One-third Co-determination in German Supervisory Boards and its Economic Consequences. New Evidence for Employment

The economic consequences of workers’ participation rights in Germany are still uncertain. Because employee representation at the board level is mandatory based on the legal form and size of the company, a direct comparison of firms that apply co-determination and those that do not does not appear to be possible. However, a new kind of data set used in this paper allows such a direct comparison. The present study analyzes the potential impact of co-determined supervisory boards on employment. Whereas several studies have looked at the possible effects of works councils on employment growth, the effects of co-determination at the enterprise level have been the object of investigation only once. The present paper contributes to this lack of empirical evidence in showing that there is no significant correlation between supervisory board existence and employment growth.