Article
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

We present the first panel estimates of the productivity effects of the unique German institution of parity, board-level co-determination. Although our data span two severe recessions when labour hoarding costs of co-determination are probably highest, and the panel is too short to capture the likely long-run benefits in terms of human capital formation and job satisfaction, we find positive productivity effects of the 1976 extension to parity co-determination in large firms. Copyright Blackwell Publishing Ltd/London School of Economics 2005.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... The relationship between productivity and firm performance should be studied as separate (2019) found that operational performance has a significant impact on the financial performance of organizations. The operational performance measured based on the number of (sports) games won is more akin to productivity (in terms of efficiency) and the financial performance measured in terms of revenue and ticket sales is similar to firm performance: a similar pattern echoed in earlier studies of Crook et al. (2011) andFitzRoy andKraft (2005). To the contrary, Frank and Obloj (2014) highlighted that employees being more productive at work do not guarantee superior organizational performance. ...
... The relationship between productivity and firm performance should be studied as separate (2019) found that operational performance has a significant impact on the financial performance of organizations. The operational performance measured based on the number of (sports) games won is more akin to productivity (in terms of efficiency) and the financial performance measured in terms of revenue and ticket sales is similar to firm performance: a similar pattern echoed in earlier studies of Crook et al. (2011) andFitzRoy andKraft (2005). To the contrary, Frank and Obloj (2014) highlighted that employees being more productive at work do not guarantee superior organizational performance. ...
... Since prior studies indicate that firm-size, age of the firm and types of industries have a significant effect on ambidexterity, productivity and firm performance, those variables were controlled in the current study (FitzRoy & Kraft, 2005;Kengatharan, 2019;Kostopoulos et al., 2015;Malik et al., 2017;Raffiee & Coff, 2016). The control variables were dummy coded-firm-size (1=Small, 2=Large); Age of the firm (1= less than 25 (<=25) Years, 2 = More than 25 (>25) Years) and industry (1= Telecommunication and Hotels, 2= Banking and Insurance)-and were treated as covariates among themselves and with exogenous variable (firm-specific human capital) and added as predictors of the endogenous variables (ambidexterity, productivity and firm performance) (see Kline, 2015;Patky & Pandey, 2020;Xu & Huang, 2020). ...
Article
Full-text available
Drawing on the knowledge-based theory of the firm and organisational learning theory, the present study chiefly examines the impact of firm-specific human capital on organisational ambidexterity and the subsequent effect of organisational ambidexterity on productivity by integrating human capital theory with the theory of transaction cost. The data were garnered from 197 managers in Sri Lanka with self-reported questionnaires in a time-lagged approach. The results disclose strong significant relationships between the variables investigated: a chain of positive relationships between firm-specific human capital and organisational ambidexterity, organisational ambidexterity and productivity, and productivity and firm performance; and mediated relationships between firm-specific human capital and productivity through organisational ambidexterity, and between organisational ambidexterity and firm performance via productivity. The findings of the study push back the frontiers of human resource management literature in many ways. Notably, managers should be cognizant of the effects of firm-specific human capital, organisational ambidexterity, and productivity on firm performance.
... Most prior empirical studies on parity codetermination in Germany focus on firm value (Gorton and Schmid 2004;Gurdon and Rai 1990;Petry 2015;Schmid and Seger 1998) or 1 3 Parity codetermination at the board level and labor investment… productivity and financial performance (FitzRoy and Kraft 1993;Vitols 2006) but find a negative relationship. Few studies document a positive relationship between codetermination and firm profitability (Gurdon and Rai 1990), firm productivity (FitzRoy and Kraft 2005;Renaud 2007), and return on equity (Kraft and Ugarkovic 2006;Vitols 2008). Fauver and Fuerst (2006) document that parity codetermination positively influences firms' market value and monitoring in the German two-tier board system. ...
... 24 In practice, employee representatives, who are often works council members and are closely involved in decisions over working conditions which may affect workers' skill and pay classification, account for the remaining majority. Works council members are not allowed to call for industrial action, yet anecdotal evidence suggests that in reality, they are involved in unofficial strikes (FitzRoy and Kraft 2005). 25 However, the design of the German codetermination system has attempted to reduce the conflict between efficiency and distributional goals [for a discussion, see also FitzRoy and Kraft (2005)]. ...
... Works council members are not allowed to call for industrial action, yet anecdotal evidence suggests that in reality, they are involved in unofficial strikes (FitzRoy and Kraft 2005). 25 However, the design of the German codetermination system has attempted to reduce the conflict between efficiency and distributional goals [for a discussion, see also FitzRoy and Kraft (2005)]. Hence, the presence of labor representatives may capture possible indirect effects of unions and lead to a more efficient net hiring policy through less information asymmetry than could be achieved by external trade unions. ...
Article
Full-text available
This study examines whether parity codetermination at German supervisory boards improves labor investment efficiency at firm level. We focus on labor, as it is an important production factor. Labor investment decisions are not easily reversible in the short term, given that hiring and firing costs are usually quite high due to labor regulation in Germany. As labor representatives are legally entitled to 50% voting rights at the supervisory board level (parity codetermination), we expect them to contribute insider knowledge to the supervisory board. As they have access to internal documents, we also expect them to reduce information asymmetry and potential agency conflicts between management on the one hand and outsiders such as investors or capital suppliers on the other. Both smaller information asymmetries and reduced agency conflicts, in turn, ought to increase a firm’s labor investment efficiency. Labor investment proxies for deviations from a firm’s optimal level of investment in labor in the form of over- and underinvestment, defined as hiring fewer employees than required to run profitable projects (underhiring) or retaining employees who are occupied with non-profitable projects (overhiring). We measure labor investment efficiency using such a net hiring optimum for a sample of German listed firms between 1995 and 2015. The results indicate that parity codetermination causes a lower deviation from the net hiring optimum. Our results are interesting for various stakeholders, especially for policymakers, managers, shareholders and employees who may not be aware of the importance of codetermination for firm efficiency, as well as for firms that are considering circumventing German legislation.
... In this regard, two opposing opinions can be identified in the literature. The first strand of literature considers board heterogeneity positively, as greater board diversity leads to a larger pool of resources and capabilities, which should improve strategic decision-making (Zhou et al., 2023;Ararat et al., 2015;FitzRoy and Kraft, 2005) and innovation (Vafaei et al., 2021;He and Jiang, 2019) and increase firms' responsiveness to crises and other challenges (Harjoto et al., 2019). The second strand of research, on the other hand, considers homogeneous boards to be beneficial (Hosny and Elgharbawy, 2022;Frijns et al., 2016;Tekleab et al., 2016;Torchia et al., 2015). ...
... For companies employing more than two thousand people, the number of employee and owner representatives must be equal (Lin et al., 2018). The involvement of employee representatives is based on the premise that the flow of information from employees to management positively influences decision-making (FitzRoy and Kraft, 2005). This is said to be particularly beneficial in industries that require intensive coordination, integration of activities and exchange of information. ...
Article
Purpose The effects of board composition on performance have long been discussed in management research using fractionalization measures. In this study, we propose an alternative measurement approach based on board polarization. Design/methodology/approach Using an exploratory analysis and applying the polarization measure to German Deutscher Aktienindex (DAX)-, Midcap-DAX (MDAX)- and Small Cap-Index (SDAX)-listed companies, this paper applies the polarization index to examine the relationship between board diversity and performance. Findings The results show that the polarization concept is well suited to measure principal-agent problems between the members of the management and supervisory boards. We reveal that board polarization is negatively associated with firm performance, as measured by return on investment (ROI). Originality/value This exploratory study shows that the measurement of board polarization can be linked to performance differences between companies, which offers promising starting points for further research.
... 6 Amongst a few, we recall here that Cable and FitzRoy (1980) find that co-determination positively affects labour productivity, FitzRoy & Kraft (1993) obtain no statistically significant evidence of productivity gains due to co-determination laws, Baums & Frick (1998) study how the behaviour of the German courts during the period 1974-1995 on co-determination issues affects the stock price developments, finding no statistically significant stock market response to court verdicts. More recently, Gorton & Schmid (2004) and FitzRoy & Kraft (2005) respectively pinpoint (1) the negative effect caused by co-determination on the market value of firms, and (2) the positive labour productivity effect of near-parity co-determination, whereas Kraft (2018) considers a model to study empirically the effects of extending co-determination rights on both productivity and bargaining power. He pinpoints no productivity disadvantages of codetermined firms. ...
... The empirical literature on co-determination has shown that quantity, prices, profits and wages under co-determination are different than under profit maximisation. Specifically, productivity, profits, stock returns, wages and employment adjustment, labour share, bargaining power and other relevant variables on the firm side have been widely analysed by many studies such as Svejnar (1982), FitzRoy & Kraft (1993, 2005, Kraft & Ugarkovic (2006), Gorton & Schmid (2004), Fauver & Fuerst (2006) and Kraft (2018). For instance, Gorton & Schmid (2004, p. 895) pinpoint that co-determination appears "to succeed in altering the objective function of the firm", Fauver and Fuerst (2006, p. 677) state that "… our analysis suggests that the judicious use of labor representation can increase firm value", whereas Kraft (2018) finds that codetermination leads to a significant increase in workers' bargaining power and the distribution of rents. ...
Article
Full-text available
This work aims to investigate the effects of co-determination in a game-theoretic setting by considering network externalities in consumption. The received theoretical literature, so far focused only on standard (non-network) industries, showed that co-determination might emerge as the sub-game perfect Nash equilibrium (SPNE) of a non-cooperative Cournot duopoly, but this outcome generates a prisoner’s dilemma. The present research shows that (positive) network externalities may solve the prisoner’s dilemma and let co-determination become a Pareto-efficient SPNE with homogeneous or heterogeneous products. In a network industry, co-determination becomes a Pareto-superior institution for society, as firms, consumers and workers are better off than under profit maximisation. These results hold for exogenous (homogeneous and heterogeneous) co-determination and endogenous co-determination.
... The dualistic model favours employee representation in company bodies (Fitzroy & Kraft, 2005). The staff there is represented mainly in the supervisory board, less often in the company's management board. ...
... Research has also shown that the presence of employees in the board means a higher rate of long-term investment as well as a higher rate of sustainability. Fitzroy and Kraft (2005) point to the favourable results of BLER following their research that they carried out in German companies. They claim that increasing the representation of the employees in supervisory boards in large German companies from 1⁄ 3 to the parity system improved the economic results of those companies. ...
Article
Full-text available
Motivation: Since the 1970s, there has been recorded a significant scope of the employee representation in corporate governance bodies, as the earlier German solutions have been popularized in many European countries. Since then, there has been a discussion about the impact of this representation on the activities of companies, their economic results, their value, etc. The research conducted on this subject does not provide a clear answer on this topic.Aim: The article aims to determine the impact of board level employee representation (BLER) on the activities of companies. The latest findings in this area, based on the results of empirical research shall be considered. New types of BLER impact on the value of companies in various phases of the business cycle and on preventing tax avoidance shall be presented. The objective of the article is also to provide the governments of particular countries with additional arguments in favour of introducing or expanding the institution of employee representation. In the longer term, these arguments should encourage the EU authorities to try to develop and adopt a directive on this subject, obliging member states to introduce or extend BLER.Results: The controversy over the influence of BLER on the company’s operations has not diminished. However, taking into account the entirety of such an impact (ideological, economic and social results), there has been an increasing number of arguments in favour of a positive assessment of such an impact. They are provided by the latest, extensive empirical research conducted on this subject, covering several dozen countries. They indicate that BLER has a positive effect on the stabilization of the company in times of economic downturn (recession), that it affects the adoption of a long-term development strategy by companies, etc. The research also shows that representation of the employees in boards prevents companies from tax avoidance. Its effectiveness correlates with the scope of such representation.
... In a similar pattern, Crook et al. (2011) found that the relationship between human capital and firms' performance was mediated by operational performance such as customer service satisfaction or innovation. Further, FitzRoy and Kraft (2005) submit that the firm with increased productivity is successful in the market. A review of earlier studies concede that firm performance is mostly determined by internal and external factors such as tangible assets, competition, infrastructure and technology (see Beheshti and Beheshti, 2010;Grant, 1996;Kopelman et al., 1990). ...
... Controls. The present study controlled for firm size, firm age and the number of employees (FitzRoy and Kraft, 2005;Kostopoulos et al., 2015;Takeuchi et al., 2007). The types of industry were also controlled to negate potential industry effects (1telecommunications and hotels; 2banking and insurance) (e.g. ...
Article
Purpose Drawing on the knowledge-based theory of the firm, the purpose of this paper is to examine the relationship between each facet of intellectual capital, productivity and firms’ performance and further investigate, heretofore neglected, a mediating effect of productivity in the relationship between each facet of intellectual capital and firms’ performance. Design/methodology/approach Data were garnered with a self-reported questionnaire from 232 firm managers working in various industries: banking, insurance, telecommunications and hotels. Reliability and validity of the instruments were confirmed using confirmatory factor analysis. Prior to hypothesis testing using structural equation modelling, as a caveat, tests for nonresponse bias and common method variance were employed. Findings The paper confirmed that intellectual capital is the pièce de résistance and established a strong connection with productivity. The results further disclosed a positive relationship between productivity and firms’ performance. A mediated relationship between individual facets of intellectual capital and firms’ performance through productivity was also affirmed. Practical implications Chiefly, the paper underscored the importance of intellectual capital in promoting productivity and firms’ performance. It behoves human resource managers and practitioners to make the organisational arrangements to reinforce intellectual capital thereby boosting the productivity that brings organisations’ success. Originality/value Previous studies in the sphere of intellectual capital have unequivocally discounted in establishing relationships between intellectual capital, productivity and firms’ performance. The results of the paper are novel findings, unequivocally contributing to the frontiers of the knowledge-based theory of the firm and conjointly, the paper has made methodological and geographical contributions.
... Moreover, corporate decision-making about various matters pertaining to workers, such as those concerning breaks, health and safety, hours and shifts, availability after hours, introduction of work groups, and termination of employees, among others, must be made in consultation with the works council. The relevant point about German codetermination is that the institution of codetermination advanced relational equality while not only having little to no set back to the efficiency of production, but in fact by producing a relatively greater degree of productivity (Smith 1991;Freeman and Lazear 1995;Hübler and Jirjahn 2003;Zwick 2004;FitzRoy and Kraft 2005;Renaud 2007). ...
Article
Full-text available
Relational egalitarians argue that workplace hierarchy is wrong or unjust. However, even if workplace hierarchy is morally deficient in one respect, the efficiency of hierarchical cooperation might vindicate hierarchy. This paper assesses the extent to which relational egalitarians must make concessions to workplace hierarchy for the sake of efficiency. I argue that considerations of hierarchy provide egalitarians with reasons that make workplace hierarchy tolerable despite being unjustified, and, moreover, that under a predominantly hierarchical status quo, the practical import of egalitarian reasons is unlikely to be undercut. This can be the case even if social hierarchy sometimes constitutes social cooperation.
... Because the board is involved at an earlier stage and a higher level of decision-making, however, this voice effect may be stronger. Empirical studies have found mixed results (Addison, 2009), with some recent studies signalling positive effects on productivity (FitzRoy and Kraft, 2005;Renaud, 2007) and employment (Gorton and Schmid, 2004). Other studies indicate that the effect depends on the business cycle (Kleinknecht, 2015) or the degree of coordination required in the firm (Fauver and Fuerst, 2006). ...
Article
Is worker participation becoming more prominent or less? Furthermore, what is the impact of worker participation on economic performance? This article introduces a tool designed by researchers at the ETUI to help answer these questions: the European Participation Index (EPI), a country-level summary measure of the strength of workers’ voice in companies. The EPI is based on (i) union density and collective bargaining coverage, (ii) workplace representation and (iii) board-level representation. This multi-level index provides an alternative to existing cross-national measures by taking into consideration two levels at which worker participation can take place: the workplace and the board. The article shows first that worker participation has become less prevalent in the EU over the past decade; and second that the EPI is robust and has superior explanatory power in relation to income inequality compared with traditional measures of collective bargaining.
... Second, we expand the voluminous literature on shopfloor ER by studying the organizational implications of ER. There is a rich body of research investigating the role of ER in relation to several aspects of firms' activity and performance, such as wage bargaining (Booth and Chatterji, 1995), work engagement and employee voice (Bryson, 2004;Kwon and Farndale, 2020), productivity (Addison et al., 2004;FitzRoy and Kraft, 2005), investment (Addison et al., 2007), employment (Addison and Teixeira, 2006;Jirjahn, 2010), innovation (Addison et al., 2017;Kraft et al., 2011), production technology (Flynn, 2005) and non-wage aspects of labour, including hours of work (Buchmueller et al., 2004), flexible-time arrangements (Burdin and Pérotin, 2019), human resource practices (Bryson et al., 2007). We embed the well-known information and communication role of ER (Freeman and Lazear, 1994) into the framework of knowledge hierarchies, bridging the gap between disparate bodies of literature in industrial relations, management and organization studies. ...
Article
Full-text available
We investigate whether workplace voice through institutionalized forms of employee representation (ER) affects the design of firm hierarchies. We look at the role of ER within a knowledge-based view of hierarchies, where the firm's choice of hierarchical layers depends on the trade-off between communication and knowledge acquisition costs. Using a sample of more than 20,000 private-sector firms in 32 countries, we find that the presence of ER is positively associated with the number of organizational layers, though the relationship is tempered by firm size. ER positively correlates with job training, skill development and enhanced internal communication via staff meetings. The analysis of managers' perceptions suggests the higher frequency of meetings in firms with ER does not lead to more delays in the implementation of organizational changes. Taken together, our findings point to ER as facilitating the flow of information to top decision-makers and hence reducing communication costs. This may enable the firm to economize scarce cognitive resources without retarding the accumulation of new shop-floor capabilities. We contribute to recent literature on organizational design by suggesting ER institutions as possibly relaxing the trade-off between communication and knowledge acquisition costs within firms.
... We include WORKS_COUNCIL, which is equal to one if the proportion of firms in the industry with a works council is above the median of all industries and zero otherwise. Prior literature suggests that works councils have information rights and consultation rights, which improve communication between workers and management and increase operating efficiency (Freeman and Lazear 1995;FitzRoy and Kraft 2005). 22 Finally, we control for a firm's governance quality (GOV) to isolate the specific influence of worker representatives in our tests. ...
Article
Full-text available
We examine whether worker representation on corporate boards results in improved monitoring or payroll maximization. Several economic theories predict that worker representatives would use control and voting rights in the boardroom to transform firm assets into private benefits and increased wages, but labor contract models suggest that workers’ inside information should permit improved monitoring. To investigate this conflict, we use mandatory worker representation on corporate boards in Germany. Using hand-collected data, our results suggest that the worker representatives’ payroll maximization incentives dominate their monitoring duties. Specifically, worker representatives reduce real earnings management when it results in wage cuts or job losses but not when it increases payroll or job security. Similarly, worker representatives are generally associated with improved monitoring of tax planning activities. However, when the risk of offshoring jobs is high, worker representatives do not promote tax planning for low-aggression firms and instead block aggressive tax planning for high-aggression firms. This evidence helps policymakers and researchers better understand the role of workers in corporate governance systems and contributes to the ongoing public debate about introducing worker representation in the United States and the United Kingdom.
... Since the pioneering works of McCain (1980) and Kraft (1998), there has been increasing attention by the theoretical (Fanti et al., 2018;Kraft, 2001;Kraft et al., 2011) and empirical (FitzRoy & Kraft, 1993, 2005Gorton & Schmid, 2004;Kraft, 2018) literatures on the effects of codetermination on labour productivity and the output market. McCain (1980) was the first in providing a detailed contribution about the theoretical effects of codetermination in the industrial economics literature, whereas Kraft (1998) ...
Article
Full-text available
This research introduces endogenous codetermination in a Cournot duopoly. Unlike the received literature (Kraft, 1998), this work assumes that firms bargain with their own union bargaining units under codetermination if and only if they can choose an ad hoc bargaining effort by maximising profits (three‐stage non‐cooperative game). There are remarkable differences compared with the main findings of the exogenous codetermination literature. Indeed, there may exist asymmetric multiple (Pareto efficient) Nash equilibria in pure strategies. Mandatory codetermination, therefore, is Pareto worsening. Each firm can then use the union bargaining power as a strategic device in a Cournot setting.
... Further, research on social enterprises has indicated that stakeholder representatives enhance external legitimacy, which helps with the acquisition of human and financial resources (Miller et al., 2012). In contrast, however, other scholars indicate that organizations with workers directors show reduced productivity and profits (Fitzroy & Kraft, 2005) and slower decision-making at board-level (Hielscher et al., 2014;Matten & Crane, 2005). Meanwhile, a study on social enterprises found that stakeholder representatives facilitate the creation of cliques and that this can be detrimental to board performance (Crucke & Knockaert, 2016). ...
Article
Full-text available
Supporter directors are individuals elected to a sports organiza-tion's board to represent the interests of its supporters. Although their inclusion on boards is widely considered to be good ethical practice, recent research shows that supporter directors face distinct challenges that often inhibit them from performing effectively. The purpose of this study was to illuminate how supporter directors can overcome these challenges by, firstly, generating a deeper understanding of the roles of supporter directors in Scottish football clubs and, secondly, analysing how board-level social interaction influences supporter directors role performance. The research method consisted of 17 interviews with individuals who are currently serving, or have previously served, as supporter directors on Scottish football club boards. The findings show that supporter directors perceive their role to encompass three elements: (1) promoting supporters' interests in board meetings, (2) acting as a conduit of information, and (3) complying with their fiduciary duties. Drawing on the social exchange theory, the findings then revealed a perception among supporter directors that successful performance of those roles is dependent on their ability to initiate and sustain patterns of reciprocal social exchange with their board colleagues. The research provides practical recommendations for supporter directors and other types of stakeholder representatives on how to improve their performance.
... This law was enacted by a government of SPD and FDP (social democrats and liberals). Some believe that this law is a favour of the SPD to the traditionally closely linked trade unions, without bringing any economic benefit to the economy (FitzRoy & Kraft, 2005). However, other studies assume that codetermination on the supervisory board does have some advantages. ...
Article
Full-text available
This paper empirically investigates the association between codetermination on the audit committee (AC) and audit quality. Using a sample of 655 firm‐year observations related to German CDAX companies, our results indicate that the presence of employee representatives on the AC is negatively associated with audit quality. This negative association can also be observed for the percentage of employee representatives serving on the AC. However, our analyses show that the mentioned findings turn insignificant when employee representatives have accounting expertise. In addition, the type of employee representatives seems to influence audit quality differently: our findings turn insignificant for employee representatives who are classified as company outsiders and, thus, expected to be more independent. These findings highlight the importance of accounting expertise and independence for AC members' monitoring effectiveness. To the best of our knowledge, this study is the first that analyses the impact of codetermination on the AC on audit quality.
... Employee representation on company boards and works councils are characteristic co-determination arrangements. Most available evidence points to positive effects on labour productivity, but mixed results for other indicators such as profitability (FitzRoy and Kraft 2005;Müller & Stegmaier, 2016). Zwick (2004, 724) cites studies which conclude that the presence of works councils is usually associated with higher productivity 'because the exchange of private information is valuable, because consultation offers new solutions to production problems, and because co-determination encourages workers to take a longer-run view of the prospects of the firm'. ...
Article
The Covid-19 pandemic has intensified the economic and social problems that societies face today. At the same time, the public response to the crisis points to a constructive way forward. It has brought people together and unleashed a desire to contribute in many ways, some small and others spectacular. It has demonstrated how opportunities for people to participate in collective activities both psychologically and behaviorally can achieve remarkable results, especially when addressing a common danger. This paper argues that it is timely to widen participation in organizational decision-making as an approach to addressing many of the problems which will continue to be with us post-Covid, and which indeed the pandemic has exacerbated. In order to arrive at practical policy options, it proceeds through the following stages. The first is to establish a working definition of organizational participation and to develop a framework for classifying its principal forms. This framework serves to identify the more advanced and consequential forms of participation, and is then used to structure an evidence-based review of how they can constructively contribute to economic and social improvement. The final part of the paper reviews conditions bearing on the practical implementation of participation and which serve to clarify practical policy implications.
... Since empirical studies typically analyze the effect of a single element on productivity (e.g. Mathew et al., 2012;FitzRoy and Kraft, 2005;Grafton et al., 2010) thus far, there is no agreement about the relative importance of these elements for productivity. ...
Article
It is hard to find clear dence that developing intangible assets leads to higher productivity and yet, rather a lot of wishful thinking and even myths still exist in this field. With this special issue we aim to open up a re-examination (and if necessary a questioning) of the concepts and relationships between intangible assets and performance, and especially productivity. Seven articles approach productivity and intangible assets from different angles – gossip, CEO characteristics, employee age and wages, innovativeness and financial performance, complexity of products and exporting, employee age and productivity by comparing high-waged and low-waged employees. Did we find new evidence that productivity benefits from intangible assets? The articles in our issue reflect that several aspects of intangible assets have a direct or indirect effect on productivity. Learning and training seem to be key to higher productivity. This finding is not surprising; however, it was showed that not all kinds of education and experience necessarily lead to higher productivity. It is not enough to develop employees and raise their competences; organizations should also focus on various forms of learning at the team and organizational level.
... Other studies have analysed the effects of board-level employee representation on employment ( Gregori č and Rapp, 2019 ), innovation( Kraft et al, 2011;Belloc, 2019 ), productivity ( FitzRoy andKraft, 2005 ) and corporate market value( Gorton & Schmid, 2004 ).5 The use and impacts of flexible working-time practices have received attention in sociological research (see for instance,Chung and Tijdens, 2013 ).6 Addison et al(2004)discuss major identification challenges in the empirical literature on works councils. ...
Article
This paper provides evidence on the effect of employee representation on working-time flexibility in private-sector European establishments. A 2002 European Union directive granted information, consultation and representation rights to employees on a range of key business, employment and work organization issues beyond a certain firm size. We exploit the quasi-experimental variation in employee representation introduced by the implementation of the Directive in four countries (Cyprus, Ireland, Poland and the UK) with no previous legislation on the subject. The empirical analysis is based on repeated cross-section establishment-level data from the last three rounds of the European Company Survey. Difference-in-difference estimates suggest that the Directive had a positive and significant effect on both employee representation and the utilisation of flexible working-time arrangements for eligible establishments. Interestingly, the relaxation of shareholders’ property rights and the limits imposed on managerial discretion as a result of the operation of employee representation seem necessary to achieve certain valuable forms of organizational flexibility in market economies.
... Depuis la loi de 1976, les entreprises de plus de 2000 salariés ont un conseil de surveillance « quasi-paritaire » c'est-à-dire composés pour moitié de représentants des actionnaires et pour moitié de représentants des salariés 7 . Fitzroy and Kraft (2005) étudient ainsi 179 firmes qui sont passées d'une participation au tiers à la quasi-parité après la loi de 1976 8 . Leurs résultats montrent une relation significative et positive entre le passage à codétermination quasi paritaire et la productivité. ...
... Depuis la loi de 1976, les entreprises de plus de 2000 salariés ont un conseil de surveillance « quasi-paritaire » c'est-à-dire composés pour moitié de représentants des actionnaires et pour moitié de représentants des salariés 7 . Fitzroy and Kraft (2005) étudient ainsi 179 firmes qui sont passées d'une participation au tiers à la quasi-parité après la loi de 1976 8 . Leurs résultats montrent une relation significative et positive entre le passage à codétermination quasi paritaire et la productivité. ...
Conference Paper
Full-text available
Si la codétermination représente une avancée démocratique dans l'entreprise, celle-ci se fait-elle au détriment de la performance ou au contraire peut-elle la renforcer ? En mobilisant des études empiriques réalisées dans des pays fortement codéterminés, l'objectif de cette communication sera de tenter de répondre à cette question centrale. Pour évaluer la performance des entreprises, il faut au préalable définir la vision de l'entreprise que l'on souhaite valoriser et la définition de la performance qui peut lui être associée. Or, dès lors que l'on admet que l'objectif de l'entreprise ne se limite pas à la seule maximisation des gains pour les actionnaires, la codétermination, loin de dégrader la performance, peut au contraire l'améliorer. En effet, si les effets de la codétermination sur la performance financière sont mitigés, ils sont positifs en matière de performance économique (hausse de la productivité, de l'innovation) et sociétale (baisse du turnover, réduction des inégalités, baisse du chômage). Au final, une codétermination exigeante sera associée à une vision de l'entreprise comme entité politique dont les bienfaits pourront être mesurés en interne comme au niveau de la société.
... Baums and Frick (1998) find no negative effect on share price following on the introduction of parity codetermination and significant court decisions. Kraft and Stank (2004) and Fitzroy and Kraft (2005) show a small positive effect of codetermination on innovation and productivity. ...
Book
Full-text available
For the past two decades corporate governance reform in Europe has been guided by the ‘shareholder value’ model of the firm. That model has been discredited as one of the major causes of the financial and economic crisis. This book provides an alternative approach to corporate governance is presented by members of the GOODCORP network of researchers and trade unionists. This new approach, entitled the Sustainable Company, draws on both traditional ‘stakeholder’ models of the firm and newer concerns with sustainability. The main elements of the Sustainable Company and the institutions needed to support it are presented. Key themes in the book are the need for worker ‘voice’ in corporate governance and for a binding legislative framework to promote sustainability. Individual chapters deal with the issues of worker involvement, employee shareholding, sustainability-oriented remuneration, international framework agreements, NGO-trade union relationships, reforming financial regulation and carbon taxes and emissions-trading schemes.
... Earlier studies examined the economic impact of worker participation on productivity measures. FitzRoy and Kraft (2005) as well as Renaud (2007) found that worker participation increases corporate productivity, while Gurdon and Rai (1990) and FitzRoy and Kraft (1993) found the opposite to be true. The effect of worker participation on the market value of companies is also mixed (Benelli et al., 1987;Gorton and Schmid, 2004). ...
Article
Full-text available
Ever since 2004 companies located in Member States of the European Economic Area have been able to opt to incorporate in a supranational legal form, the Societas Europaea. We found that companies located in Member States where the Societas Europaea offers additional legal arbitrage opportunities benefit most. Moreover, our results show that the stock price reaction is positive when the decision to incorporate as an Societas Europaea involves moving the firm's registered office and that firms are moving to jurisdictions with significantly lower corporate tax rates. Finally, we found evidence of uncertainty at the registration date but not at the time of the shareholder meeting.
... The Directive has gone through a number of major revisions ever since, though it has never been adopted. For the description of codetermination, I rely onDow (2003, section 4.3),Gorton and Schmid (2000), andFitzroy and Kraft (2005). ...
Article
Full-text available
Workplace democracy is often defined, and has recently been defended, as a form of intra-firm governance in which workers have control rights over management with no ownership requirement on their part. Using the normative tools of republican political theory, the paper examines bargaining power disparities and moral hazard problems resulting from the allocation of control rights and ownership to different groups within democratic firms, with a particular reference to the European codetermination system. With various qualifications related to potentially mitigating factors, such as workforce and shareholder composition or risk aversion and reallocation, the paper contends that forms of workplace democracy in which workers control and own the firm, such as cooperativism, are preferable to other forms, such as codetermination, in which ownership and control rights are formally separated.
... Later, in an influential work Gorton and Schid (2004) concluded for a negative effect of codetermination on the market value of firms by taking annual observations for the period 1989-1993 of 250 German nonfinancial stock corporations and comparing firms near parity (i.e., equal representation of employees and shareholders on the supervisory board) with firms where employee representation is lower (one-third). Finally, through the study of panel estimates of codetermination, FitzRoy and Kraft (2005) concluded for a positive labour productivity effect of near parity codetermination. ...
Article
This research revisits the theoretical literature on codetermination in differentiated Cournot duopoly markets. Although codetermination is widely adopted in some north European countries, the theoretical analysis is restricted to a few number of works. The literature is led by Kraft (1998), who shows that codetermination emerges as a market outcome (sub-optimal Nash equilibrium) in a quantity-setting duopoly with homogeneous products. However, there exists evidence that codetermination is quite absent in countries where there are no specific laws. This article shows that codetermination cannot emerge as a Nash equilibrium when products are sufficiently differentiated (even when they are complementary). These results also holds by considering R&D activities.
Article
Seit mehr als 40 Jahren erweist sich das „duale System“ als der zentrale Schlüsselbegriff zur Kennzeichnung des deutschen Systems der industriellen Beziehungen. Anknüpfend an Debatten um Prozesse der Dezentralisierung, Substitution und Erosion/ Dualisierung der industriellen Beziehungen wirft der Beitrag die Frage auf, welche Rolle der Mitbestimmung im Aufsichtsrat im Rahmen dieser Prozesse zukommt. Zwei konkrete Wirkungsweisen der Unternehmensmitbestimmung werden hierbei untersucht: die Verstärkung von Machtressourcen in Interaktion mit betrieblichen und überbetrieblichen Akteuren der Arbeitnehmerseite sowie die unter dem Begriff „Versachlichung“ zusammengefasste Durchsetzung von Arbeitnehmerrechten im Betrieb. Wie die auf Basis der Daten der WSIBetriebsrätebefragung 2018 vorgenommenen statistischen Auswertungen belegen, stützt die Unternehmensmitbestimmung den Erhalt der Tarifbindung und sorgt für eine Versachlichung der betrieblichen Arbeitsbeziehungen, indem sie die Einhaltung des Gesundheitsschutzes fördert und darüber hinaus mit einer Einhaltung der Informationspflichten des Arbeitgebers gegenüber dem Betriebsrat in Verbindung steht. Keine Anhaltspunkte ergeben sich hingegen für die These, die Mitbestimmung im Aufsichtsrat könnte zur Triebkraft einer weiteren Dezentralisierung der Arbeitsbeziehungen werden.
Article
To enhance the academic endeavours confronting the globalisation of managerial orthodoxy (predicated on antagonising the interests of companies and employees), we will investigate the relationship between institutional performance and employees' (subjective) wellbeing in Turkish shipyards by undertaking an extensive survey. We will argue that there is a positive association between the two covariates that lends itself to a conceptual frame of Mutual Interests Management (MIM). The MIM refers to the managerial impacts that result in cross‐fertilisations between the interests of companies and employees. However, we will also argue that MIM has a dynamic and amorphous character in the sense that no correlation whether it be positive, negative or the lack of thereof necessarily survives through our purposive analyses with the trial of various interaction models among the specific types and combinations of variables considered. Accordingly, the conclusion stresses that the amorphous nature of MIM can be adapted by the managers at company‐level to tailor or innovate feasible MIM strategies.
Article
We argue that the link between women directors in co‐determined supervisory boards and firm innovation depends on two contextual factors: (1) Women directors' power, as measured by their share among shareholder representatives, and (2) on whether women are represented in both representative functions, that is, shareholder and employee representatives. In our empirical analysis based on German panel data, we find the positive link between women directors and firm innovation to be driven by women shareholder representatives, and we find the joint presence of women among shareholder and employee representatives to be positively linked to firm innovation.
Chapter
Theoretische und konzeptionelle Ansätze unterstützen dabei, komplexe Sachverhalte strukturiert oder komplexitätsreduzierend darzustellen; dabei erheben sie aber keineswegs den Anspruch, ein vollständiges Bild der Realität oder einen allumfassenden Lösungsansatz zu bieten. Vielmehr helfen diese Ansätze, Fragestellungen aus Forschung und Praxis zu strukturieren, einzugrenzen und Hypothesen abzuleiten. Dabei werden bestimmte Annahmen zugrunde gelegt. Im Folgenden werden drei ausgewählte Bereiche theoretischer und konzeptioneller Ansätze mit Relevanz für das Personalmanagement in Non-Profit-Organisationen dargestellt und deren Implikationen für die Diskussion von Fragestellungen aus dem Personalmanagement in Non-Profit-Organisationen aufgezeigt. Es handelt sich dabei um die Bereiche der verhaltenswissenschaftlichen und der ökonomischen Ansätze des Personalmanagements sowie um die Ansätze des Non-Profit-SHRM (Strategic Human Resource Management).
Thesis
Full-text available
Strategic alliances and mergers & acquisitions are theoretically now considered as real levers of value creation. This value creation takes different forms, essentially strategic value, substantial value, institutional value and financial value (including shareholders). This latter holds our attention specifically. The objective of our research, after analyzing the results of empirical works focused on the acquisition announcements impact on the stock market performance, is to answer two fundamental questions. The first question is to know that if, on a more or less distant horizon, the stock market performance of acquisitions coincides with the actual performance and so if this form of acquisitions can be justified by the financial motivation of CEOs or shareholders. The second question is to know that if this hypothesis is also true in the case of alliances, establishing by the way an advantageous comparison in favor of one or other of the external growth options. Our final results show that in the short term the announcement of an alliance has a negative impact on performance as opposed to the announcement of a merger & acquisition, while other hand on the long-term, there is no positive impact (neutral impact) on financial performance whether it be the strategic alliance or merger & acquisition. We explain this result by the phenomenon of "creation of compensatory value" in the context of a strategic and financial plan.
Article
Von Pfadabhängigkeit wird gesprochen, wenn Entscheidungen in der Vergangenheit die Handlungsoptionen heute beeinflussen oder sie sogar einengen. Der am Wissenschaftszentrum Berlin für Sozialforschung entwickelte Mitbestimmungsindex (MBix) analysiert anhand von sechs Indikatoren die Konfiguration der Repräsentation von Arbeitnehmer*innen primär im Aufsichtsrat. Da die Daten über mehrere Jahre erfasst werden, nimmt der vorliegende Beitrag die zeitliche Perspektive in Betracht und kommt zu zwei zentralen Ergebnissen: erstens variiert die Verankerung der Mitbestimmung stark zwischen den Unternehmen, zweitens bleibt das jeweilige unternehmensspezifische Niveau der Mitbestimmung über die Zeit stabil. Die Unternehmen nähern sich also im Zeitverlauf weder an, noch driften sie auseinander. Der institutionelle Kontext, etwa beeinflusst durch Gesetze, Betriebs- und Sozialpartnerschaft, bedingt eine pfadabhängige Kontinuität und macht ein Abschwächung oder Stärkung auch für die Akteur*innen aufwendig oder sie wird gar nicht beabsichtigt. Stattdessen scheint die jeweilige unternehmensspezifische Konfiguration der Mitbestimmung selbst Stabilität und Erwartungssicherheit zu verschaffen, auch für die Seite der Anteilseigner*innen. Die einzige Option, um die Mitbestimmung zu schwächen, ist sich dem System gänzlich zu entziehen, etwa durch die Umfirmierung in eine ausländische Rechtsform, so dass die deutschen Mitbestimmungsgesetze nicht anzuwenden sind.
Chapter
Kap. 5 bespricht die Voice-Modelle anhand des deutschen Modells der CG und legt einen besonderen Schwerpunkt auf die Mitbestimmung. Zunächst werden das Grundmodell des sog. two-tier systems (oder auch Trennungsmodell) mit Vorstand und Aufsichtsrat vorgestellt und die rechtlichen Regelungen dargelegt. Hier wird besonderer Wert auf den Aufsichtsrat gelegt, neben einzelnen ausgewählten Aspekten wie der Bildung von Ausschüssen und der Verantwortung für die Vorstandsvergütung werden aktuelle Studien zur (deutschen) Aufsichtsratsarbeit vorgestellt. Es folgt die Einführung in und Erläuterung der Mitbestimmung, die auch gern als „der deutsche Sonderweg“ bezeichnet wird. Die drei prägenden Mitbestimmungsgesetze werden vorgestellt und anhand von Beispielen illustriert. Die (potenzielle) Mitbestimmung in der SE wird ebenfalls vorgestellt, bevor auch die Betriebsebene mit anderen, aber nicht weniger wichtigen Mitbestimmungsrelevanten Rechten kurz andiskutiert wird.
Article
Full-text available
Die deutschen Arbeitsbeziehungen zeichnen sich – gerade auch im internationalen Vergleich – durch ein komplexes Geflecht unterschiedlicher Akteure, Ebenen und Institutionen der kollektiven Interessenvertretung aus. Im Zentrum des Beitrags steht ein besonders komplexes Mehrebensystem: die Koordinierung und Integration von Arbeitnehmerinteressen in multinationalen Unternehmen. Basierend auf zehn Fallstudien wird analysiert, wie aus Sicht deutscher Betriebsräte Interessen integriert und koordiniert werden, welche Rolle hierbei Gesamt- und Konzernbetriebsräte sowie die Mitbestimmung im Aufsichtsrat spielen und welche Bedeutung deutsche Betriebsräte der transnationalen Interessenvertretungsebene zumessen. Die Analyse fördert drei zentrale Befunde zu Tage. Erstens bilden in den untersuchten Unternehmen jeweils der GBR oder auch der KBR das Zentrum der Interessenintegration und -koordination. In diesen Gremien werden Interessen gebündelt, um sie dann gegenüber der Unternehmensseite zur Geltung bringen zu können, und sie sind Sammelstellen der Information und der Interessenvertretungsmacht. Zweitens spielen die deutschen Interessenvertretungen eine zentrale Rolle für die transnationale Interessenvertretung, entweder als starke und einflussreiche Interessenvertretungen am Hauptsitz oder als wichtige Akteure in den transnationalen Gremien. Drittens sind zentrale Unterschiede zwischen den Betriebsräten in Unternehmen mit Sitz in Deutschland und den Betriebsräten in deutschen Tochtergesellschaften ausländischer Unternehmen zu beobachten.
Article
This article examines board‐level employee representative independence with regard to said representatives’ dual role as employee representatives and supervisory body members. In the context of corporate governance, board member independence has been of increasing interest, though this has mostly been related to shareholder representatives. We address board‐level employee representative independence focused on Slovenia, a central‐eastern European country with a developed system of employee participation. We conducted qualitative research at twelve public limited companies in Slovenia to gain in‐depth understanding, with a CEO or board member, board‐level employee representative and works councillor not at board‐level being interviewed in situ following the same semi‐structured format. Results indicate legal and practical concern regarding board‐level employee representative independence, calling for further research and regulation.
Article
Contrary to previous literature we hypothesize that labor’s interest may well—like that of shareholders—aim at securing the long-run survival of the firm. Consequently, employee representatives on the supervisory board could well have an interest in increasing incentive-based compensation to avoid management’s excessive risk taking and short-run oriented decisions. We compile unique panel data on executive compensation over the periods 2006–2011 for 405 listed companies and use a Hausman–Taylor approach to estimate the effect of codetermination on the compensation design. Finally, codetermination has a significantly positive effect on performance-based components of compensation, which supports our hypothesis. (JEL codes: J52, L20, G32, M12, C33)
Chapter
This paper aims at filling some gaps in the mainstream debate on automation and the future of work. This debate has concentrated, so far, on how many jobs will be lost as a consequence of technological innovation. This paper examines instead issues related to the quality of jobs in future labour markets. It addresses the detrimental effects on workers of awarding legal capacity and rights and obligation to robots. It examines the implications of practices such as People Analytics and the use of big data and artificial intelligence to manage the workforce. It stresses on an oft-neglected feature of the contract of employment, namely the fact that it vests the employer with authority and managerial prerogatives over workers. It points out that a vital function of labour law is to limit these authority and prerogatives to protect the human dignity of workers. It then highlights the benefits of human-rights based approaches to labour regulation to protect workers’ privacy against invasive electronic monitoring. It concludes by highlighting the crucial role of collective regulation and social partners in governing automation and the impact of technology at the workplace. It stresses that collective dismissal regulation and the involvement of workers’ representatives in managing and preventing job losses is crucial and that collective actors should actively participate in the governance of technology-enhanced management systems, to ensure a vital “human-in-command” approach.
Book
Cambridge Core - Comparative Law - Sustainability and Corporate Mechanisms in Asia - by Ernest Lim
Article
Drawing on transaction costs economics and longitudinal data on Danish corporations, we analyse the distribution of board‐level employee representation (BLER) and the characteristics of employee directors in a context where workers have the possibility (but not also an obligation) to nominate representatives to the board of directors. We show that BLER is less likely instituted in firms with CEO or family‐related members on the board, but more likely observed in larger, older firms and in those with high firm‐specific human capital and union density. Firm‐specific human capital, qualifications and union membership also determine individual worker's probability to become a board member.
Chapter
Republicanism and the Future of Democracy - edited by Yiftah Elazar April 2019
Article
Full-text available
Cambridge Core - Political Philosophy - Republicanism and the Future of Democracy - edited by Yiftah Elazar
Article
Full-text available
The paper discusses the structure, applications, and plausibility of the much-used parallel-case argument for workplace democracy. The argument rests on an analogy between firms and states according to which the justification of democracy in the state implies its justification in the workplace. The contribution of the paper is threefold. First, the argument is illustrated by applying it to two usual objections to workplace democracy, namely, that employees lack the expertise required to run a firm and that only capital suppliers should have a say over the governance of the firm. Second, the structure of the argument is unfolded. Third, two salient similarities between firms and states regarding their internal and external effects and the standing of their members are addressed in order to asses the potential and limits of the argument, as well as three relevant differences regarding the voluntariness of their membership, the narrowness of their goals, and the stiffness of the competition they face. After considering these similarities and differences, the paper contends that the the parallel-case argument provides a sound reason in favor of democracy in the workplace-a reason, however, that needs to be importantly qualified and that is only pro tanto.
Article
We investigate codetermination on German supervisory boards of multinational companies and pose two questions. First, under what conditions does board-level representation constitute a power resource for employee representatives? Second, how does board-level representation articulate with European Works Councils? We conclude that factors related to corporate structure – head office location, the level at which supervisory boards are established – play a decisive role in determining the power resources available to employee representatives. Articulation with European Works Councils depends on the adoption of a strategic approach whereby German employee representatives deploy the power resources derived from national codetermination rights at the transnational level, or use the mechanisms of transnational employee representation to compensate where such national power resources are lacking.
Article
This research develops a tractable two‐stage non‐cooperative game with complete information describing the behaviour of price‐setting firms that must choose to be profit maximisers or bargainers under codetermination in a network industry with horizontal product differentiation. The existing theoretical literature has already shown that codetermination might arise as the endogenous market outcome in a strategic competitive quantity‐setting duopoly. In sharp contrast with this result, the present article shows that codetermination does never emerge as a Nash equilibrium in a price‐setting non‐network duopoly. Then, it aims at highlighting the role of network externalities in determining changes of paradigm of the game and letting codetermination become a sub‐game perfect Nash equilibrium when prices are strategic substitutes or strategic complements. This equilibrium may be Pareto efficient. Results allow distinguishing between mandatory codetermination and voluntary codetermination. The article also proposes a model of endogenous codetermination according to which every firm may choose to bargain with its own corresponding union bargaining unit only whether the firm's bargaining strength is exactly the profit‐maximising one. The equilibrium outcomes emerging in this case range from a uniform Nash equilibrium, in which both firms are codetermined, to mixed Nash equilibria, in which only one of them chooses to be codetermined. These results are ‘network depending’ and do not hold in a non‐network duopoly.
Article
The Board of Directors: Governance and Accountability Issues This article examines the role, functioning and composition of corporate boards. It relies on the recent literature in economics, finance and management, and presents the main evolution of French corporate boards (for the SBF120 companies) over the 2007-2015 period. Board studies raise key questions regarding firm performance, governance and accountability. We highlight three main issues. The first concerns board delegation in dedicated sub-committees: while important, it has received little attention so far. The second concerns board composition. The literature has been for a long time focused on board independence; however, there is a growing interest for board diversity (as a way to improve firm performance and/or to integrate various interests in the corporate decision-making process). The third is board gender diversity, as a number of EU member states have in the 2010 decade adopted regulation (hard or soft) to increase female representation. Classification JEL : G32, G34, M12, M14.
Article
This paper aims at filling some gaps in the mainstream debate on automation, the introduction of new technologies at the workplace and the future of work. This debate has concentrated, so far, on how many jobs will be lost as a consequence of technological innovation. This paper examines instead issues related to the quality of jobs in future labour markets. It addresses the detrimental effects on workers of awarding legal capacity and rights and obligation to robots. It examines the implications of practices such as People Analytics and the use of big data and artificial intelligence to manage the workforce. It stresses on an oft-neglected feature of the contract of employment, namely the fact that it vests the employer with authority and managerial prerogatives over workers. It points out that a vital function of labour law is to limit these authority and prerogatives to protect the human dignity of workers. In light of this, it argues that even if a Universal Basic Income were introduced, the existence of managerial prerogatives would still warrant the existence of labour regulation since this regulation is about much more than protecting workers’ income. It then highlights the benefits of human-rights based approaches to labour regulation to protect workers’ privacy against invasive electronic monitoring. It concludes by highlighting the crucial role of collective regulation and social partners in governing automation and the impact of technology at the workplace. It stresses that collective dismissal regulation and the involvement of workers’ representatives in managing and preventing job losses is crucial and that collective actors should actively participate in the governance of technology- enhanced management systems, to ensure a vital “human-in-command” approach.
Article
This paper aims at filling some gaps in the mainstream debate on automation, the introduction of new technologies at the workplace and the future of work. This debate has concentrated, so far, on how many jobs will be lost as a consequence of technological innovation. This paper examines instead issues related to the quality of jobs in future labour markets. It addresses the detrimental effects on workers of awarding legal capacity and rights and obligation to robots. It examines the implications of practices such as People Analytics and the use of big data and artificial intelligence to manage the workforce. It stresses on an oft-neglected feature of the contract of employment, namely the fact that it vests the employer with authority and managerial prerogatives over workers. It points out that a vital function of labour law is to limit these authority and prerogatives to protect the human dignity of workers. In light of this, it argues that even if a Universal Basic Income were introduced, the existence of managerial prerogatives would still warrant the existence of labour regulation since this regulation is about much more than protecting workers’ income. It then highlights the benefits of human-rights based approaches to labour regulation to protect workers’ privacy against invasive electronic monitoring. It concludes by highlighting the crucial role of collective regulation and social partners in governing automation and the impact of technology at the workplace. It stresses that collective dismissal regulation and the involvement of workers’ representatives in managing and preventing job losses is crucial and that collective actors should actively participate in the governance of technology-enhanced management systems, to ensure a vital “human-in-command” approach.
Article
Codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor. Based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing. The empirical test is based on German data and includes years before and after the extension of German codetermination law in 1976. The estimates determine the productivity of labor and relative bargaining power of capital and labor. It turns out that codetermination does not affect productivity, but leads to a significant increase in workers’ bargaining power and the distribution of rents. Results based on a second data source with more recent information support the conclusions of the difference-in-differences estimations.
Article
How do analysts make decisions about which firms to cover? Previous research has not considered how such decisions can be influenced by cultural understandings about appropriate forms of corporate governance. Drawing upon the institutional logics perspective, we propose that analyst firms’ home-country institutional logics of corporate governance can shape analyst perception of coverage risks for family firms. Specifically, we argue that given the negative view towards family governance in shareholder-based logic, family firms are less likely to be covered by analyst firms from shareholder-based countries than by those from stakeholder-based countries. Furthermore, the coverage divergence between shareholder- and stakeholder-based analyst firms will be greater for family firms featuring higher risks of value assessment and expropriation. We test our framework in the context of global analysts’ coverage of publicly listed firms in Taiwan between 1996 and 2005 and find empirical support. Our study contributes to the institutional logics perspective by establishing the implications of corporate governance logics for analyst coverage and providing a boundary condition for agency theory. We also uncover a less-noted source of institutional variation among the analyst community.
Article
Full-text available
Braun (The ecological rationality of historical costs and conservatism. Accounting, Economics and Law: A Convivium, this issue) argues that the traditional accounting principles underlying the revenue-expense approach such as Historical Cost and Conservatism are ecologically rational in that they help organizations survive better in uncertain economic environments. More importantly, Braun argues that the revenue-expense approach generates new private information, which informs markets and makes them more effective (Hayek, 1945, The use of knowledge in society. The American Economic Review, 35(4), 519–530), as opposed to merely reflecting back market data under the asset-liability approach (e.g. Sunder, 2011, IFRS monopoly: The Pied Piper of financial reporting. Accounting and Business Research, 41(3), 291–306). We try to explicate the nature of the new private information generated jointly by Historical Cost and Conservatism, and how this information facilitates the survival of individual entrepreneurs and organizations in market competition.
Article
Full-text available
Models of Autoregressive Conditional Heteroscedasticity (ARCH) and their generalizations are widely used in applied econometric research, especially for analysis of financial markets. We bring to our reader’s attention a consul-tation on this topic prepared from the book of Marno Verbeek “A Guide to Modern Econometrics” appearing soon in the Publishing House “Nauchnaya Kniga” Note: this is not the textbook "A Guide to Modern Econometrics", which is copyright owned by John Wiley and Sons.
Article
Full-text available
Works councils, found in most Western European economies, are elected bodies of employees with rights to information, consultation, and in some cases co-determination of employment conditions at local workplaces, mandated by law. Many European employers and unions believe that councils improve communication between workers and management, raising social output, while reducing the speed with which decisions are made. This paper analyzes the operation of councils as a means of improving social output by creating more cooperative labor relations. It argues that councils are mandated because the incentive for companies to institute them and delegate them power falls short of the social incentive; that workers provide more accurate information to employers about preferences when councils have some say over how that information is used; and that the communication from employers to workers produces socially desirable worker concessions in bad times that would not occur absent this institution. It compares a jury style random selection of works councilors with selection via elections.
Article
Full-text available
This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a simple bargaining model we derive our main hypothesis: In establishments covered by collective bargaining agreements works councils are more likely to be engaged in productivity enhancing activities and less engaged in rent seeking activities than their counterparts in uncovered firms. Using data from German manufacturing establishments, our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered industrial relations regime. In contrast, the presence of works councils has a positive effect on wages within the uncovered industrial relations regime but not to the same degree within the covered industrial relations regime.
Article
In this paper we draw on recent progress in the theory of (1) property rights, (2) agency, and (3) finance to develop a theory of ownership structure for the firm.1 In addition to tying together elements of the theory of each of these three areas, our analysis casts new light on and has implications for a variety of issues in the professional and popular literature, such as the definition of the firm, the “separation of ownership and control,” the “social responsibility” of business, the definition of a “corporate objective function,” the determination of an optimal capital structure, the specification of the content of credit agreements, the theory of organizations, and the supply side of the completeness-of-markets problem.
Article
If workers are wealth maximizers, codetermination should lead to less risky investments, smaller dividends, reduced firm leverage, higher and more stable salaries, and more capital- intensive production processes. Unless codetermination also increases productivity by raising workers' morale and satisfaction or reduces information asymmetries within the firm, shareholder wealth and firm value will decline. An analysis of West Germany's case, however, indi cates that codetermination has little, if any, effect on corporate op erations and performance. Copyright 1987 by the University of Chicago.
Article
German works councils are often thought of as operating in all firms that exceed the basic size threshold (of five permanent employees) established under law. Drawing on a new large-scale, representative German data set, we report that only one-fifth of firms in our sample have works councils even if such firms do account for almost three-fourths of employment. The principal factors behind works council presence emerge as fairly conventional: firm size, firm age, branch plant status, the gender composition of the work force, and certain working arrangements. There are also signs of a close relation between workplace union density and council presence. However, some controversial causal links suggested in an earlier econometric literature receive little support.
Book
The continuing development of automated production methods, combined with increasing competition from low-wage developing economies, is likely to reduce yet further the scope for the employment of low-skilled and inexperienced personnel in advanced economies. Higher standards of schooling and of vocational training are now widely recognised as essential. Based on visits by expert teams over the last ten years to matched samples of manufacturing plants, as well as to schools and vocational colleges in Britain and the European Continent, this book provides a realistic analysis of what needs to be done. The emphasis is on the need to expand, not the proportion of the workforce with university qualifications, but those with craft and vocational qualifications. The findings of this research have been influential in the development of government policies, and the author explains why these policies need to move even further, and in which directions they must next move.
Article
This paper has developed a framework of theory within which codetermination, collective bargaining, individual bargaining, and workers' management may be compared. This has required a rather long digression on the theory of labor contracts in general when effort is endogenous but is wholly specified by the contract (section II) and when effort is multidimensional and labor contracts are incomplete (section III). When labor contracts are incomplete, suboptimization behavior results, and this in turn implies inefficiency. The inefficiency is displayed in a maximization problem by a structure which formally resembles the Lipsey-Lancaster second-best solution. Codetermination permits improved efficiency by creating a context of joint management decision in which some of the free variables may be jointly determined, with the result that some second-best constraints are relaxed. Thus the theory allows a possibility that power-sharing can in itself shift the effort-productivity frontier outward. This is an empirical question, of course, but one which is excluded from consideration by theories in the neoclassical and Illyrian tradition which are based on homogenous labor and complete labor contracts. Thus, the theory set forth here should supplant the less general neoclassical and Illyrian hypotheses unless and until evidence is offered which supports those hypotheses.
Article
Simple models of individual and group incentives under uncertainty are compared, and comparative performance is shown to depend upon various exogenous parameters. The incentive effects of profit sharing will thus vary with organizational and other characteristics that may be difficult to observe, and attempts to quantify productivity effects that neglect selection bias are likely to be misspecified. Significant selection effects are found in previously used firm-level data, and productivity effects of existing profit sharing are found to be much larger than potential effects in firms without sharing arrangements. This throws doubt on policies to encourage sharing in isolation.
Article
Using data on gross output for two-digit manufacturing industries, we find that an increase in the output of one manufacturing sector has little or no significant effect on the productivity of other sectors. Using value-added data, however, we confirm the results of previous studies which find that output spillovers instead appear large. We provide an explanation for these differences, showing why, with imperfect competition, the use of value-added data leads to a spurious finding of large apparent external effects.
Article
This paper investigates the effect on company performance of the 1976 West German Codetermination Law, which expanded decision-sharing rights of the work force. Property rights theorists have predicted that capital-labor ratios will increase under conditions of codetermination, while participation theorists have asserted that productivity will increase. The two schools likewise disagree about its impact on profitability. This paper tests these hypotheses by performing nonparametric tests on three categories of firms distinguished by the level of participation mandated by the Codetermination Law. A sample of 63 firms was obtained from questionnaires mailed directly to West German firms. The analysis found that capital-labor ratios actually declined for the category of firms directly affected by the legislation, that productivity declined, and that profitability increased. The weight of the evidence slightly favors the participation theorists, although it is far from conclusive.
Article
As the influence of labor unions declines in many industrialized nations, particularly the United States, the influence of workers has decreased. Because of the need for greater involvement of workers in changing production systems, as well as frustration with existing structures of workplace regulation, the search has begun for new ways of providing a voice for workers outside the traditional collective bargaining relationship. Works councils—institutionalized bodies for representative communication between an employer and employees in a single workplace—are rare in the Anglo-American world, but are well-established in other industrialized countries. The contributors to this volume survey the history, structure, and functions of works councils in the Netherlands, Germany, France, Spain, Sweden, Italy, Poland, Canada, and the United States. Special attention is paid to the relations between works councils and unions and collective bargaining, works councils and management, and the role and interest of governments in works councils. On the basis of extensive comparative data from other Western countries, the book demonstrates powerfully that well-designed works councils may be more effective than labor unions at solving management-labor problems.
Article
It is traditional in the theory of the firm to define the production opportunity set available to the firm in terms of its boundary the maximum attainable set of output quantities for various input quantities, given the state of technology and knowledge. This boundary is the production function of the firm. One of our purposes here is to point out the dependence of such production functions on the structure of property rights and contracting rights within which the firm exists. We redefine the production function in order to recognize the dependence of output on the structure of property and contracting rights. That expanded framework is then used to discuss a concrete set of problems surrounding the role of labor in the firm ranging from the labor-managed firm system (in which tradable capital value residual claims [common stock] are legally prohibited), and the codetermination and industrial democracy movements (in which management participation by labor is required by law), to cooperatives and professional partnerships (i.e., quasi-labor-managed firms which arise out of the voluntary contracting process), and the capitalist corporation.
Article
This paper attempts a generalization of both the theory of the labor-managed firm and that of the managerial firm by allowing all members of the firm to participate in decisionmaking and sharing of profits. We demonstrate that under rather plausible assumptions, and independently of the objective function of the firm, some profit sharing and participation in decisionmaking are required for Pareto efficiency. The allocation relations for factors of production that obtain under different decision-making structures are shown to be substantially different from each other and also different from what pure profit maximizing would indicate.
Article
Works councils are the most important pillar of workplace industrial relations in Germany but little is known of their economic effects. The paper uses a modern, large-scale dataset to examine this issue. Consonant with recent applied theoretical conjectures, it is found that works councils are associated with reduced labour fluctuation, higher productivity (in larger establishments only), and no reduction in innovative activity. Yet they are also associated with lower profitability and higher wages. This concatenation of results, although not inconsistent with efficiency, underscores the need for closer investigation of the institution given actual and prospective EU works council mandates. Copyright 2001 by Oxford University Press.
Article
Using interview and survey data they gathered in 1995-97 from managers and employees in 45 establishments, the authors investigate how high-performance work practices, such as self-directed teams and offline teams, affected workers' earnings in the apparel, steel, and medical electronics industries. An analysis with extensive controls for personal characteristics and other variables shows a positive relationship between high-performance practices and earnings in the apparel and steel industries. In medical electronics, the same statistically significant association disappears when a control variable for education is added, suggesting that there is a strong relationship between formal education and high-performance systems in that industry. (Author's abstract.)
Article
Under the German system of "codetermination," employees are legally allocated some control rights over corporate assets, in the form of board seats. We empirically investigate the implications of equal board representation compared with one-third employee representation and find a 26% stock market discount on firms with equal representation. Employees redistribute the firm's surplus towards themselves but may also prefer a different objective function for the firm, maximizing employee utility rather than shareholder value. We investigate the shareholder response to codetermination via higher leverage that commits more cash to leave the firm. We also examine the relationship between codetermination and the performance sensitivity of compensation for board members.
Article
In her recent survey, Carola Frege concludes that economic analysis of the works council has reached a 'dead end'. The present paper offers a very different assessment. The evolving economic literature is shown to follow three distinct phases, the last of which contains some of the most positive evaluations to date of works council impact on establishment performance. Although these estimates are exaggerated, and the effects of works councils are likely to be small on average, the new literature redirects our research focus towards factors producing swings around this average, including differences in works council types and their workplace environments. Copyright Blackwell Publishing Ltd/London School of Economics 2004.
Article
This paper develops a positive (efficiency) economic case for codetermination law resting on the correction of labor and capital market and organizational failures. A legally mandated codetermination structure is shown to provide employee ‘checks’ on several structural incentives for management opportunism. Codetermination is shown to offer advantages for technical efficiency, skill development and knowledge generation through its protection of specific human capital investments. Financial markets cannot enforce codetermination due to a set of free rider problems.
Article
In this paper, the authors survey noncompetitive theories of training. With competitive labor markets, firms never pay for investments in general training, whereas when labor markets are imperfect, firm-sponsored training arises as an equilibrium phenomenon. The authors discuss a variety of evidence that supports the predictions of noncompetitive theories and they draw some tentative policy conclusions from these models.
Article
This paper investigates the impact of international migration on technical efficiency, resource allocation and income from agricultural production of family farming in Albania. The results suggest that migration is used by rural households as a pathway out of agriculture: migration is negatively associated with both labour and non-labour input allocation in agriculture, while no significant differences can be detected in terms of farm technical efficiency or agricultural income. Whether the rapid demographic changes in rural areas triggered by massive migration, possibly combined with propitious land and rural development policies, will ultimately produce the conditions for a more viable, high-return agriculture attracting larger investments remains to be seen.
Article
An important purpose in pooling time-series and cross-section data is to control for individual-specific unobservable effects which may be correlated with other explanatory variables, e.g. latent ability in measuring returns to schooling in earnings equations or managerial ability in measuring returns to scale in firm cost functions. Using instrumental variables and the time-invariant characteristics of the latent variable, we derive: 1. (1) a test for the presence of this effect and for the over-identifying restriction we use;2. (2) necessary and sufficient conditions for identification of all the parameters in the model; and3. (3) the asymptotically efficient instrumental variables estimator and conditions under which it differs from the within-groups estimator. We calculate efficient estimates of a wage equation from the Michigan income dynamics data which indicate substantial differences from within-groups and Balestra-Nerlove estimates — particularly a significantly higher estimate of the returns to schooling.
Article
Using the result that under the null hypothesis of no misspecification an asymptotically efficient estimator must have zero asymptotic covariance with its difference from a consistent but asymptotically inefficient estimator, specification tests are devised for a number of model specifications in econometrics. Local power is calculated for small departures from the null hypothesis. An instrumental variable test as well as tests for a time series cross section model and the simultaneous equation model are presented. An empirical model provides evidence that unobserved individual factors are present which are not orthogonal to the included right-hand-side variable in a common econometric specification of an individual wage equation.
‘ markets ’ ‘ works councils in Germany ——, —— and ——Works councils in Germany: their effects on establishment performance’The course of research into the economic consequences of German works councils
  • D Acemoglu
  • J Pischke
  • J T Schabel
  • C Wagner
Acemoglu, D. and Pischke, J.-S. (1999). ‘ markets ’. Economic Journal Addison, J. T., Schabel, C. and Wagner, J. (1997). ‘ works councils in Germany ——, —— and —— (2001). ‘Works councils in Germany: their effects on establishment performance’. Oxford Economic Papers, 53: 659–94. ——, —— and —— (2004). ‘The course of research into the economic consequences of German works councils’. British Journal of Industrial Relations, 42: 255–81
Exit, Voice and Loyalty
  • A Hirschman
Hirschman, A. (1970). Exit, Voice and Loyalty. Mass: Harvard University Press.
Workers and Incentives
  • M R Sertel
Sertel, M. R. (1982). Workers and Incentives. Amsterdam: North Holland.
Co-determination, the fourth decade International Perspectives on Organizational Democracy
  • W Streeck
Streeck, W. (1984). 'Co-determination, the fourth decade'. In B. Wilpert and A. Sorge (eds.), International Perspectives on Organizational Democracy. New York: John Wiley, pp. 391–422.
Management and Economics of OrganizationEconomic effects of co-determination'. ScandOn the choice of incentives in firms
  • F R Fitzroy
  • Z Acs
  • D Gerlowski
  • K —— And Kraft
FitzRoy, F. R., Acs, Z. and Gerlowski, D. (1998). Management and Economics of Organization. London, New York, Toronto: Prentice Hall. —— and Kraft, K. (1993). 'Economic effects of co-determination'. Scand. J. of Eco-nomics, 95(3): 365–75 —— and —— (1995). 'On the choice of incentives in firms'. Journal of Economic Behav-iour and Organization, 26: 145–60.
Information und Mitbestimmung in Inter-nationalen Konzern
  • B Nagel
  • B Riess
  • S And Rüb
Nagel, B., Riess, B. and Rüb, S. (1996). Information und Mitbestimmung in Inter-nationalen Konzern. Baden-Baden: Nomos Publishing Company.
'Final Report of the Group of Experts on European Systems of Worker Involvement
European Commission (1997). 'Final Report of the Group of Experts on European Systems of Worker Involvement,' C4-0455/1997.
Cooperation in Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2005. Cooperation in Industrial Relations. Chicago: University of Chicago Press, pp. 313– 17.
Works councils in Western Europe: from consultation to participation
—— (1995). 'Works councils in Western Europe: from consultation to participation'. In J. Rogers and W. Streeck (eds.), Works Councils: Consultation, Representation, and Co-determination, Efficiency and Productivity 247
  • Rogers J.