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The German System of Supervisory Codetermination by Employees

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German Corporate Governance in International and European Context

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Abstract

Chapters 3 and 4 dealt with the primary organs of German public corporations, namely the general meeting, the management board and the supervisory board. Since the German two-tier board system is founded on the management board and the supervisory board, most attention was devoted to these two organs. In this chapter the primary focus is on the German system of supervisory codetermination by employees, and so, again primarily on the supervisory board as it is on the supervisory board that employee representatives serve. This is such an important aspect that it deserves separate chapters. Discussion includes the historical development of codetermination in Germany, its application in various industries and corporations, and the role of trade unions. In Chapter 6 we examine some recent developments and recent perceptions of codetermination in Germany and the European Union. It could be said that in the European context codetermination is at the crossroads because of some fundamental decisions by the European Court of Justice (ECJ). Further, the German rules on codetermination are under serious threat of being eroded by some European Community legislation.

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References

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  29. This information was obtained from the Association of German Steel Manufacturers in Duesseldorf (Wirtschaftsvereinigung Stahl). See also Anonymous, ‘Gewerkschafter in Aufsichtsräten’ Frankfurter Allgemeine Sonntagszeitung (weekly nationwide German journal) 26 Oct 2003, 37.

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  36. These numbers are taken from the Dec 2003 issue 64/12 of Die Mitbestimmung (Zeitschrift) stating the following numbers: 515 companies have a supervsory board with 12 members, 100 companies have a supervisory board with 16 members and 152 companies have a supervisory board with 20 members. See also Elke Bohl, ‘Die Mitbestimmung irritiert die ausländischen Investoren’ FAZ (nationwide German daily newspaper) 20 Sept 2003, 14.

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  43. The ADHGB of 1861, for instance, did not contain any provisions as to who was responsible for appointing the members of the supervisory board or the way in which the supervisory board was to be constituted. It was, apparently, left as a matter to be dealt with in the corporation’s constitution, but it seems as if the underlying idea was that they were supposed to be appointed by all the shareholders—Wiethölter (n 52) 280.

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  44. Ibid 281.

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  46. Karsten Schmidt, Gesellschaftsrecht (4th edn Carl Heymanns Verlag, Cologne 2002) 805 para 28(II)(1)(a), comments on S 76 AktG: ‘Under its own responsibility, the management board has to govern the company.’

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  48. Wiethölter (n 52) 300: ‘Bei Einschluß der Mitbestimmung ist der Aufsichtsrat gesell. schaftsrechtlich ein Fremdkörper.’

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  49. For example, Wolfgang Spieker, ‘Möglichkeiten und Grenzen der Mitbestimmung im Aufsichtsrat’ (1962) 4 Das Mitbestimmungsgespräch 51 ff; Karl-Heinz Sohn, ‘Die Mitbestimmung und ihre Kritiker’ (1965) 7 Das Mitbestimmungsgespräch 195 ff. Also Raiser (n 4) 115, 119–20. In general Bernhard Großfeld and Ulrich Irriger, ‘Intertemporales Unternehmensrecht’ (1988) 11 JZ 531, 537.

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  51. See Wiethölter (n 52) 295–97.

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  53. Ibid.

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  55. Ibid 68. Also, reading through the German sources, one is struck by the similarity between arguments raised in the UK and some earlier arguments presented by German commentators in condemning the system of employee participation at board level—eg Schilling (n 69) 442 ff.

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  58. See in general Wiethölter (n 52) 300.

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  60. Cf Wiethölter (n 52) 300–01; Hans-Joachim Mertens, ‘Zuständigkeiten des mitbestimmenten Aufsichtsrats’ (1977) 6 ZGR 272–75, 289; Stephen Laske, ‘Unternehmensinteresse und Mitbestimmung’ (1979) 8 ZGR 172–73, 200; Ulrich Immenga, ‘Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR 249, 252–53. Thomas Raiser, ‘Das Unternehmensinteresse’ in Fritz Reichert-Facilides, Fritz Rittner and Jürgen Sasse (eds) für Reimer Schmidt (Verlag Versicherungswirtschaft eV, Karlsruhe 1976) 103 ff provides an interesting exposition of the historical development and the importance the concept of ‘corporate interests’ in German law.

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  61. Collection of Decisions of the German Federal Constitutional Court(BVerfGE) vol. 50 290 et seq. (at 250 et seq.); that decision is also published in Beilage 2 to Issue 7 of (1970) BB.

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  63. See the rather early critique by Christine Windbichler and Gregor Bachmann, ‘Corporate Governance und Mitbestimmung als “wirtschaftsrechtlicher ordre public”’ in Harm Peter Westermann and Klaus Mock (eds) Festschrift für Gerold Bezzenberger (de Gruyter Verlag, Berlin 2000) 797 ff.

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  64. Ulmer Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen—noch zeitgemäß?’ (2002) 166 ZHR (n 73) 271–72. Also Peter Ulmer, ‘Der Deutsche Corporate Governance Kodexein neues Regulierungsinstrument für börsennotierte Aktiengesellschaften’ (2002) 166 ZHR 150, 180–81.

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  65. Martin Veit and Joachem Wichert, ‘Unternehmerische Mitbestimmung bei europäischen Kapitalgesellschaften mit Verwaltungssitz in Deutschland nach “Überseering” und “Inspire Art”’ (2004) 49 AG 14, 17–18 with critical analyses of codetermination by leading commentators; and Otto Sandrock, ‘Gehören die deutschen Regelungen über die Mitbestimmung auf Unternehmensebene wirklich zum deutschen ordre public?’ (2004) 49 AG 57 ff. Also Hopt (n 46) 246–48.

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  66. See Otto Sandrock, ‘Die Schrumpfung der Überlagerungstheorie’ (2003) 102 ZVgIR-Wiss 447, 490–93 who has tried to establish a comprehensive list of those shortcomings. See also the enumeration of such shortcomings by Maximilian Schiessl, ‘Leitungs-und Kontrollstrukturen im internationalen Wettbewerb—Dualistisches System und Mitbestimmung auf dem Prüfstand’ (2003) 167 ZHR 235, 240 ff. See further the differentiating comments of a number of authors and participants in a discussion published in Arnold Picot (ed) Corporate Governance, Unternehmensüberwachung auf dem Prüfstand (Schaeffer-Poeschel Verlag, Stuttgart 1995).

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  67. This conclusion follows inevitably if the many critical comments over the activities of codetermined supervisory boards are taken together—see Friedrich Kübler, ‘Aufsichtsratsmitbestimmung im Gegenwind der Globalisierung’ in Friedrich Kübler et al (eds), The International Lawyer, Freundesgabe für Wulf Henrich Döser (Nomos Verlagsgesellschaft, [Baden-Baden] 1999) 237 ff; Ulmer (n 73) 276; Schiessl (n 88) 240; Otto Sandrock, ‘Deutschland als gelobtes Land des Kapitalgesellschaftsrechts?’ (2002) 57 BB 1601, 1602 right col. Also Axel von Werder, ‘Überwachungseffizienz und Unternehmensmitbestimmung’ (2004) 49 AG 166, 171.

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  76. A spectacular example of such conflict came about when Frank Bsirske, chairman of the powerful Trade Union VERDI (Vereinigte Dienstleistungen) that volectively represents the employees working in all kinds of financial institutions; of healthservices; educational institutions; public services; media; telecommunication; and traffic, in summer 2003 called up its members for a strike against the Lufthansa AG on whose supervisory board Bsirske himself was sitting as an employee representative! Cf Gregor Bender, ‘Auch Gewerkschafter im Aufsichtsrat müssen Kodex befolgen’ FAZ 9 July 2003, 17; Anonymous, ‘Wer einen Streik organisiert, gehört nicht in den Aufsichtsrat’ FAZ 27 March 2003; Christian Geinitz, ‘Possenspiel im Osten’ FAZ 12 June 2003, 13.

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  80. See, among many others, Michael Adams, ‘Was spricht gegen eine unbehinderte Übertragbarkeit der in Unternehmen gebundenen Ressourcen durch ihre Eigentümer?’ (1990) 35 AG 243, 250; Martina Röhrich, ‘Gleichbehandlungspflicht bei Kontrollaquisitionen’ (1993) RIW 93, 95 with further references; Lutz Michalski, ‘Abwehrmechanismen gegen unfreundliche Übernahmeangebote (unfriendly take-overs) nach deutschem Aktienrecht’ (1997) 42 AG 152, 156 (left col); Dietrich Becker, ‘Verhaltenspflichten des Vorstands der Zielgesellschaft bei feindlichen Übernahmen’ (2001) 165 ZHR 280.

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  81. A particularly ‘bitter’ poison pill is now contained in S 33(1) sentence 2 third alternative of the Wertpapier-Übernahme-Gesetz (Act on Take-overs) of 20 Dec 2001, which entered into effect on 1 Jan 2002 but was repealed in July 2006. It allowed the board of directors of a company that was the target of a hostile take-over to take measures with the approval of the supervisory board to frustrate the take-over. This could provoke the formation of a calamitous alliance between the board of directors and a codetermined supervisory board which acted to the detriment of the shareholders. The provision also gave rise to doubts to its compatibility with the fundamental rights catalogue of the German Federal Constitution (guarantee of the protection of property). For further details see Michael Kort in Klaus J Hopt and Herbert Wiedemann (eds) Großkommentar zum HGB (4th edn issue 19 Berlin 2003) section 76 para 95.

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  82. See Otto Sandrock, ‘German Supervisory Codetermination and the Lesson to be Learned from it’ in Chinese Culture University, Taipei (ed), 8th International Conference on Multinational Enterprises, 14–16 March 2006, vol I, 122.

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  83. Ferdinand Piëch. As to his personality see below n 145.

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  84. ‘Germany’s ‘cowboy capitalism’ Wall Street Journal 9 Aug 2005, A8.

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  85. ‘Together they stand’, The Economist, 16 July 2005, 14.

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  86. Expression used by Schiessl Leitungs-und Kontrollstrukturen im internationalen Wettbewerb—Dualistisches System und Mitbestimmung auf dem Prüfstand’ (2003) 167 ZHR (n 88) 237.

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  87. Expression used by Theodor Baums, a renowned German company law academic, according to a note in FAZ 27 June 2003.

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  88. See in particular Ulmer Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen—noch zeitgemäß?’ (2002) 166 ZHR (n 73) 272; and Klaus J Hopt, ‘Unternehmensführung, Unternehmenskontrolle, Modernisierung des Aktienrechts—Zum Bericht der Regierungskommission Corporate Governance’ in Corporate Governace: Gemeinschaftssymposion der Zeitschriften (ZHR/ZGR) (Verlag Recht und Wirtschaft GmbH, Heidelberg 2002) 42–46, 66–67. The need for a basic reform has also been stressed by Abbo Junker, ‘Unternehmensmitbestimmung in Deutschland-Anpassungsbedarf durch internationale und europäische Entwicklungen’ (2005) 36 ZfA 1–44 (expert opinion prepared for the German Federal Association of Employers).

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  89. This part is also based on the paper delivered by Otto Sandrock in Taipeh in March 2006 (see n 108).

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  90. See FAZ 20 Sept 2003, 11; 22 Sept 2003, 11; 25 Sept 2003, 18; 6 March 2004, 13. Cf also Jürgen Dunsch, ‘Das Millionenspiel bei Mannesmann’, FAZ 22 Sept 2003, 11; Ulmer (n 73) 276; also Jürgen Dunsch, ‘Das Millionenspiel auf den Chefetagen’ FAZ 5 May 2003, 13; Anonymous, ‘Der Telekom-Vorstand gibt Ron Sommer Rückendeckung’ FAZ 12 July 2002;’ showdown im Aufsichtsrat’ FAZ 16 July 2002.

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  92. See Ulmer Editorial: Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen—noch zeitgemäß?’ (2002) 166 ZHR (n 73) 276.

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  93. See FAZ 17 Jan 2004, 15; 23 Jan 2004, 13; 24 Jan 2004, 18; 29 Jan. 2004, 15; 10 Feb 2004, 12.

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  95. See FAZ 27 Oct 2006,1 and 14; 2 Nov 2006, 13; 3 Nov 2006, 13 and 20; 4 Nov 2006, 13.

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  96. See FAZ 25 Nov 2006, 1, 13, 17.

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  97. See FAZ 30 Nov 2006, 13 and 20; 4 Dec 2006, 4. See also Holger Steltzner, ‘Lehren aus dem Mannesmann-Prozeß’ FAZ 30 Nov 2006, 1.

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  98. As to the interrelationship between the State of Lower Saxony and Volkswagen see ‘Dark days for Volkswagen’ The Economist 16 July 2005, 55; Siegfried Thielbeer,’ schröder, Wulff und das System Volkswagen’ FAZ 6 July 2005, 3; Johannes Ritter, ‘Wolfsburger Filz’, FAZ 8 July 2005, 11; Carsten Germis, ‘Die politische Verantwortung’ FAZ 9 July 2005, 17; Johannes Ritter and Henning Peitsmeier, ‘Machtkampf in Wolfsburg’ FAZ 19 Oct 2005, 20; and Anonymous, ‘Das Denkmal bröckelt’ FAZ 12 July 2005, 16 and ‘VW-Betriebsrat stärkt Piëch den Rücken’ FAZ 11 Oct 2005, 17.

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  100. It was Peter Hartz, whose name is connected with important federal legislation, who reformed the German labour markets and who is well known in the German public. Peter Hartz was the so-called ‘Arbeitsdirektor’ of the Volkswagen AG.

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  101. For a comprehensive report of these different incidents see Henning Peitsmeier and Johannes Ritter, ‘Das System VW vor Gericht’ FAZ 15 Jan 2007, 12. German tabloids have taken up that subject publishing pertinent pictures, see for example’ stern’ no 40, 29 Sept 2005, 26–40. See also FAZ 30 Sept 2005, 11; and 8 Oct 2005, 11.

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  105. See Stefan Seitz, Editorial ‘Auf eine vertrauensvolle Zusammenarbeit’ (2005) 32 BB 8 Aug 2005; Volker Rieble, ‘Betriebsräte geraten ins Visier der Strafrechtler’ FAZ 17 Aug 2005, 21. See further FAZ 26 July 2005, 11; 22 July 2005, 13; 10 Aug 2005, 10; 20 Aug 2005, 11.

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  107. That covenant was heavily criticised in public; see, for example, FAZ 27 Nov 2006, 11.

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  108. Christoph Hein, ‘VW und Indien tricksen sich gegenseitig aus’ FAZ 19 July 2005, 20. See further FAZ 5 July 2005, 11; 7 July 2005, 10; 12 July 2005, 11; 5 Aug 2005, 18; 10 Aug 2005, 9; and 10 Aug 2005, 14.

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  112. He is a grandson of the legendary designer of the Volkswagen ‘beatle’, Ferdinand Porsche, who was the founder of the famous car-making company. As to his personality see ‘Face value—Volkswagen’s Ferdinand Piëch is fanatical about cars and ruthless towards people’ The Economist 2 Dec 2006, 72.

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  118. See S 4(3), 13(1) Codetermination Act for the Mining, Iron and Steel Industry 1951; Ss 26, 33(1) general Codetermination Act 1976; S 9 One Third Participation Act 2004.

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  119. A resolution of the Federal Committee (Bundesausschuß) of the Federation of the German Trade Unions (Deutscher Gewerkschaftsbund) passed on 10 Oct 2000 for the years 2001 and after regulates the ‘Transfer of Remunerations resulting from Activities in Codetermination or similar Activities’ (Abführung von Vergütungen aus der Wahrnehmung von Mitbestimmungsfunktionen oder ähnlichen Aufgaben). A copy of that resolution has been forwarded to the author of this article by the Hans Böckler-Stiftung.

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  120. The so-called ‘Eigenbehalt’.

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  121. See Rainer Hank, ‘Vater der Mitbestimmung’ FAZ 15 Nov 2006, 18.

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  124. See also the Editorial by Wolfgang Bernhardt, ‘Mitbestimmung zwischen Juristentag und Biedenkopf-Kommission’ (2006) 51/52 BB DIE ERSTE SEITE and his comments, BB-Forum: Unternehmensmitbestimmung nach Biedenkopf’, (2007) BB 381 et seq.

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  125. The paper comprises 116 pages and is published in Deutscher Juristentag (ed) Verhanldungen des 66. Deutschen Juristentages Stuttghart 2006, vol I Gutachten, Munich 2006, pp.B1–B116.

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  126. See Heinz Seidel, ‘Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 95.

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  127. Art 33(1) and (2) MitbestG and Art 13(1) Montan-MitbesG.

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  128. Immenga Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR (n 77) 258.

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  129. Uwe Hüffer in Kommentar zum Aktiengesetz (5th edn Verlag CH Beck, Munich 2002) 376.

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  130. See also Bundesverfassungsgericht (BVerfG) (1979) 32 NJW 699, 711.

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  131. See in particular Immenga Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR (n 77) 257–58.

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  132. Kübler (n 4) 406.

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  133. Ibid.

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  134. Cf Immenga Zuständigkeiten des mitbestimmten Aufsichtsrats’ (1977) 6 ZGR (n 77) 257–58; Kübler (n 4) 406.

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  135. BVerfG (1979) 32 NJW 699, 711. See also Peter Hanau, ‘Die arbeitsrechtliche Bedeutung des Mitbestimmungsurteils des Bundesverfassungsgerichts’ (1979) 8 ZGR 545–46.

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  137. See s 28(1) Erste Wahlordnung zum Mitbestimmungsgesetz (1. WOMitbestG v. 27. Mai 2002 (BGBI. I S. 1682)).

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  138. Press Release 15 May 2002 ‘Wahl von Arbeitnehmervertretern in Aufsichtsräte wird einfacher’ <http://www.bundesregierung.de/Nachrichten/-,433/Pressemitteilungen.htm>.

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  139. For academic purposes the Germans distinguish between collective bargaining (Tarifvertrag); codetermination in the enterprise (Mitbestimmung im Unternehmen); and codetermination at shop-floor level or in business (Mitbestimmung im Betrieb)-see Hanau Die arbeitsrechtliche Bedeutung des Mitbestimmungsurteils des Bundesverfassungsgerichts’ (1979) 8 ZGR (n 179) 540. Another distinction which is sometimes made is between workplace codetermination (betrieblichen Mitbestimmung) and enterprise or corporate codetermination (unternehmerische Mitbestimmung)-Loritz (n 4) 3; Eisenhardt (n 8) 307. The different forms of codetermination are, however, also linked to each other-Hanau (n 179) 541. See also Hanau (n 14) VII.

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  141. At first, corporations were classified as large public corporations if they complied with any two of three stated requirements, namely employing more than 2000 employees, with a balance sheet sum of more than DM 50 million, and with a turrnover of DM 100 million-see Seidel Um die Ausweitung der qualifizierten Mitbestimmung (II)’ [1966] Das Mitbestimmungsgespräch 115–16 (n 187) 95–96. After some further deliberation, these requirements were eventually fixed in 1966 at 2000 people employed, a balance sheet sum of more than DM 75 million, and a yearly turrnover of DM 150 million.

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  142. Seidel Um die Ausweitung der qualifizierten Mitbestimmung (I)’ [1966] Das Mitbestimmungsgespräch 95 (n 169) 96.

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  143. Seidel Um die Ausweitung der qualifizierten Mitbestimmung (II)’ [1966] Das Mitbestimmungsgespräch 115–16 (n 187) 116–17.

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Authors
  1. Jean du Plessis
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du Plessis, J., Sandrock, O. (2007). The German System of Supervisory Codetermination by Employees. In: German Corporate Governance in International and European Context. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-71187-2_5

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