Codetermination and Corporate Governance in a Multinational Business Enterprise

Article excerpt

Viet D. Dinh*


The extensive body of legal and economic literature on codetemination1 has, for the most part, not focused on the fundamental question of how employee participation affects the governance of corporations2 and, in particular, of multinational corporations whose major operations span across jurisdictions with different corporate and labor law regimes. Such a gap in legal scholarship is hardly surprising. The historical divide between capital and labor has been replicated in the American law school.3 The dominance of the contractarian paradigm4 focused the attention of corporate law scholars for a decade or so on explaining, refining, or challenging the notion that maximizing shareholder value is the most efficient form of corporate governance because it allocates resources efficiently and thereby maximizes social welfare, reduces the cost of collective decisions because of shareholder homogeneity,5 and matches organizational structures with the interests of residual claimants.6 Mark Roe's work7 on the path-dependency of American corporate law did prompt an interest in looking to other legal systems, such as those of Europe and Japan, for alternative structures of corporate governance. Yet such comparative analyses-evaluating the relative economic efficiency of the systems, identifying the common functional elements underlying the superficial differences, and seeking prospects of systemic convergence-simply move the intellectual debate to a different forum.8 For the most part, American corporate law scholars have scantly examined the reasons for and the implications of worker participation in the governance of corporations from codetermination countries.

On the other side of the divide, "[a]n entire generation of labor law academics focused their scholarship upon perfecting the system of collective bargaining created by the Wagner Act for ordering the legal relations between employers and employees."9 This preoccupation with "our national labor policy" continued even as union membership plunged from forty percent of the workforce to less than fourteen percent, a level below that existing before the Wagner Act.10 The decline of collective bargaining has led some American labor law scholars to call for employee participation in corporate governance as a means to resolve management-worker conflicts.11 The calls persist despite warnings, based on the European experience, that "the development of labor representation on corporate boards has not occurred as a result of rational decision, but rather through a process of political assertion and compromise."12 "Employee codetermination practices and legislation are deeply rooted in a country's history and institutions and cannot easily be exported from one country to the next."13 In addition, despite a recognition that "labor relations go swimmingly in Germany as compared to the United States," the regulatory features that these scholars seek to transplant "are but a small part of a much larger mosaic that regulates German labor law, and it is that larger mosaic that explains the success of the works councils."14

This Article partially fills the gap in the literature of both corporate and labor law by attempting to provide a systematic analysis of employee codetermination in corporate governance, focusing specifically on comparisons between the American and German paradigms and how the differences affect the governance of a multinational corporation. The purpose is not to reconceptualize U.S. corporate or labor law-neither to challenge "the deep-seated American commitment to freedom of contract"15 nor to disrupt "our national labor policy"16-or to counsel Germans of the wisdom of American law in regulating corporate behavior. Rather, this Article examines what happens when the two systems of corporate governance and labor relations merge or, put another way, come into conflict-as when a German corporation merges with an American corporation to form a truly multinational enterprise. …