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Backhaus, Jürgen G. --- "Company Board Representation" [2005] ELECD 143; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 19

Section Title: Company Board Representation

Author(s): Backhaus, Jürgen G.

Number of pages: 14

Extract:

19 Company board representation
Jürgen G. Backhaus


Introduction
Corporations can have widely differing forms. Against the backdrop of the
peculiar German system of codetermination, we can illustrate the law and
economics rationale behind different types of board composition. Boards are
split into two, the managing and the supervisory boards. Works councils elect
the powerful chairmen, who can end up on supervisory boards and, more
importantly, the steering committees. In addition, investment bankers may
join forces with employee representatives in controlling management ap-
pointments. How did this system come about, which events shaped it, and
why is it being continued by globally operating companies?

Codetermination as an interlocking system
Codetermination is an interrelated set of institutions which consists of five
major elements (Table 19.1). At the plant level, it involves the representation
of workers in works councils. Works councils need to be heard in many
matters referring to the daily practice of work and they need to be involved in

Table 19.1 Codetermination as an interlocking system

Competition
Works Collective Two-tier Bonding of between
council bargaining board investment locations

Works council x 1 2 3 4
Collective
bargaining 5 x 6 7 8
Two-tier
board 9 10 x 11 12
Bonding of
investment 13 14 15 x 16
Competition
between
locations/
Gewerbesteuer 17 18 19 20 x

297
298 The Elgar companion to law and economics

discussions with respect to such issues as hours, time and form of payment,
and the hiring and firing of individual ...