Annals of Public and Cooperative Economics 89:1 2018
NONUNION EMPLOYEE REPRESENTATION: THEORY
AND THE GERMAN EXPERIENCE WITH MANDATED
University of Trier, Germany
Stephen C. SMITH
George Washington University, USA
Theories of how nonunion employee representation impacts ﬁrm per-
formance, affects market equilibria, and generates externalities on labor and society are
synthesized. Mandated works councils in Germany provide a particularly strong form
of nonunion employee representation. A systematic review of research on the German
experience with mandated works councils ﬁnds generally positive effects, though these
effects depend on a series of moderating factors and some impacts remain ambiguous.
Finally, key questions for empirical research on nonunion employee representation,
which have previously been little analyzed in the literature, are reviewed.
Keywords: Nonunion representation, works councils, organizational failures, market failures, society
JEL classiﬁcation: J50, M50
Nonunion employee representation can be deﬁned as employees’ participation in decision
making within ﬁrms through representative agencies; it plays an important role in
corporate governance in many West European countries (Rogers and Streeck 1995).
Works councils and/or board level representation are typical institutions of nonunion
employee representation in Europe. A key feature of these institutions is that they have
the force of law and enforceable regulation. The legally speciﬁed employee participation
rights vary across countries and can include rights to information, consultation, veto
power, joint decision making, and codetermination.
The authors would like to thank the Institute for Labor Economics (IZA) for hosting us
at the IZA center in Bonn, Germany, as we began to work on this paper and the Institute for
International Economic Policy at George Washington University for research assistance. E-mails:
2018 The Authors
Annals of Public and Cooperative Economics
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