The Washington Post

In Germany, workers help run their companies. And it’s going great!

Frank Augstein/Associated Press - The Oct. 28, 2010 file photo shows people entering the entrance of the jobless center in Duisburg, western Germany.

Think workers don't have enough of a say in U.S. companies? Look to Germany, Boston College professor Kent Greenfield argues in the latest issue of Democracy.

Through a process called "codetermination," large German companies are required to elect half their board of directors by a vote of their employees, rather than of their shareholders. And it's "now the economic powerhouse of Europe," Greenfield contends.

How much the latter is true is pretty arguable. Germany does not have the kind of widespread unemployment that plagues the rest of the continent, but it also has much more severe wage stagnation. So it's hardly a paradise. But Greenfield's piece raises a good question: What have the results of codetermination been for Germany, both for growth and for workers' share of that growth?

The best research on this in English-language publications has come from John Addison of the University of South Carolina. He, along with Claus Schnabel and Joachim Wagner, recently produced a literature review summarizing all 17 studies that have been conducted on codetermination to date. There have been three stages of research, each using better data than the last, but the most recent is almost uniformly positive toward the councils.

While there's little evidence that they increase sales or overall employment, they do seem to have a positive effect on productivity, according to the two most recent studies on that question. One, from Bernd Frick, found that Western German firms saw a huge 25 percent spike in productivity, while Eastern German firms transitioning out of Communism saw an even bigger 30 percent jump. Previous research almost uniformly found that the councils increase wages.

That said, some suggested that the effects on productivity are blunted for small firms, or those without unions. Addison and his coauthors do urge skepticism of the more recent productivity numbers, noting that getting a good sample for comparisons is tough. And obviously, the United States and Germany are very different countries and a policy that worked with one might not pan out in another.

But similar policies in the United States have borne fruit. Studies of Employee Stock Ownership Plans (ESOPs), in which employees are encouraged to take an ownership stake in their own firms, find that they increase overall compensation, job satisfaction, productivity and profitability. "Evidence suggests that combining employee ownership with increased employee participation may generate astounding returns on investment," concludes Penn's Steven Freeman.

Giving workers more control over their firms seems to help both them and the companies. Maybe U.S. companies could take the hint.



Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Show Comments
Most Read



Success! Check your inbox for details.

See all newsletters

Your Three. Videos curated for you.
Play Videos
How to make Sean Brock's 'Heritage' cornbread
New limbs for Pakistani soldiers
The signature dish of Charleston, S.C.
Play Videos
Why seasonal allergies make you miserable
John Lewis, 'Marv the Barb' and the politics of barber shops
What you need to know about filming the police
Play Videos
The Post taste tests Pizza Hut's new hot dog pizza
5 tips for using your thermostat
Michael Bolton's cinematic serenade to Detroit
Play Videos
Full disclosure: 3 bedrooms, 2 baths, 1 ghoul
Pandas, from birth to milk to mom
The signature drink of New Orleans
Next Story
Sarah Kliff · October 7, 2012

To keep reading, please enter your email address.

You’ll also receive from The Washington Post:
  • A free 6-week digital subscription
  • Our daily newsletter in your inbox

Please enter a valid email address

I have read and agree to the Terms of Service and Privacy Policy.

Please indicate agreement.

Thank you.

Check your inbox. We’ve sent an email explaining how to set up an account and activate your free digital subscription.