In a practice not typically seen worldwide, a select group of employees gathers for a company management meeting in Germany, where key decisions shaping the company's future are made. This scenario is more common in Germany, a country renowned as the economic powerhouse of Europe.
Germany has a long-standing tradition of worker participation in corporate governance, dating back to the mid-20th century.
In Germany, there is a term that specifically describes the concept of shared decision-making, known as Mitbestimmung, which translates to "co-gestion" in Spanish.
Employees possess the authority to determine the leadership and strategic direction of their organization, thereby exerting influence over its long-term trajectory.
In accordance with German law, companies with a workforce exceeding 2,000 employees are required to allocate half of the seats on the Supervisory Council to their staff members.
The workforce is comprised of two equal segments, each accounting for 50% of the total. The first segment includes workers, administrative staff, trade union representatives, and executives, who must be elected through a direct vote to join the body. The second segment is comprised of shareholders, also representing 50% of the workforce.
The committee's participation system is meticulously planned, requiring four annual meetings to be scheduled a year in advance. In the event of extraordinary circumstances, such as a company acquisition, internal crisis, or managerial change, additional meetings are convened as necessary.
Several prominent German companies, including Volkswagen, Mercedes-Benz, and Deutsche Bank, have a notable characteristic in their corporate governance structures, with a significant proportion of their Supervisory Board members being current or former employees, often making up half of the board's composition.
Claudia De Meulemeester, a UK-based corporate governance expert, views employee representation on boards as a forward-thinking policy.
Labor unions often resist significant changes affecting staff, which can lead to delayed corporate transformations as negotiations over concessions are typically required.
Co-management is structured to prevent split voting, with most discussions typically occurring prior to the Supervisory Board's meeting, where representatives of workers and shareholders engage in negotiations.
Informal prior party meetings, known as Vorbesprechungen, play a crucial role in the negotiation process. The objective of these meetings is to facilitate open dialogue and foster agreement among all parties involved.
Labor unions and management frequently reach mutually beneficial agreements, with workers accepting restructuring plans in exchange for long-term investment commitments in specific facilities or job security guarantees for a set period.
The chairman of the Supervisory Board's decision to exercise his double vote, a provision allowed by the governing rules, is a rare occurrence that typically suggests the presence of a significant conflict.
A concept of this nature appears to diverge from the fundamental principles of classical or hard capitalism, where profits from production are typically allocated to entrepreneurs or investors, who assume the risk of their capital and consequently wield sole decision-making authority over the company's direction.
The proposed approach suggests that the primary role of a company's board of directors or individual directors should be to act as representatives of the shareholders.
In the United States and the UK, a prevailing perspective on capitalism exists, whereas in other countries, companies are generally expected to prioritize the interests of a broader range of stakeholders, encompassing customers, local communities, and employees, in conjunction with those of shareholders.
In the United States, the United Kingdom, and other Anglo-Saxon countries, a distinct corporate governance system prevails, where a single entity exercises comprehensive control over a company's operations. Conversely, in nations such as Germany, France, Austria, the Netherlands, and certain Eastern European countries, a dual corporate governance model is employed, characterized by a separation of powers and decision-making authority.
The dual system of corporate governance features a dual leadership structure, comprising an executive body responsible for overseeing daily operations and a Supervisory Board tasked with monitoring the company's activities. The Supervisory Board possesses significant authority, enabling it to appoint and dismiss senior management, review and approve annual financial reports, and make key strategic decisions, including major investments and mergers.
The seating arrangement for workers' representatives can accommodate up to 50% of the available space.
The underlying principle of this model is based on a distinct distinction between the roles of those who implement policies and those who oversee and ensure their financial accountability.
In accordance with German corporate governance regulations, each member of a Supervisory Board is required to prioritize the company's interests exclusively.
The effectiveness of this system in granting workers meaningful influence over decision-making processes is a matter of debate, with some questioning its true impact.
Benjamin Schoefer, an economics professor at the University of California, Berkeley, has extensively studied the Mitbestimmung system and concludes that it occupies a middle ground in the redistribution of corporate power, neither solely symbolic nor entirely transformative.
Schoefer believes the policy has a genuine yet relatively modest effect, with its influence being more pronounced in Germany than in other developed countries.
The extent of actual power is likely influenced by a country's unique institutional framework.
In Germany, workers possess more extensive decision-making authority compared to countries like Finland, which is another model analyzed, where the system primarily serves as a platform for information exchange.
Research has extensively examined the impact of worker participation in corporate decision-making on business outcomes, specifically the relationship between employee involvement and enhanced productivity and profitability.
A recent study by economics professor Joachim Wagner of Leuphana University in Lunenburg, Germany, published in 2025, found that there is insufficient evidence to support the notion that codetermination, or cogestion, leads to significant improvements.
The analysis found no conclusive proof that the Mitbestimmung model negatively impacts the economic performance of companies.
Empirical results in the field of company performance vary significantly depending on factors such as the industry sector, company size, and research methodology employed, making it challenging to establish a definitive conclusion.
Researchers Schoefer and his colleagues conducted a study in Germany, titled "The Work in the Board of Directors," which yielded similar findings.
Research conducted by Schoefer found no conclusive link between mandatory employee inclusion in management and its impact on corporate performance.
Employee representation in company management can lead to increased long-term commitment from employees, resulting in benefits that extend beyond financial gains. This loyalty is often more pronounced in employees than in shareholders, ultimately contributing to the company's overall success.
BBC World's Lionel Fulton, a researcher at the UK Labor Research Department think tank, notes that staff representation on the Supervisory Board significantly enhances the organization's outlook.
A recent study by a group of economists has found that improved cognitive abilities can lead to enhanced employee well-being, resulting in a 1.6% average salary increase and a reduction in unemployment.
Research suggests that employees who feel empowered to express themselves more assertively in the workplace tend to experience greater job satisfaction, which in turn can lead to improved individual performance.
The Mitbestimmung model continues to be widely recognized and accepted in Germany, regardless of its outcomes.
The origins of the dual corporate governance model can be traced to the mid-19th century, when regulatory requirements established the need for a Board of Directors to oversee daily operations and a separate Board of Supervisors to monitor management and safeguard shareholder interests.
Following Adolf Hitler's ascension to power, he implemented a policy that removed workers from positions of management within companies.
Following the conclusion of World War II, trade unions successfully advocated for the reinstatement of co-management agreements, which became a standard practice with the backing of successive legislative measures enacted in the 1950s.
The post-war economy experienced significant growth, primarily driven by the mining, coal, and steel industries, which served as the key drivers of economic recovery.
Following the occupation, stringent regulations were implemented to curb the influence of industrial leaders with ties to Nazism, thereby reinforcing the existing power structure.
Co-determination, a system of workplace representation, has been a cornerstone of Germany's industrial sector for over seven decades, with experts predicting its enduring presence in the country's powerful industry.
The impact of this factor on business performance remains unclear, with some suggesting it has both positive and negative effects. However, most agree that its primary benefits are of a social nature.
The Mitbestimmung model promotes collaborative relationships between labor unions, workers, and shareholders, resulting in decreased labor disputes and a more harmonious balance between corporate interests and social entitlements.
The system's true nature is a reflection of a nation's commitment to a balanced form of capitalism, where both economic and social requirements are intertwined and mutually supportive.
The BBC World Service has launched a new app, offering users a comprehensive platform for global news. The app, which includes news alerts, documentaries, and in-depth analysis, is now available for download. However, it is essential to note that the new app is not accessible in the United Kingdom or the United States.
To stay up-to-date with our latest news and updates, you can also follow us on our social media platforms, including YouTube, Instagram, TikTok, Facebook, and X, as well as our WhatsApp channel.
To stay up to date with our latest and most compelling stories, we invite you to subscribe to our newsletter, which will deliver a curated selection of our top content directly to your inbox every Friday.
