Academic journal article Monthly Labor Review

Employee Representation on U.S., German Boards (Foreign Labor Developments)

Academic journal article Monthly Labor Review

Employee Representation on U.S., German Boards (Foreign Labor Developments)

Article excerpt

Employee representation on U.S., German boards

In recent years, a small number of U.S. companies have accepted employee or union representation on their boards of directors.(1) However, the practice of employee board representation has had a fairly long history in the Federal Republic of Germany, dating back to the end of World War I. Employee board

representatives from both countries met in the fall of 1988 for an exchange of recent experiences in "board-sitting."(2) This report compares the employee board representation system in Germany with that of the United States by viewing their structures, relationships with unions, and influences on management.


Germany. The origins of employee board participation differ greatly between the United States and Germany. In Germany, legislation gives employees the right to name board directors. Three systems exist, varying by size of company or industry, or both.

In the oldest system, employees have parity with stockholders;(3) they nominate the same number of persons to the board as do stockholders. This system covers the coal and steel industry. In the second system found in companies with 2,000 workers or more, employees have "near parity" with stockholders. Although employees in these companies elect as many board representatives as do stockholders, one employee representative must be a managerial employee. Moreover, the chairperson of the board, who casts an extra vote in case of a tie, is de facto chosen by the stockholders.

The third system consists of companies with 500-2000 employees. These employees nominate one-third of the board members; the stockholders choose the remainder. All of the German participants agreed that although the one-third arrangement limits real power for the employees, it provides access to company information which might not otherwise be available to them. However, employee representatives are sometimes kept off of key subcommittees, bypassed for decisions because such decisions had been previously decided informally in stockholders' representatives caucus meetings, and so forth. Still, they are able to bring employee problems to the boards' attention, and in many companies, the other two-thirds do try to reach a consensus with the employee representatives.

This striving for consensus rather than having split votes seems to be a characteristic of all three types of board representation. But except for coal and steel industries where full parity is established, decisions tend to be dominated by stockholders' views, although employee representatives' pressure does have influence, according to the German participants. In recent years, new economic difficulties, competitive pressures, and restructuring of many companies to seem to lead to somewhat more decision between employee and stockholder representatives.

Some companies, outside of coal and steel, try to avoid having any national union officials serve on their boards, preferring instead company employees. The German Federation of Trade Unions fears that not having a union official on the board can lead to too much "plant-only" concentrated labor relations patterns. (In Germany, collective agreements were usually negotiated at the industry level, nationally, or regionally, depending on the industry.) United States. In contrast with the legal foundation supporting employee board membership in Germany, such membership in the United States is very much a product of the recent "concession era" of collective bargaining. A number of companies accept employee board representation, or are pressed by unions to do so, as a trade-off for concessions made by unions and workers to companies in economic distress.

In some cases, the American employees owe their positions on the board to Employee Stock Ownership Plans under which they could name representatives to the company boards as well as become stockholders). Without union pressure, it was pointed out, Employee Stock Ownership Plans often do not provide for employee board membership. …

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