Codetermination is a system of corporate governance under which employees of an organization can vote for representatives on its board of directors. By enabling employees to be represented on the board of directors alongside shareholders, the system of codetermination can help reduce conflict in the workplace between employers and workers as the latter is able to participate in managing the company.
Whilst not being as prevalent in the English-speaking world, codetermination is a widespread practice in continental Europe, particularly in Germany.
The German System
German companies have a two-tier board of directors structure consisting of:
- a supervisory board - sets the company’s agenda and elects the management board
- a management board - looks after the daily operations of the company
In companies consisting of over 500 workers, one-third of the supervisory board must be elected by the workers themselves. Moreover, in companies made up of over 2,000 workers, half of the supervisory board must represent employees. However, the chairperson of the supervisory board is always appointed by shareholders.
Codetermination in the UK and US
Worker participation in management is not a legal requirement for companies in the UK or the US, although it can occur on a voluntary basis. However, codetermination was a hot topic in the UK during the 1970s. The Labour government of the day made proposals for its implementation, however, any plans were subsequently abandoned by the Thatcher-led Conservative Government which usurped Labour at the 1979 general election and remained in power until 1997.
See also: Labor Unions