author

Gary Gorton

University of Pennsylvania, NBER

Under German codetermination, firm resources are directed differently. The return on assets and equity decrease, as does the market-to-book ratio. Firms with equal representation on the supervisory board (parity codetermination) have a 26% decline in market-to-book ratio, compared to firms with one-third representation. Under German codetermination, employees use their power in equal representation firms (1/2 parity codetermination) to increase the employees-to-sales and wage bill-to-sales ratios. “ Laws on codetermination... have made European CEO's deeply committed to their employees, treating them more like partners in a long-term enterprise than anonymous factors of production. – Henzler, 1992” German companies with 50% codetermination trade at a 31% stock market discount compared to companies with only 33% codetermination.
Capital, Labor, and the Firm: A Study of German Codetermination Class Struggle Inside The Firm: A Study of German Codetermination
Codetermination
Loading...