The textile retailer operates as a European stock corporation SE.
(Photo: imago images/Christian Kielmann)
Dusseldorf Germany is the land of poets and thinkers, they say. So much for our culture. But we also have a special profile in business. It is probably no exaggeration to say that the German economy is the economy of co-determination. It has been enshrined in federal law since July 1, 1976. The business conduct of the largest German listed corporations is also controlled and co-determined by employee representatives.
But this characteristic of the German economy is disappearing quietly and insidiously. More and more supervisory boards of the Dax 40 companies are no longer staffed with representatives of employers and employees. Currently, only 28 of the 40 Dax companies have equal representation and are therefore co-determined. In 2015, there were still 29 of the then 30 Dax companies.
There are many reasons for this, the main one being the increasing internationalization of the Dax. The insurance giant Allianz, the housing group Vonovia, the food supplier Hello Fresh and the online fashion retailer Zalando have the European legal form SE. The gas specialist Linde, the aircraft manufacturer Airbus and the diagnostics group Qiagen are not based in Germany. The dialysis specialist Fresenius Medical Care and the medical technology group Siemens Healthineers have special corporate structures with co-determination at other levels, and Porsche SE is a financial holding of the car manufacturer.
Good for the return
This development is not good news for Germany as a business location. Because co-determination has historically been one of the secrets of the success of the German economy. It has proven itself particularly in crises. According to an empirical analysis from 2019 by Michael Wolff, Professor of Management and Controlling at the University of Göttingen, and Marc Rapp, Professor at the University of Marburg, co-determined companies not only came through the financial and economic crisis better, they also recovered faster from the effects of the crisis.
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Their profitability fell less sharply during and after the financial and economic crisis than for companies without employee participation. An example of this is the chemical group BASF. According to the analysis, it survived the financial and economic crisis significantly better than other European chemical giants that are not co-determined.
The German economy also owes the construct of short-time work to the cooperative model of co-determination. An instrument that ensured that there were no – politically dangerous – mass layoffs and that the German economy was able to grow again quickly.
This crisis resilience is more important than ever, because the economy seems to be in permanent crisis mode and transformation stress. The financial crisis was followed by the corona pandemic and the Ukraine war with supply chain problems and the energy crisis.
Feminine and younger
In addition, co-determination is not only a proven instrument, it is also a very modern one. It made the supervisory boards of German corporations more diverse at a time when the word diversity was not yet on everyone’s lips. The employees’ side was traditionally more female and younger, and they brought in different professional perspectives.
Discussions between the two blocs have not always been easy. However, the German economy practiced the comprehensive and sustainable stakeholder perspective early on and did not only act in the sense of the short-term and concentrated Anglo-Saxon shareholder approach.
The inertia that sometimes results from arguments between employee and employer representatives must be endured. The conviction is that it is better to decide later than to make the wrong decision. Democratic processes simply take longer than dictatorial announcements.
Co-determination is a viable model for the future, especially for a country like Germany whose raw materials are its people. It increases the attractiveness of corporations as employers. The young generation in particular feels attracted by this prospect of participation.
Co-determination should therefore not be given up as a special form of cooperation. That would be negligent. Because the diverse and, in a way, grassroots-democratic perspective that was institutionalized early on through co-determination strengthens international corporations in particular. Comprehensive transformations such as those caused by digitization can only be managed and a sustainably successful strategy developed if the people who work for a group are taken along.
More: A new generation of supervisory board members is storming the Dax companies.