# Co-determination

In corporate governance, codetermination (also "copartnership" or "worker participation") is a practice where workers of an enterprise have the right to vote for representatives on the board of directors in a company. It also refers to staff having binding rights in work councils on issues in their workplace. The first laws requiring worker voting rights include the Oxford University Act 1854 and the Port of London Act 1908 in the United Kingdom, the Act on Manufacturing Companies of 1919 in Massachusetts in the United States (although the act's provisions were completely voluntary), and the Supervisory Board Act 1922 (Aufsichtsratgesetz 1922) in Germany, which codified collective agreement from 1918 and expanded it in the 1976 Mitbestimmungsgesetz.

## Overview

There are three main views as to why codetermination exists: to reduce management-labour conflict by improving and systematizing communication channels; to increase bargaining power of workers at the expense of owners by means of legislation; and to correct market failures by means of public policy. The evidence on "efficiency" is mixed, with codetermination having either no effect or a positive but generally small effect on enterprise performance.

### Impact

A 2020 study in the Quarterly Journal of Economics found that codetermination in Germany had no impact on wages, the wage structure, the labor share, revenue, employment or profitability of the firm, but it increased capital investment.
A 2021 Study by the Bureau of Economic Research found that "the European model of codetermination is neither a panacea for all of the problems faced by 21st-century workers, nor a destructive institution that is dramatically inferior to shareholder primacy. Rather, as currently implemented, it is a moderate institution with, on net, nonexistent or small positive effects. Board-level and shop-floor worker representation cause at most small increases in wages, possibly lead to slight increases in job security and satisfaction, and have largely zero or small positive effects on firm performance."

## Canada

During the 2021 federal election, Conservative Party leader Erin O'Toole pledged to require that federally regulated employers with over 1,000 employees or $100 million in annual revenue include worker representation on their boards of directors should he be elected Prime Minister.

## Germany

The first codetermination plans began at companies and through collective agreements. Prior to 1976, German coal and steel producers employing more than 1,000 workers already commonly maintained a board of directors composed of 11 members: five directors came from management, five were workers' representatives, with the eleventh member being neutral. (Note: Boards could be larger as long as the proportion of representation was maintained.) In 1976, the law's scope was expanded to cover all firms employing more than 2,000 workers; with some changes concerning to the board structure, which has an equal number of management and worker representatives, with no neutral members (except in the Mining-and-steel industries where the old law remained in force). The new board's head would represent the firm's owners and had the right to cast the deciding vote in instances of stalemate. (The original law comprising coal-and-steel industries thus remained unchanged in force)

## New Zealand

The Companies Empowering Act 1924 allowed companies to issue shares for labour and have them represented by directors, but it was little used, even its chief promoter, Henry Valder, being unable to get his company board to agree to it. It was consolidated into the Companies Act in 1933. The Law Commission recommended its abolition in 1988 for lack of use. The Companies Act 1993 did not allow for labour shares.

## United Kingdom

In the UK, the earliest examples of codetermination in management were codified into the Oxford University Act 1854 and the Cambridge University Act 1856. In private enterprise, the Port of London Act 1908 was introduced under Winston Churchill's Board of Trade.
While most enterprises do not have worker representation, UK universities have done so since the 19th century. Generally the more successful the university, the more staff representation on governing bodies: Cambridge, Oxford, Edinburgh, Glasgow and other Scottish universities,

## United States

Massachusetts has the world's oldest codetermination law that has been continually in force since 1919, although it is voluntary and only for manufacturing companies.