, unless they are certain that the market will grow fast enough to accommodate the extra production. In other words, the high efficiency of individual companies goes hand in hand with adverse effects on the overall productivity of the economy. 

6. Management in codetermined enterprises is exposed to constant pressures to provide information and to give reasons for its decisions. This has forced it to consider decisions more thoroughly, to take more factors into account, to make underlying assumptions more explicit, and to learn to communicate more effectively within the organization, in general, and with the workforce in particular. 

7. Research has demonstrated that in companies in which the influence of the labor representatives on the Supervisory Board is high, the influence of professional management is also high; influence of shareholders, on the other hand, is negatively correlated with management influence. Consequently, management can use larger portion of profits for investment rather than for dividends.



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