What is Codetermination?

Codetermination is an arrangement in which the management works together with the workers when making decisions relating to issues in their workplace and even voting for representatives. In developed democracies, there are laws that require workers to have a say in the voting of representatives. Codetermination laws apply in countries which have one-tier or two-tier board of directors. Codetermination laws only apply when a company has a set number of employees as defined by local law.

How Does Codetermination Work?

In large companies, ones with more than 100 employees, workers form small representative groups call workers council. In small companies, the workers vote one of theirs as a representative. Through the representative or the workers council, the employees will get informed or consulted on matters that need their input. Employees may also elect a representative in a managerial or supervisory position. In single-tier systems, an employee is allowed a seat in the board of directors while in two-tier systems, an employee will work in a supervisory position. When electing into the board, an employee representatives power is limited to issues relating to employees welfare. This is unlike the representative of shareholders who holds the deciding vote. In 1-tier systems where codetermination applies, employees are allowed a representative or two in the company's board of directors and sometimes in the other committees in the company. Codetermination plays an important role in companies. First, it reduces conflicts between the management and the workers to enhance productivity. It also enhances the creation of legislation that favors workers and to correct failures in the market. However, codetermination has been shown to have minimal or no effect on how businesses perform.

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